Why it is better to finance your solar panels than lease them

In a continuing trend people are moving away from solar leases, and deciding to either buy their solar panel systems through home equity loans or home equity lines of credit. 

There are a few reasons for this, but mostly they all boil down to one factor. It makes financial sense to buy them rather than lease them. If you lease your solar panels, then you lose on much of the savings associated with purchasing them. Also, the cost to install a solar system has dropped dramatically in the last five years.

First, the cost of manufacturing solar panels has dropped while the efficiency has improved. Second, the cost of installing those panels has dropped because of competition, and efficiency. If the panels are more efficient, then you need less of them to get the power you want. If you need fewer panels installed, then it costs less to install them.

That was not the case as little as two years ago. Two years ago, more people in the US decided to lease their solar panels rather than finance them, because it was more economical to do so. Back in 2014, more than 70 percent of solar deals were homeowners leasing the equipment. 
 

Banks and lending institutions are open to solar panel financing

Many banks were not including solar panels in home equity loans, or home equity lines of credit. All of this has changed. Now almost 60 percent of solar deals are people purchasing their panels rather than leasing them. It is from a combination of factors. First, the price for the solar installation process has dropped, the panels themselves are less expensive, and because more people want them on their homes, banks see the value and are willing to finance the deals.

Most experts agree that It is better to pay for your system with a home equity loan or home equity line of credit than to use an unsecured loan or a credit card to pay for them. Because your home is the collateral for the loan, most home equity lines of credit have low fixed interest rates and they range from five to 20 years.

A home equity line of credit is like a loan sitting on the sideline, just in case you need it. Maybe you don’t need anything for five years, and then your roof starts to leak and you decide that is the right time to get solar too. That home equity line of credit you have lying around can pay for that roof and solar, and then you have 10 years to pay for the money lent. Lines of credit do have variable rates, so it is important to check before activating the credit line if it has been a while since you initially received the line of credit.
 

Why leasing solar panels is not a good idea

A lot of people are turned off from buying their solar panels because of a steep upfront cost that pays off over time. Banks were not open to home equity loans, companies seized on that opportunity. It was appealing to homeowners to pay little or nothing upfront and have solar panels installed for the same price they are already paying their utility. Leasing can also look a lot simpler than purchasing the solar system. You don’t have to find the equipment or shop around for different installation companies. Instead, people just signed on the dotted line. This is why so many people leased their solar systems as recently as 2014. 
 

You will not save as much money if you lease solar panels

There are quite a few ways you don’t save as much money if you lease your residential solar system. You miss out on a Federal tax credit totaling 30 percent of the cost of the system. Many states also offer tax credits on the equipment bought, and there are net-metering programs across the country that help pay for the cost of the system.

Then there are escalator clauses which may be in your lease contract, which states that they can raise the cost of the lease by as much as three percent a year. If the cost of energy doesn’t rise as fast as those payments, then your savings will be gone. You may even pay more.
 

You don’t control where the solar panels are placed

Many people are worried about not enough power, but what about too much power? Leasing companies are not about getting the right system for you. They are about getting more profit. If that means they need to add too many solar panels to your roof so they will make more money, then they will have the right to do that. They also can put them in places you may not want the panels to be located. It’s simple, you own your roof if you own your solar panels, and you don’t if you lease them.
 

Solar leases scare off prospective home buyers

Your home is also an investment, and if you have leases tied to that investment, it will make it harder to sell. Most solar panel leases are 20 years, and the average person sells their home after seven years. If you get a solar lease and then want to sell the home 10 years later. It will be an extra burden for the home buyer to assume your lease.

On the other hand. If you finance and purchase your solar panels. The owned solar panels will add value to the home and if there is any outstanding debt on the panels, it will be paid from the sale of the home.

It is pretty simple. Buying your solar panels is always a better deal than leasing them. It takes a bit more work than the sign-here approach of leasing panels, but in the end, the panels pay for themselves while adding value to the home. 

If you want to see how much you can save from utility visit HahaSmart.com and try our price checker tool. You can see how much a system will cost, and how much you can save over the next 20 years. 

For more information relating to going solar, don't forget to visit our solar blog section for more handy guides and articles.