Is It Better To Lease Or Buy Solar Panels What You Need To Know
Solar installations can come at a pretty high price. While buying solar panels gives you the best return on investment, not everyone has the cash on hand to cover the upfront costs of going solar.
Luckily, homeowners can take advantage of financing options, like solar leases and solar loans, to help them afford making the switch to solar.
But which solar financing option is the best for you? Were going to take a look at the financial benefits of leasing vs buying solar panels, to help you figure out how you should finance your solar power system.
A Solar Lease Can Make It Difficult To Sell Your Home
Solar leases are seen as an obstacle by many real estate agents selling solar homes. We discovered that solar homes can sell 20 percent to more than 100 percent faster than those without solar. But if theres a solar lease in place, they tend to sell more slowly. This is primarily because they complicate the selling process.
In addition to my own stories above, here are a few examples of professionals who have found that a solar lease can make it more difficult to sell a home.
Janelle McGill, a Fort Collins real estate agent and consultant who offers free classes for agents, homeowners, solar installers, and utility companies, maintains that leased solar panels dont add any real value to homes. This is because buyers are sometimes unwilling to take over solar leases. If buyers do agree to a transfer and the process is delayed for any reason, it will delay and might even cancel a closing.
We agree with her sentiments: while there are reasons people lease solar panels, an easier real estate transaction isnt one of them!
Blake Guinn, a Nevada real estate agent, is an expert in the realm of residential solar systems and property sales. He warns that third-party-owned systems are very difficult to buy and sell.
Reasons To Buyout Of Your Solar Lease
1. If youre planning on selling your home soon, buying out your lease can add thousands of dollars in value when you go to sell. Instead of waiting till your lease ends or keeping the leased panels on your roof, the additional value added to your house can greatly outweigh the cost of buying out your loan. For example, if your buyout cost is $7,000, your system could add more than that to your homes value, making it a reasonable and financially sound option.
- Keep in mind that leased systems add little value to your home. While some solar companies report painless lease transfers, it can still cause a headache. Some people also dont like the idea of taking over a solar lease when buying, which could make your house a harder sell.
2. Your lease buyout amount might be cheaper than your monthly payments. This varies on a case by case basis, but some of the analyses weve seen show monthly payments around $14,000 versus a buyout cost of $7,000. This route would help you save money in the long run if your buyout amount is less than your monthly payment.
Recommended Reading: How Many Solar Panels Needed To Charge A Tesla
Buying Solar Panels Walks Your Talk
Buying solar panels isnt just a great lifetime investment. Its also the best thing you can do for the environment. Studies have shown that your neighbors are more likely to get solar panels if you get them first.
Having solar panels on your house sets a good example to the neighborhood and starts a conversation about clean, green power.
You never know, you might end up on a block with five other solar paneled roofs.
If you opt for buying solar panels, consider these top solar panels to use.
Schedule A Free Consultation
Get a free consultation and a free quote when you decide to go solar with ADT Solar. Aside from the number of solar panels, we know youll have plenty of other questions about solar power. ADT Solar is happy to provide answers and make your switch to solar clear and painless.
Find out how much you can save with ADT Solar
Also Check: Are Solar Panels Worth It In Portland
The Downside To Leasing Solar Panels
We have been talking about how bad leasing is for you financially in the long run because of escalation clauses, but what happens if there is not an escalation clause in place? Does this suddenly mean that leasing solar panels is worth it? The first point to mention is that it is going to be almost impossible to find a company who will offer solar leasing without there being a built-in escalation clause.
This is because they are not actually going to be able to harness as much excess power as you might think from your solar system. Your monthly payments might be significant to you, but to a large company with millions of dollars of backing, the profits in one series of panels alone are not enormous even factoring in the excess energy that the company is able to harness in surplus of your power requirements being met from the system.
But for arguments sake, lets say that you are actually able to find a company that offers a solar lease without a built-in escalation clause. How much money are you actually likely to save over time compared to purchasing your system outright? Here is the cold, hard truth.
|Potential savings after 25 years||Between $70,000$80,000||Between $25,000$29,000|
The above chart may have opened your eyes a little regarding the realistic savings that you are able to make when buying a system outright compared to leasing it over time.
Reasons Why You Should Definitely Not Lease Solar Panels
Are you thinking of leasing solar panels? Please think again before you do.
