More than a million American families and businesses have installed solar panels – and with each passing day, thousands more are joining them.
People across the country are using solar power to save money, reduce carbon pollution, increase energy independence, conserve water, and create a more resilient electric grid.
There are more ways than ever to adopt solar technology. Beyond buying a panel system outright, a homeowner can choose among solar loans, leases, power purchase agreements, or other customized payment plans. These options have helped solar become commonplace, but myths and misconceptions about them still abound, from online marketplaces to mainstream media outlets.
SolarCity has installed more than 9 million solar panels for upwards of 285,000 customers under all the options listed above. What we’ve learned is that there is no one-size-fits-all approach; the best option depends on the customer’s situation.
One of the most common questions we get about financing solar panels, however, is a pretty simple one: buy or lease?
The answer of course depends on your unique circumstances. Here are some considerations to think through.
Should you buy your solar panels?
Purchasing a solar power system – especially through a loan – is the fastest-growing way to go solar in the U.S.
Cash purchases and loan options can be very attractive if you are looking to maximize the long-term financial benefits of going solar.
Solar loans offer a range of payment terms — the most popular tend to be $0-down with fixed monthly payments. One way to differentiate among loan options is by looking at the services that are included. The best loans include a full 20-year system warranty and a performance guarantee (which encourages the provider to ensure the system is always delivering on expectations). While some service plans don’t amount to much in practice, a full built-in warranty is extremely valuable: replacing a power inverter, for example, can alone be worth more than a thousand dollars for a typical household.
When considering a loan, it’s also important to look for a low interest rate that allows you to pay off the system over a reasonable time period (e.g. 10 to 20 years), with an option to pay it off sooner if you’d like (at no penalty).
A key reason that buying a solar power system (whether outright or through a loan) can help you maximize financial benefits is the opportunity to claim a valuable tax credit. The U.S. government currently offers a 30% tax credit to people who purchase a solar power system. If your federal taxes are high enough to qualify for the tax credit yourself, then buying a solar power system is likely to produce greater long-term energy cost savings than a lease.
The chart below shows this comparison for an example home in California: buying a solar power system outright is likely to yield the greatest long-term savings (relative to paying your same old utility bill), followed by the loan option, and then the lease option (check out the next section to learn more about solar leasing).
While the exact financial outcome is naturally different for each option, the key point is that the money saved by any of the options in this example can reach many thousands of dollars.
Consider, too, that after you pay off a purchased system, it’s yours to keep – so things can get even better down the road. In particular, customers that own their system can look forward to using solar electricity that doesn’t require any monthly payments to anyone.
To make sure you realize the full benefits of solar ownership, it’s crucial to carefully review your provider’s terms and conditions. You should make sure you are protected in all cases of equipment failure (including the power inverter), as well as protected against unfair circumstances like a lender putting a primary lien on your house.
|Why should you buy solar panels (cash or $0 down loan)?|
Should you lease your solar panels?
Solar leases – and similar arrangements called Power Purchase Agreements (PPA’s) – have made solar power more accessible for a wider range of homeowners, and have driven a tremendous amount of growth in residential solar. Their popularity is rooted in delivering instant gratification: they allow many customers to immediately pay less for solar electricity than utility electricity. While lease customers typically are unlikely to save as much as loan customers over the long term, many solar lease customers can start saving money right away.
These savings can add up to thousands of dollars over the life of the system, while also preventing thousands of pounds of global warming pollution from power plants.
A common reason that a solar lease may suit a particular household is simply related to taxes. As mentioned previously, the U.S. government currently offers a 30% tax credit to people who purchase a solar power system. But if your yearly tax bill is quite low, you may be ineligible to claim the tax credit yourself. In this case, a lease is almost certain to be a better choice. Regardless, the availability of the tax credit can still benefit you, since a solar provider can use it to reduce your monthly lease payments.
The industry’s best leases are offered with $0 down and fixed monthly payments, as well as service packages that are often more robust than those offered with loans. This not only includes strong repair and equipment replacement services and performance guarantees, but expansive insurance coverage. SolarCity’s lease includes insurance that protects against the elements, theft, and even earthquake – coverage that goes above and beyond the vast majority of homeowner insurance policies.
In all cases, solar leases should adhere to consumer protection guidelines published by the Solar Energy Industries Association, and contracts should comply with Solar Energy Finance Association standards.
Solar leases can give homeowners extensive benefits, all without entailing personal ownership of solar panels. After a 20-year lease term, the homeowner has the option to renew their lease agreement at a 10% discount relative to average utility rates at that time.
|Why should you lease solar panels ($0 down)?|
Regardless of how you pay to get solar power – lease or buy – you‘ll want a panel system that is built to last. The best systems hold up well for 35 years or more. The amount of money you save by going solar – and your positive impact on the planet – depends on how much power your panels produce. To make sure your system goes strong for decades, it’s important to select an attentive solar provider that can honor its warranty decades from now.
With a solar lease or loan from a reputable provider, you also have full control in deciding on your final system design and placement, and you can transfer your lease or loan to the next owner in case you sell your house. A common misconception is that a solar lease or loan can make it difficult to sell your house, but that’s simply not true if you have a responsible solar provider. SolarCity alone has transferred more than 11,000 solar agreements, and seamlessly facilitates dozens of transfers per day. If a buyer qualifies to purchase a home with solar from one of our customers, the buyer can qualify to assume the solar service agreement.
Should you buy or lease your solar panels? The answer is yes.
Buying or leasing a solar panel system are both excellent options to pay less for electricity, be more energy independent, and do the right thing for the environment. It’s important you pick a trusted and high-quality solar provider, and it’s important to select the financing option that works best for you.
Here’s a summary of side-by-side considerations of buying versus leasing a solar power system:
|Why should you buy solar panels?||Why should you lease solar panels?|
|You want to pay less for electricity, be more energy independent, and save the planet.|
|Full 20-year system warranty, monitoring, and performance guarantee|
Have more questions? We’d love to answer them. Talk to one of our friendly energy advisers.