Thousands of homeowners have made the decision to switch to a cleaner source of energy, and most have considered the switch as a long term investment in the benefits their solar system will provide. But like any investment, there is the question of which financial option is most beneficial. Should you buy or lease your solar panels? Your personal goals and preferences are central to answering this question, and different solutions can be better for meeting different personal and financial goals..
So here is a closer look at more information on the details and advantages for buying and leasing solar panels.
Benefits of buying solar panels
You can buy solar panels either outright with cash or, as most qualified consumers do, with a $0 down loan.
Buying solar panels outright with cash has many great advantages. Buying a system outright will always result in the most savings, as homeowners can outright eliminate their monthly electricity payments from their budgets.
Purchasers who choose to utilize a loan option also benefit from long term economic benefits. There are several financing programs that allow qualified homeowners to purchase a solar power system at no upfront cost. At PowerScout, you can begin your journey towards clean energy with no initial costs by choosing a $0 down financing option offered by our partners. You can choose from many $0 down loan programs and several $0 down PACE financing options. PACE financing is a form of financing where the loan is repaid through the property tax bill and usually has lower credit requirement criteria.
Purchasers who pay federal income taxes can also receive 30% of the solar power system price in federal tax credits. Unlike a tax deduction, a tax credit is a dollar for dollar reduction in your tax bill. This means you are effectively spending only 70% of the quoted system price. In addition to federal tax credits, you may also be eligible for state tax credits and rebates, depending on the state you live in. In some states, you may also receive payment for each unit of solar electricity that your solar panels generate. The solar panels can often pay for themselves after a few years with a combination of these tax incentives and rebates and money savings from reduced or eliminated electricity bills.
Most solar panel installations are worry-free and come with many forms of guarantees: a 25-year guarantee for the electricity produced by the panels, a 10-25 year warranty for the inverters and a 10-year workmanship warranty for the installation itself.
Benefits of leasing solar panels
Customers who prefer to lease their solar panels or sign a Power Purchase Agreement (PPA) also have some advantages to enjoy. In both the Lease and PPA, you get the benefits of solar energy without owning the solar panels.
The primary difference between a Lease and a PPA is that, in a Lease you pay a fixed monthly fee while in a PPA, you pay for the electricity produced by the system each month. So, in a PPA you may pay more during the summer months when the solar panel system is producing more electricity than in the winter months.
While Leases and PPAs don’t typically deliver as much financial savings as loans or paying cash, they are better for consumers who have little to no income tax liability. In such cases, owning a solar system would mean WASTING the 30% federal income tax credit. Opting for a Lease or a PPA in this case makes more sense as the solar company that owns the system can capture those tax incentives and pass the benefit to the homeowner through a reduced monthly lease or PPA payment.
Leasing or a PPA may also be better if you want to avoid being responsible for any maintenance or repair of the solar panel system. The solar company will install and manage the panels throughout the duration of your lease or PPA, and you are still able to get the system for no money down. You are free to purchase outright or renew your agreement at the end of the term.
How to choose the right option for you
There are opportunities and rewards in both buying and leasing solar panels. Each customer's individual circumstances and preferences will ultimately determine the importance of the practical differences in factors such as costs, financial benefits, maintenance, and savings.
The most important part is to consider and review all of these factors beforehand. This will ensure the best possible outcome and the maximum benefit from your solar investment.