When installing a solar power system at your home or business, you can choose between two financing options – buying your system or leasing it.
It’s a simple distinction between owning your system or having a third party own the system, but it also impacts the cost, maintenance, terms, financial offsets, and savings/returns on investment of your solar panel system.
Making the choice depends on your goals for installing the system.
Owning your own system is the best choice when you want to get the most financial benefits from the system as possible, such as being able to add the system’s value to your home or business should you sell your property.
You should also consider owning if you are eligible to reduce your federal and state tax liability through the federal investment tax credit. Businesses can also realize tax benefits by treating the solar panel system as a depreciable asset.
A solar lease/PPA is your best option when you are primarily interested in using electricity generated from renewable resources and want to avoid the costs of maintaining and repairing the system. It’s also a viable option if you are ineligible for federal or state investment tax credits.
Here’s a look at the practical differences in cost, maintenance, terms, opportunities for financial offsets, and savings/returns on investment, depending on the financing decision that you make with some help from energysage.com.
Installation cost
• Solar loan/cash purchase
Solar power systems can cost $25,000 to $40,000 before rebates and incentives.
State and Federal rebates can reduce the total cost by up to 40 percent. Most solar installers will manage the paperwork and adjust the purchase price to reflect the net amount.
• Solar lease/PPA
You can get a solar energy system for little or no money down. However, you won’t qualify for tax credits, rebates, or incentives – those belong to the third party owner of the system.
Maintenance
• Solar loan/cash purchase
You own the system and are responsible for maintaining it. Note that solar equipment is durable and carries warrantees, so you won’t have much maintenance to worry about.
Your purchase may not include an app to track your system’s performance.
• Solar lease/PPA
The solar company owns and maintains the solar power system.
Most leases include free apps that track the performance of your system.
Terms
• Solar loan/cash purchase
Loans are generally available for 10 to 20 year terms, with interest rates ranging from 3 percent to 8 percent if you have a FICO credit score of 640 or above.
• Solar lease/PPA
Solar leases and PPAs are generally for 20 to 25 years, at which point you can renew your agreement or purchase the system outright.
Savings and return on investment
• Solar loan/cash purchase
You can save between 40 percent and 70 percent on electricity costs over the lifetime of your solar panel system, depending on your property and the incentives in your state.
You receive free electricity for the life of the solar energy system (usually 25 to 30 years).
• Solar lease/PPA
You can save between 10 percent and 30 percent off the prices you pay your utility for electricity, depending on your property and the incentives in your state.
Before you make a decision on buying or leasing your solar power system, explore all of the solar financing options available to you. Every situation is different, and what is best for your property depends on a wide range of factors. We can help you make the best choice for your circumstances.
Do you have questions about solar installation or financing? Call TerraSol Energies at 888.873.9995. Or leave us a note on our contact form. We’ll be happy to help answer any of your questions.