What’s the difference between buying solar panels with a loan and leasing them? If you’re wondering what’s the best option for you, you’ve come to the right place. Let’s go through what you need to know about leasing vs. buying solar panels.
What Are The Pros And Cons Of Leasing Vs. Buying Solar Panels?
Leasing solar panels has some pros and cons of its own. It’s important to note that the benefits are more pronounced for homeowners with good credit scores. Here are some of the pros of leasing solar panels:
Benefits of leasing solar panels
Lower upfront costs
When you lease solar equipment, you don’t have to pay for the entire installation cost. The leasing company covers the rest of the expenses. That means that your monthly payments are more affordable than they would be if you had to pay for everything upfront.
No maintenance worries
Solar leases typically include routine inspection and maintenance. The leasing company takes care of all the maintenance and repairs for you. You can continue to enjoy your system without having to worry about its workability or reliability.
Avoids risks involved with buying solar panels
Homeowners who lease their solar equipment avoid risks like market fluctuations, obsolescence, inability to pay off loans, and non-transferability.
Offers various payment plans
A solar lease offers more payment plans than a purchase. You can choose to pay the entire installation cost of the equipment or make smaller monthly payments over an extended period of time.
Equipment upgrades
When you lease solar panels, you have access to newer technology as it becomes available. That means that your system will always be up-to-date and can take advantage of the latest advancements in technology.
Cons of leasing solar panels
The term is usually short for a small monthly payment
Many solar leases have a term as short as 10 years, but often much longer. While this might seem better than a loan, keep in mind that shorter terms make it more difficult to benefit from rebates. In addition, more expensive equipment upgrades can mean that you pay more in the long run.
Non-transferrable benefits
The benefits of a solar lease are non-transferable, which means that if you move homes (or sell your home and move in with someone else), the new residents won’t be able to use the solar system. That means that you may end up paying both your previous and new utility costs.
Could put your home at risk for foreclosure
Some leases can keep you from selling your home if you don’t pay off the lease or make timely payments. If you go through a short sale or foreclosure, you’re still responsible for paying off the solar panels.
When Should You Buy and When Should You Lease?
It’s important to note that leasing isn’t the best option for all homeowners. Some solar equipment is more affordable when you purchase it outright. Some state and local incentives are only available to people buying solar panels rather than leasing them.
In addition, going through a lease agreement requires going through a third-party company, which means higher installation costs. You can keep your installation costs low by going through a purchase agreement with a solar leasing company, but you’ll end up paying more over the lifetime of your system if you go that route.
When should you buy and when should you lease? If your credit score is high enough to qualify you for a loan, it’s usually better to buy your solar equipment rather than leasing it. Otherwise, the best option is to study up on the various benefits of buying or leasing and then make an informed decision.
FAQ
What is the difference between a solar lease and a purchase agreement?
A solar lease means that you pay off the system over time with monthly payments. The leasing company owns the panel, but you can save money by having reduced electric bills as long as you make your monthly payments on time.
What does it mean when people say “lease to own?
Lease to Own means that you are essentially leasing the equipment with an option to buy. The exact details will depend on the contract, but at some point, you should be able to purchase your leased solar panels for a lump sum, which is then deducted from what you owe.
Does it benefit you financially if you buy solar panels instead of leasing them?
The answer varies, but in general yes. You will save more money if you purchase the equipment upfront rather than lease it.
What is my home’s eligibility for a solar panel lease?
If your roof is not shaded and has at least 40% coverage, it should be good to go.
What is a third-party owned or leased system?
This means that the panels are owned by an investor and leased to a homeowner in exchange for reduced utility costs. This can be a positive in some cases, but it does add another layer of complexity to the process.
What is a system or equipment warranty?
It’s important for homeowners to consider what kind of warranty they should expect when purchasing solar panels. Most systems offer 25-year warranties, though some last longer, which will save you money in the long run.
How do I finance my home solar panel lease if I can’t get a loan?
There are several options in this case. You can use cash equity, in which you take out a second mortgage on your home to pay for the solar panels.
If you don’t own the home yet, you could ask your lender if they will allow you to pay it off through an equity line of credit. If you own any kind of assets, like stocks or bonds, you could sell them to pay for the system; however, this is likely to lead to capital gains taxes, which will be assessed once you sell your assets.
Conclusion
Solar power is on the rise, and many people are debating whether to lease or buy their solar equipment. Leasing has some benefits over purchasing outright, but it’s important to do your research before making a final decision about which option best suits you.