Lease vs Own?

Jul 18, 2023Amanda's Corner0 comments

This is a BIG question when considering going solar. And Buyer Beware!! There are too many unscrupulous ads, gimmicks, catchy tag lines, and companies out there steering solar customers down a potentially rocky road. So let’s break it down.

Do you ever see the ads, “Get Solar for ZERO $ down?” or “The Government wants to pay YOU to go solar!” or “Free Solar! Click here for more information!” Yeah…reality check. There is no Free solar, the Government isn’t going to pay you to go solar, and frankly, no money down is common whether your lease or buy. So there’s no magic wand there. I think of these ads as bait and switch. They want to lure you in to call or contact them, and then they’ll encourage you to lease your system, or lock you into a PPA (Power Purchase Agreement), without truly explaining the costs and benefits of owning vs leasing vs PPA..

So how do you muddle through all the misleading advertisements of unscrupulous companies to figure out what’s best for you? I hope to shed some light on that for you here today.

Hands down, the best financial investment and resale decision is to own your own solar system. But why? So many reasons. You have options so you aren’t putting substantial money down out of pocket. Many reputable solar companies will provide you options to pay 100% cash, and possibly negotiate a better overall price. This option will result in money out of pocket up front, obviously, but the best overall net cost. The next best option, and the way I personally went, is to put no money down, zero out of pocket, and get a solar loan. In most cases, this is very cost effective, and can be a lower payment than your average monthly electric bill! Lastly, you can pay for it through a home equity loan or some other personal loan. Rates may be higher, but in some cases, the interest may be tax deductible. Consult with your tax accountant.

Regardless of the way you go about purchasing your solar array, the benefits are numerous! In most cases, you can do so with no money down whatsoever. Your payments will likely be less than your average monthly electric bill, so you are already “winning.” You benefit directly from all of the Federal, State/Local, and installer incentives and rebates. Your ROI (return on investment) is in the 5-7 year range, at which point, your pockets are filling up, rather than emptying! Solar arrays that are owned increase your property value and appeal to savvy buyers looking for energy efficient and environmentally friendly upgrades. You recoup your costs initially in the energy savings monthly, then AGAIN when you sell at an increased value. You are in control of your roof, your panels, your rebates and incentives, your energy use and savings, your increase in home value, appeal, a faster sale, and you are contributing to and benefiting from the environmental benefits, sustainable energy, and reduced carbon footprint.

No matter what, going solar in any way is more affordable than staying with a utility 100%. But buying your solar system offers the greatest savings over leasing or a PPA. Studies show more buyers are seeking energy efficient upgrades and “Green” technology. Solar adds value and typically results in a sale price 3.74% higher than comparable homes without solar. It can also sell your home 20% faster. The actual value of the solar array can add between 4.1%, $1.00 of annual electric savings to approximately $20 of house value increase, or $5900 per kW of system installed. Basically, that means, on a $500,000 house with a 10kW system, this can be anywhere from a $20,500 to $60,000 added value!!! Fannie Mae has implemented guidelines specifying if a household owns a solar array system, an appraiser should assess its value. So it’s catching on!

So, why not lease? Consumer Reports states people who lease save far less than those who purchase outright or with a loan. Those who lease also do not directly benefit from the Federal or Local/State tax incentives. The Federal tax incentive is currently 30%! We’re talking savings of $7,500-$10,000 on a $25,000-$33,500 system. But not if you lease. If you lease, the solar company benefits, not the homeowner. Many leases also include an escalator clause, meaning your payments will increase by roughly 3% each year. Your savings could literally evaporate if your lease payment rises faster than the energy rates. Most leasing companies need to maximize their profit, so there’s a chance you’ll end up with a bigger system and more panels than you really need. And once the lease is up, the solar company may remove the system from your house, and you are now back to paying full utility rates, at likely significantly higher costs. And here’s a real kicker – leasing could actually deter buyers for your home and complicate a sale. You may have to buy out the lease in order to sell, or your buyer may have to assume it with all the existing terms. Many buyers are reluctant to do so, and if they are willing, they’ll have to qualify financially to assume the lease or obtain a loan, in addition to qualifying to buy the house. Ouch.

Leasing means you own nothing… you are renting from the solar company. It adds no value to your home, the lease end buyout can be quite substantial, it can complicate the selling process, and possibly deter buyers, and you don’t benefit from any tax incentives.

A PPA is very similar to leasing, in that you, again, do not own the system. You give a solar installer permission to install a mini-power plant on your roof, and you purchase your power from the solar installer instead of the power company. Again, the installer reaps the tax benefits, not the homeowner. You can pay a fixed rate or an escalated rate, as referred to in leasing. In a PPA, the installer will guarantee a minimum production, but I have found that to be true when purchasing a system as well. Otherwise, the benefits and drawbacks are very similar to leasing.

Bottom line? Going solar in any way is more affordable than staying with the utility company and doing nothing. Buying is by far the greatest savings benefit. You should ask yourself, 20 years from now, would you rather have:

  • A monthly utility bill of $400-$600
  • A monthly lease payment of $250
  • A paid-off solar system with five years still remaining on your warranty and little to no electric bill
  • Or No electricity?

Reach out to EcoSmart Home Services if you have any questions about purchasing, leasing, or enrolling in a PPA for solar. I personally bought my system using a 12 year solar loan, received Federal and State tax incentives, and have a loan payment that is lower than my average monthly electric bill was 4 years ago, before electric rates went up significantly. So I am already coming out ahead. Today? No doubt I am saving even more with the rise in utility rates. I know the increased desirability by buyers looking to minimize monthly expenses, and the increase in value due to my solar array, will pay me back the cost of my system and more!

Take time to soak up some sun!