Purchasing vs. Leasing

Adrienne SorensenOctober 2, 2018 788 0

Purchasing vs. Leasing

In a continuing trend people are moving away from solar leases, and deciding to either buy their panel systems through home equity loans or home equity lines of credit. It makes financial sense to buy them rather than lease them. If you lease your panels, then you lose on much of the savings associated with purchasing them.


Also, the price to install a solar pv system has dropped dramatically in the last five years. First, the cost of manufacturing panels has dropped while the efficiency has improved. Second, the price of installing those panels has dropped because of competition, and efficiency. If the solar panels are more efficient, then you need less of them to get the power you want.


If you need fewer panels installed, then it costs less to install them. Many banks were not including panels in home equity loans, or home equity lines of credit. All of this has changed. Now almost 60 percent of deals are people purchasing their panels rather than leasing them. It is from a combination of factors.


First, the price for the installation process has dropped, the panels themselves are less expensive, and because more people want them on their homes, banks see the value and are willing to finance the deals. Most experts agree that It is better to pay for your system with a home equity loan or home equity line of credit than to use an unsecured loan or a credit card to pay for them.


Because your home is the collateral for the loan, most home equity lines of credit have low fixed interest rates and they range from five to 20 years. A home equity line of credit is like a loan sitting on the sideline, just in case you need it. Maybe you don’t need anything for five years, and then your roof starts to leak and you decide that is the right time to get solar too.


That home equity line of credit you have lying around can pay for that roof and solar, and then you have 10 years to pay for the money lent. Lines of credit do have variable rates, so it is important to check before activating the credit line if it has been a while since you initially received the line of credit.


Purchasing is the Best Way to Go

A lot of people are turned off from buying their solar panels because of a steep upfront price that pays off over time. Banks were not open to home equity loans, companies seized on that opportunity. It was appealing to homeowners to pay little or nothing upfront and have solar panels installed for the same price they are already paying their utility.


Leasing can also look a lot simpler than purchasing the system. You don’t have to find the equipment or shop around for different installation companies. Instead, people just signed on the dotted line. This is why so many people leased their solar systems as recently as 2014.


The True Savings

There are quite a few ways you don’t save as much money if you lease your residential solar system. You miss out on a Federal tax credit totaling 30 percent of the cost of the system.


Many states also offer tax credits on the equipment bought, and there are net-metering programs across the country that help pay for the cost of the system. Then there are escalator clauses which may be in your lease contract, which states that they can raise the cost of the lease by as much as three percent a year.


If the cost of energy doesn’t rise as fast as those payments, then your savings will be gone. You may even pay more. It is pretty simple. Buying your solar panels is always a better deal than leasing them. It takes a bit more work than the sign-here approach of leasing panels, but in the end, the panels pay for themselves while adding value to the home.


If you want to see how much you can save from utility visit and try our price checker tool. You can see how much a system will cost, and how much you can save over the next 20 years. For more information relating to going solar, don't forget to visit our solar blog section for more handy guides and articles.

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