Buy or Lease Solar Panels
So, you’ve decided to move to a sustainable option: solar panels. This is a great idea considering the amount of potential savings you can benefit from this alternative. However, it’s no secret that moving to this option doesn’t come cheap.
Aside from purchasing the actual panels, you may have to make changes to your roof and you may need to hire a professional to do the installation.
In some countries, there are not many solar panel installation experts, so the fees for one can break the bank if you don’t plan it well or set aside enough for it. The good news is, you have an option to either buy or lease solar panels. Of course, each option has its pros and cons.
Buying solar panels can cost you around $15000 to $30000. If you have the cash, you can buy the parts and services upfront. However, you can also make a loan to purchase solar panels and get them installed or serviced.
Also, leasing can be more affordable for you. With leasing, you will sign a contract with a solar company, and it will install and maintain your solar panel system usually at a monthly rate. Therefore, it will seem just like a monthly electric bill.
However, if you lease instead of buy, you can lose all the potential tax incentives. Making a decision can be problematic without enough context. To help you choose, this article will go through the benefits and downsides for each option.
Pros and Cons of Buying Solar Panels
With the world leaning towards more ecological alternatives, buying solar panels has a better advantage than leasing in terms of cash back. With this pricier yet smarter option, you will get reductions (some areas can go up to $6,000/ kilowatt) and a 30% tax credit from the government.
This is besides the fact that you’re up for the additional Solar Renewable Energy Certificate (SERC) income that your new solar panels generate. Take note that a purchased solar system is considered an ownership, which means that your home value increases substantially, and you can raise its selling price, should you decide to put it up for sale.
If you decide to take a loan to buy solar panels, any interest accrued from the borrowed money can be deducted from your future tax returns. Therefore, a purchase gives you tax and income incentives now and in the future.
Of course, the major drawback of buying is the expenses. You will have to give up a huge sum to successfully have the system completely functioning in your home. The solution to this problem is through applying for a loan, which can only be approved if you have a good credit standing.
Pros and Cons of Leasing Solar Panels
The other option is to lease solar panels. This is an attractive option because you can get the panels at a starting cost of $0. Since money is not an issue, you can get the panels installed right away and get the energy savings as soon as possible.
You can think of it as renting an apartment and getting the electricity and water connections added as soon as you sign the rental contract. The same logic applies for leased panels.
There’s a list of cons with this option, though. First, agreements with your provided usually last for 10-20 years, which means you are tied with that solar company with a monthly owing for a really long time. You will also not be able to take advantage of the tax returns and credit benefits since you only have the lease solar panels type.
You will also not be able to sell your property easily until you’ve paid the provider in full, as it becomes unattractive to the potential buyer because of the debt still owed.
Finally, instead of enjoying all the revenue from reducing your carbon footprint, the solar company gets it all. So when you decide to buy or lease solar panels, the benefits of the former outweigh the benefits of the latter.
Buy or Lease Solar Panels Comparison
To further establish the difference between the two options and to help you finalize your decision of whether to buy or lease solar panels for your home, refer to the comparison table below.
|40-70% in energy costs plus free electricity while your system is functional||10-30% of energy costs|
|Requires professional fee minus the reductions||Done by the solar company leasing the panels|
|Maintained by the owner, may be covered by manufacturer warranties for a few years||Maintained by the solar company at no costs|
|Increases value of property||Makes it difficult to transfer the ownership of the property with the leased panels|
Difference Between Solar Lease and Solar PPA
Aside from leasing, you can also sign a Power Purchase Agreement (PPA) with a solar company. In many ways, leasing solar panels and signing a PPA to acquire them are similar.
With both methods, you will need to connect with a provider and pay them on an instalment basis. The main dissimilarity of solar lease vs solar PPA is that for PPA, you only pay for the solar energy you used. This means you don’t pay a fixed amount versus what will happen if you lease them.
The drawback with this option, though, is that you will usually have to pay for a down payment of about $1000. However, this payment comes with covered maintenance and service of your panels, plus a connection to the grid to supply additional power to your unit if needed.
With leased ones, you do not have to pay a deposit, but you won’t have that connection to the solar provider’s grid. For both methods, though, the tax incentives will go to the solar company, but you have an opportunity to buy the panels when your contract is about to end.
Solar Panels Purchase: Cash or Loan?
So, imagine you’ve decided to buy solar panels instead. The challenge now is producing that large initial amount of money to cover all the expenditures for the installation. It’s a good thing that you can actually apply for a loan.
With good credit standing, you can get the needed cash for the entire solar panel transition from your local banks. Like any loan, it comes with a contractual obligation to pay for the amount with set interest. Some loans can be paid in a spread of 10 to 25 years with a 3-8% interest.
After completing the payment within the set term, the system is officially yours. This is what makes cash payment more beneficial as the ownership of the system is immediately yours upon purchase.
Cash payments are also generally cheaper than loaned purchases due to the interest acquired. With a large purchase amount, you will also immediately feel the discounts and tax benefits.
Buy or Lease Solar Panels: Conclusion
Deciding to switch to solar panels is always a good choice. However, making the decision of whether you should buy or lease solar panels is tricky. You have to evaluate your current capabilities to determine if you can afford to make a big purchase or whether you should just go for the lease option.
Of course, purchasing is the better option, but it can really take a lot to collect that large amount of money that you need. You have the option to apply for a loan instead. Although it may seem that the savings with a lease are initially higher, in the long run, purchased panels will give you better returns.
Another option is to sign a Purchase Power Agreement with a Solar Company. You may pay a little lower than leasing, but you also have the option to own the panels at the end of your contract. However, this option is not widely available, so it will be a good move to check if it is, so you can eliminate it from your list if it’s not actually a viable choice.
Regardless of what you choose, you will get energy savings from transitioning to a solar energy source. You will also be able to help the planet. If you really want to make the best decision, calculate your expenditure and potential energy savings for all options. A mathematical approach can allow you to make the most objective decision.