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Home Solar Power System – Should You Buy or Lease?

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Residential Solar Power Systems Booming, but Should You Lease or Borrow?
Residential Solar Power Systems Booming, but Should You Lease or Borrow?

Taking a look at residential solar power systems, a lot has changed in the last decade. True, solar power systems have been around for decades, exorbitantly expensive being just one reason why there weren’t a lot of systems being installed.

Even five years ago, a 5 kW solar power system cost in the range of $40,000. Part of the problem with this expense was that they were insanely difficult to finance. Banks really had no idea what to do with them, and most simply refused. Even today, with prices for the same system bottoming on $15,000, most banks still don’t really understand how to secure or properly price loans.

On the other hand, solar power system leasing came along just in time to help residential owners take advantage of solar tax incentives and clean renewable energy for their homes. Big companies, like SolarCity or SunPower, could aggregate thousands of them into a single huge loan, something that the big banks could understand.

Still, with solar power system prices dropping, thanks to more-efficient and cheaper solar panels, some small banks are venturing into offering loans for them. Mostly, banks’ willingness to consider the possibility has to do with the costs, less than half that of even five years ago, as well as finally learning how to price and secure new solar systems. The question is, should you lease or borrow your way to a new solar power installation?

Of course, the answer is “It depends.” Mainly, the issue has to do with who owns the system when, or if, you decide to sell your home. While studies conclude that installed solar powers systems add upwards of $15,000 to the value of a home, they can be easier, or more difficult, to sell, depending on whether the system was leased or loaned. With a lease, the new owner could be saddled with the remnants of a 20-year lease, in addition to the mortgage, because the system is not part of the house. On the other hand, a solar power system financed by loan easily becomes part of the home and can be rolled into the mortgage.

If you have the income to offset tax benefits of installing a residential solar power system, or you are considering selling your home, then getting a loan makes the best financial sense. On the other hand, if your income is lower, and you have no plans to sell your home, $0-down lease deals could be the way to go.

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3 COMMENTS

  1. Solar leases and PPAs are two of the most expensive ways to have solar on your roof.

    1. Add up your lease payments and when compared to an outright solar system purchase you’ll typically find that you’ll easily be paying up to 3 times more on a $0 down solar lease versus a purchase. Today, pricing for an average sized 4.75 kW purchased system has dropped below $11,000 after applying the 30% federal tax credit.

    2. You’ll typically pay so much more for a lease than a purchase that’s it’s actually you who will be over-paying for your own maintenance, monitoring and insurance not the leasing company. Why do you think so many solar leasing companies are BUYING solar systems while leasing them to you?

    3. You may have trouble selling your home because what home buyer in his right mind will want to assume your lease payments on a used, outdated system when they can buy a brand new system with the latest technology and keep the 30% federal tax credit for thousands less.

    Don’t believe it ? Well then simply type the keywords “solar lease scaring buyers” into Google and you can read many accounts of homeowners and real estate professionals reporting difficulty when trying to sell a home with a 20 year solar lease or PPA attached to it.

    4. After making 20 years worth of leasing payments, you won’t even own the system. It will still belong to the leasing company. If you want to own their system after making all those payment, then you’ll have to buy it from the leasing company at the end of your lease at fair market value.

    5. Check that quote from the solar leasing company and you’ll find that most of the time they won’t even tell you what brand of equipment they’re installing on your home. I wonder why?

    6. Most if not all $0 down solar leases include an annual payment escalator that will increase your monthly payment by up to 2.9% per year for 20 years.

    Imagine what would happen if your utility company decides to, or is ever mandated to lower their rates or flatten out their rate tier structure, like is happening in California. You could end up being forced to pay more for your electricity than if you never had signed that air tight, escalating solar lease contract in the first place.

    7. Remember, the solar leasing/PPA companies are still using Gen 1, boxy looking aluminum framed solar panels that were originally designed back in the 1950s, instead of the latest, Gen 2, higher performance, one quarter inch thick, glass on glass, double sided solar panels that are now available. So you’ll be stuck with the same aging solar system on your roof without the ability to upgrade for the full 20 year term of the contract.

    Your neighbors are just going to love you at year 13 of your 20 year lease with that boxy looking superstructure bolted to your roof. If you bought your system instead, you can sell it at any time you wish and take the proceeds from the sale and upgrade to the latest and greatest equipment that will produce even more power in the same amount of space and improve your home’s curb appeal. You can’t do that with a lease because it’s not your system to sell.

    8. You’ll have to forfeit the 30% federal tax credit and any applicable cash rebate to the leasing company and you won’t get tax deductible interest on your lease payments. Only a $0 down FHA solar loan or second mortgage can give you tax deductible interest and let you apply all of your incentives to a lower priced system for a much better return on your investment.

  2. Think of it this way:

    Your home is designed to use the 110v AC grid, yet ‘everything’ with the exception of your ‘electric central home heat’ is now automatically converted to ‘Low Voltage’ DC. If the major cost of Solar heat is converting Solar DC to AC, in order to be converted ‘back’ to D/C, then why not CONVERT THE HOME to ‘low voltage DC”? The existing AC grid should be dedicated to the backup role, in order to support “central” heating, DC refrigeration, etc., all to ultimately be integrated and supported by TDI Diesel (of course air-cooled and running on 100% Veggie Fuels).

    The above is OTS technology that can be easily be implemented (particularly with the use of today’s microprocessor controlled circuitry). No longer does Solar have to be bare the burden of support for a high AC voltage, 300/600 amp residential load center – just to run your computer (or 90% of everything else in your home and hell, your lighting should be LEDs transferred/multiplied and terminated through magnified lenses anyway @ 1 x 100).

    I’d better explain the LED concept: 1 LED can be transmitted and thereby multiplied by 100 lighted fiber optic terminals, with each terminal x 20 (insulated) strands p/light, terminated (elsewhere at any distance) at and/or through magnified lenses (magnified similarly to the way a subminiature bulb now makes a full size auto headlight). Conceptually, lighting an entire home, using low voltage LEDs, and multiplying their elimination (without heat transfer) should not present a problem

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