The price of solar panels has decreased radically in the past decade, but they can still be costly. If you lease solar panels, you dont pay 100% up front for installation. For some people, this makes it seem like theyre getting the system for nothing. So, why shouldnt you lease solar panels?
For starters, nothing is free! But more importantly, you wont own the solar panels and they wont be part of your homeownership, nor your personal assets. Sure, you wont pay as much for the solar system upfront. But youll pay the leasing company a monthly fee for decades, and will end up paying more in the long run for many reasons.
Of course, there are some advantages, which is why some people do lease solar panels. These include the fact that there isnt any upfront cost. Also, the leasing company will be responsible for the ongoing maintenance of the system. But these advantages dont justify leasing solar panels, and Im going to show you why.
If you can afford to pay cash for a solar PV system, that is definitely the easiest way to go. You then own the solar system and get all the benefits, including the opportunity to get your house off the grid. And you wont put any more debt on your personal balance sheet either. But thats not to say financing the solar system has benefits as well. Ultimately, you will also save more money than you will if you opt for a lease or any other finance option.
You May Like: Where To Point Solar Panels
Transfer Of Ownership Is Often Problematic
In point 10, we said you have four options if you want to get out of a solar lease. When homeowners sell, transferring the lease into the name of the purchaser usually seems to be an obvious solution. But it is far from simple and can be seriously problematic.
A solar contract requires the new owner to take over the lease and the terms previously agreed on with the leasing company. Often, new owners would rather own solar equipment, especially if the system was installed 10, 15, or more years before. Solar technology is changing all the time and old equipment might be obsolete.
If this happens, you will be liable for the rest of the lease term and any fees associated with removing and/or relocating the equipment.
If the purchaser does agree to transfer the solar lease into his or her name, because solar systems are owned by a third party, the lessor will have to assist with the transaction. This might seem like an advantage, but it can be the cause of delays.
Things To Know Before Buying Solar Panels
As energy becomes all the more expensive, solar panels continue to grow in popularity. Thinking about it: why wouldnt you want to take advantage of free renewable energy from the Sun? However, installing solar panels is never as easy or straightforward as one might think. Theres the initial expense to consider as well as selecting the best type of solar panel for your home. Then theres the whole process of getting them installed and hooking them up.
But, this shouldnt stop you from investing in solar panels. After all, once youve got them installed, theyll save you money on your bills, not to mention add value to your house. Thats why weve pulled together this guide on essential things you should know before buying solar panels.
Also Check: How To Do Sole Proprietorship Taxes
More Expensive In The Long Term
Like everything else, lease prices tend to increase over time. For example, the $200 monthly fee you pay now might become $250 next year or in three years.
Suppose you have a $200 monthly lease contract with a provider. In that case, you will spend about $2,400 in the first year. Let us say the contract price increases by three percent every year. You will pay $2,472 in the second year and $2,546 in the third year.
Without going into complex calculations, you spend at least $12,000 on leasing solar panels for five years. Hence, five yearsâ worth of lease payments is enough to buy solar panels.
Moreover, solar panel lease contracts are long-term, tying you to the company for 15 to 20 years. Even if you get a $50/month lease contract, you will still spend about $9,000 to $12,000 by contract expiration.
Pros Of Buying A Home With Leased Solar Panels
With easy-access sustainable energy gaining popularity all over the world, there are more homes with leased solar panels than ever on the modern housing market. Almost always, people are not selling their homes because of their solar lease, so there are still many great benefits of continuing the contract as a new buyer.
Aside from the carbon offset of adopting clean, renewable energy, purchasing a home with leased solar panels may provide buyers with the following benefits:
- Low, expected electricity costs for the remainder of the lease agreement
- Home purchasing power from a lower potential pool of buyers dissuaded by complicated lease agreements
- No future system maintenance costs or concerns, as everything is handled by the lessor
Read Also: Does Pine Sol Deter Mice
A Real Life Story On Leasing Solar Panels
Ill actually start this out with a couple, potentially very scary stories/warnings.
As Ive gone to purchase homes both for myself and for the company to do our net-zero home renovations on, I sometimes run into properties with descriptions like this:
Beautiful small home nestled in the heart of XYZ city. Price is $220,000 with solar panels, $180,000 if you pay of the solar system.
