Solar Buy vs Lease
|Buying Solar||Leasing Solar|
|Monthly energy savings||Homeowner receives all energy credits||Leasing company receives majority of credits|
|Tax credits and incentives||Homeowner receives all rebates and credits||Homeowner receives no rebates or credits|
|Upfront installation costs||Homeowner pays all but can roll into mortgage or credit line for positive cash flow in first year||Low or no upfront costs|
|Home value||Home value increases by $20,000 for each $1,000 offset in annual electricity cost||Value of home does not change and new homeowner must negotiate new lease terms|
Many people with hopes of going green face the decision to buy or rent a renewable energy system, yet are not aware of the problems with solar leases. The decision to change any home or business to renewable energy is an important one, and every consumer should fully understand the differences between renting and purchasing these systems.
Practically since their invention, sun-powered energy panels have been deemed “too expensive” to own, and any home or small business owner is better off entering a contractual agreement. However, technological advancements in recent years have significantly reduced the cost of ownership, and a new system can fit into any budget. Although it’s true that most leases for these systems are at a fixed rate with no down payment, many customers do not know that the leases contain an ‘escalator clause’. This clause causes payments to increase over time. With an increasing rate built into the contracts, customers find that the cost of renting exceeds their average utility bill in just a short period of time.
Several states offer a variety of tax incentives and other benefits, but only to the owner of the solar panels. One of the problems with solar leases is that the consumer is only renting the equipment; therefore all financial benefits are funneled to the lender of the systems. The federal government currently offers a 30% tax credit on the cost of installation, but only to the person or entity that owns the panels. Some states also offer significant cash rebates to purchasers that can reach up to $6,000!
More problems with solar leases arise when a home or building owner wishes to sell their property. The potential buyer must assume responsibility for the rental agreement. If the buyer does not, the original signee of the leasehold must buy out the remainder of the agreement, or otherwise default. This can present a difficult situation when faced with an attractive offer to sell that is hindered by the requirement to spend money in order to avoid financial delinquency.
However, someone who owns photovoltaic panels can increase the market price, and advertise the incentive of savings on utilities to any buyer without complicating matters with another monthly payment. After the short one and a half day installation time (on average), sun-powered energy systems require little maintenance, if any, throughout the life of the structure. However, setups that are borrowed are owned only by a company that, over time, will aggressively advertise for its customers to upgrade to newer panels. The financial problems with solar leases include the cost of the system to correspond with the ever-increasing price of average utilities. However when one purchases a system, a new owner can essentially see their investment pay for itself in as little as four years.
A common misconception of investing in photovoltaic panels for a home or small business is that the systems are only effective in specific geographical climates. This worry can be disregarded; solar panels have been proven to work all over the world. This also means that any location in the continental United States and Hawaii is capable of supporting energy from the sun. Thousands of customers nationwide are utilizing renewable energy, and that number continues to grow as more people learn the benefits of owning this technology while recognizing the problems with solar leases.