Solar done right is a win-win for the homeowner and the environment. But there are a few important things you need to consider before you sign a contract. Let’s look at them step-by-step.
To Lease Or Not to Lease?
You have two fundamentally different financing options if you want to go solar: You could lease the solar energy system or you could own it. In the last few years, third-party ownership like zero-down leases or Power Purchase Agreements (PPA) have been very popular in the U.S., making up about 67% of the market in 2014. Experts predict, however, that in the future more homeowners will actually purchase their solar panels again with attractive solar loan offers becoming ever more popular. If you look at it from a pure financial perspective, it is safe to say, that owning the solar panels will almost always leave more money in your pocket in the long run than entering into a lease or PPA contract. But there are still scenarios when it might make sense to lease instead of buying.
Leasing could be a good option for you if…
- …you don’t owe enough taxes to take full advantage of the available federal tax credits.
The federal government allows you to write off 30% of your investment, some of that maybe be carried forward to the next five tax years. You can find more information on their website.
You may also want to consult with your CPA about the issue before you decide whether to lease or to buy. If you lease or sign a PPA, the company that installs your system claims the credit for itself.
- …you don’t want to deal with maintenance issues.
While solar panels require very little maintenance, you should expect to replace the inverter at least once in the 20 year life span of a system. If you lease, the leasing company has to deal with warrantees and replacements. Recently, solar loan companies started to address the issue as well by offering operations and maintenance services (O&M) bundled with their loan offers.
- …you want to save money right away.
This common argument is made by the leasing companies because, after the solar energy system is up and running, the sum of your new (lower) utility bill and your lease payments will be lower than what you paid before. If you buy a system outright, it would take several years before your savings would exceed the money you paid up front. A solar loan with a zero-down option, however, would also allow you to save money from day one.