Now, in the madness of the real estate market and trying to find a home in general, you have to figure this one out. What it means is that the sellers had signed a solar lease, and they cannot sell the house without paying off the system contract price to the solar company that owns this lease.
The realtor, in this case, had told me that the previous couple had made an emotional decision and signed, but now there was a lien on the house and the system has to be paid off by $40,000 before they can sell.
Since we design solar systems here and after taking a look at the roof, I knew the system only cost the installer a max of $15,000 or so, given the amount of panels and overall KW size.
This isnt to scare you off immediately here, but these are real stories. Be careful of what youre signing up for and read these contracts fully, and probably multiple times over.
Home Or Property Sale
If you are thinking about installing solar power, you must consider how renting or ownership will impact the sale of the property. In certain instances, buying solar panels is the best option because they increase the propertys value. A home fitted with a solar power system will sell faster and make more money than one without solar power.
Yet, a lease will make your life more challenging because finding potential buyers willing to assume the lease contract becomes an issue. Your property will have fewer buyers, and the pool of potential buyers will shrink even further if the energy rates by the renting company are high.
Moreover, the solar installation service might be afraid of entering into a new deal, especially if the potential buyer of the property has a low credit score. Therefore, even if it is easy to find a property buyer willing to assume the lease contract, it will be challenging and time-consuming to spot a buyer the leasing firm wants.
So, if you plan on selling the property in the future, its best to buy solar panels because everyone wants to buy a property that produces its electricity for free.
Recommended Reading: Is Leasing Solar Better Than Buying
Buying And Selling Homes With Leased Solar Panels
If youre buying a home with leased solar panels, then the lease terms and agreement must be transferred into your name. As the new lessee, you will have the option to continue the lease as is, purchase the system outright, or terminate the agreement and remove the panels if the terms of the contract allow it.
Should I Buy A House With Leased Solar Panels
In order to effectively answer this question, we need to present a hypothetical scenario to you. The scenario is that you are a prospective home buyer and really like the look of a property. What is the only problem? It has solar panels attached to the roof and a few other areas.
You like the benefit of having solar panels so much, including the long-term cost savings, that you do not mind and are actually happy to buy them as part of the purchase. You tell the seller that you are willing to purchase the solar system as part of the house price and feel like you are doing them a favor because they do not have to take them down and move them.
This is when they drop an enormous bombshell. They do not actually own the solar panels. Instead, they are eleven years into a solar lease with a built-in escalation clause. The lease is going to go on for another fourteen years. As part of the house purchase, you need to be willing to take on the payments for the solar lease for the duration of its remaining lifetime.
Currently, the escalation clause has led to the monthly payments increasing to the point that the monthly payments on the system cost roughly the same as standard utility rates would in your area. As the years progress and starting from two years down the line, you are going to be paying more money per month for using the solar panels than you would for grid power.
Recommended Reading: What Voltage Are Solar Panels
You Add Value To A Home When Buying Solar Panels
When you buy your dream house and put the starter home on the market, you will learn that home buyers no longer look at solar panels as a strange new thing. Solar energy adds value to a house, especially if you show your buyers energy bills with a zero balance or even a credit.
In regions with high energy costs, like California, buyers will line up to buy a house with solar energy.
Worst-case scenario: You dont find a buyer who wants your house WITH the panels. You then move the panels to your dream house, rather than buying new ones.
Solar leases have been known to scare buyers off.
Recommendations About Forms Of Acquisition
This is the background of the Bottom Area shown below. It’ll display correctly on published site.If you don’t want background for the bottom area, simply hover over the bottom of this image to delete it. The background of the bottom area will be a solid dark color.
Read Also: How To Build My Own Solar Panel System
Most Lease Agreements Have Restrictions
It is common for leases to restrict certain activities or developments the property owner might want to carry out. For example, lessees may not be allowed to replace the roof or build any structure on the property that might cast shadows on the system.
Also, the leasing company will need access to your roof to be able to maintain the solar panels for the duration of the lease. This may not always be convenient for you, the homeowner.
According to Choose Energy, another factor is that leasing companies tend to design solar systems to fit their specifications rather than being guided by the number of panels homeowners want or where they want them to be placed.
When you buy the system outright, you have considerably more freedom determining the size of the system and how it is installed.