"Going solar" is fast becoming a standard move in California and throughout the US, for home owners and business owners alike. But there is more involved in the decision than just calculating how much you can save based on production-usage ratios and investigating the different varieties of solar panels and accompanying equipment.
There is also the decision on whether to purchase or lease your new solar system - and either way, you have to figure out a viable financial plan to make it work. At Sun Solar Electric, we can assist you with these kinds of financial planning decisions just as surely as with solar equipment and installation decisions.
See other pages of this website to explore in-depth how much money you can save or earn by installing a solar system and how to choose the best solar equipment and set up. But on this page, we'll focus on comparing buying vs. leasing your solar panels.
To talk to an experienced solar energy specialist at Sun Solar Electric, contact us today by calling 707-658-2157. We can give you a free consultation and help you make an informed decision on your solar plans going forward.
Solar Energy Continues to Boom In California
California has long led the nation in solar panel installations, and it appears it will continue to do so for many more years to come. But there is a shift going on in the solar market in California in recent years from home and business owners leasing to actually purchasing their solar system.
In 2013, around 75% of solar systems in California were owned by a third party and leased by the user. By 2017, that had dropped to 50%, and by 2018, to around 35%. That means that from 2019 on, two-thirds or more of solar panel installations in The Golden State will be user-owned.
In the past, almost everyone with solar panels had a 20 or 25 year lease on them and maybe never came to actually own them. But an irreversible trend seems to be taking hold where leasing will become more and more a thing of the past. The future of solar panels is moving toward cash, loans, and ownership instead of leases.
Options for Owning Your Solar Panels
There are multiple ways to achieve solar system ownership, and we can assist you with any of them and explain their various advantages to you in depth and in person. But here is a basic overview of the main options:
If you can afford to pay cash in full upfront for your solar system, you stand to benefit greatly by doing so. You'll avoid all interest payments, may be able to get a discounts for buying certain equipment outright, and will immediately begin to save on the power bill.
It can cost $15,000 to $20,000, on average, to install solar panels and other necessary equipment on your roof or on a stand on your property. So there's a bigger upfront investment when you pay cash, but you save more in the long term. Typically, you'll save 75% to 100% on your power bill - and may even make money by selling it back into the grid. At that rate, your solar system will pay for itself in around 5 to 7 years - and if you paid cash, you'll owe nothing on it.
Home Equity Loans
Understandably, most people can't afford to pay cash for their solar panels. They need some kind of financing plan. In this case, a home equity loan is normally the best way to go since you can get very low interest rates of only 3% to 5% on home equity loans. Plus, any interest you do pay is tax deductible.
It's true that a home equity loan will use your home (the equity in it) as collateral, which involves a degree of risk. And the loan term will likely be anywhere from 5 to 20 years, so there's a real commitment involved. But equity loans are among the safest and cheapest forms of financing if you have substantial equity in your home and they offer fixed, low interest rates.
If you get an equity line of credit instead of loan, then the interest rates will be variable and the term will be 10 years. Some may prefer variable rates if they feel interest rates are likely to drop in the years ahead.
You can often get loans for solar system installation from banks, credit unions, or through Fannie Mae's Energy Mortgage Program. We can help you connect with a solar loan offering good rates and low origination fees. Note that solar loans are unsecured, so if you don't have home equity to use as collateral or if you simply don't want to risk it, a direct solar loan may be your best option.
Comparing Ownership VS Leasing
Whether you use cash, a home equity loan, or a direct solar loan, you can own your solar system and thus maximize the benefits of solar panels being on your property. Here are some of the most important benefits to keep in mind:
- You get the federal investment tax credit for the solar panel installation rather than a third party claiming it. This is 30% real savings on your tax return or across several tax returns. It's not just reducing taxable income but reducing actual taxation.
- You also gain the full force of all state and local rebates and tax discounts.
- Solar panels can greatly increase the market value of your home, and if you own them instead of lease them, that's money in your pocket if/when you go to sell.
- Businesses can write solar panels off as a depreciating asset if they own them, but not if they lease them. This enables you to save extra money on taxes each years in order to prepare for eventually getting new solar panels - probably 20 to 30 years later.
Are there a few situations where leasing solar panels might be a better option? Yes. For example, if you don't want a loan to pay on, don't want to risk your home equity, aren't even sure how long you'll be living at your current residence, and you don't want to be responsible for maintenance and repairs to the solar system - those could be reasons to lease.
Also, if you have trouble getting the loan or if you wouldn't qualify for the federal investment tax credit for some reason, those could also be factors swaying you towards leasing over buying. If you just want to quickly get solar energy for cost savings and environmental reasons without needing any money down or getting tied up in anything more than a leasing contract, again, leasing will accomplish that for you. Leases also usually include free apps to track your solar system's usage and overall performance.
But in comparing buying to leasing, realize that leases and PPA plans usually last for 20 to 25 years - after which point you can renew the lease or buy the system. So, it's still a long term agreement. And you'll save 10% to 30% off your electric bill will solar leases typically, but you could save 70% to over 100% by buying.
Some final considerations when deciding between leasing and purchasing your solar system include:
- Rebates and tax incentives can reduce the cost of installation by as much as 50% in some cases, and your installation company will help you with all the complex paperwork. Thus, a $20,000 system might only really cost you $10,000.
- Although you are responsible for maintenance and repairs on a solar system you own, most of the best equipment is very durable and low maintenance. Plus, it will come with a valuable warranty, often lasting 25 years or so.
- A solar loan can vary in interest rates from 3% to 8% based on your credit score. So having good credit makes financing solar panel ownership much more attractive.
In sum, while there are some people who might be better off leasing, at least temporarily, for the most part you avail yourself of far more benefits by buying your solar system, whether by cash upfront or through some kind of financing scheme.
Keeping Control of Your Property
There's another reason why many people today are choosing to buy rather than rent their solar panels - keeping control of their property. The fact that you don't own the solar equipment installed on your house and/or in your yard means someone else has control over something that is physically attached to your property. Many people simply don't like that.
Also, when you lease, the company you're leasing from has to make a lot of the decisions. They have to make sure they maximize the output of the solar panels and so must have a say on quantity, type, and location of panels. But if you are buying your system, you decide it all anyway you want - although, you'll still want the helpful advice of the solar experts!
Additionally, roof mounted panels are usually included under a homeowner’s insurance policy, while ground mounted units are not. But a leasing partner has to think about production and profits not homeowner’s insurance. And if you want to move your solar panels to a new building (take them with you when you move), that would require the "yes" of the leasing company and complicate matters greatly. Once you own the panels, you can have much greater flexibility in such matters.
Finally, if you want to sell your home (solar panels inclusive), it's a lot easier when the solar panels are already owned. Many potential buyers don't like the idea of taking up the lease on the panels, though of course, some are willing to do so. A paid-for solar system is simply a greater addition to the value of your For-Sale home than leased-out solar panels.
Why Choose Sun Solar Electric?
Whether you opt to buy your new solar system or lease it, we at Sun Solar Electric can help. We realize we're not the only solar energy company in the San Francisco Bay Region and we work hard to be the best option for Bay Area residents.
Over the years, we have built up a solid reputation in local communities by serving our clients well. We have consistently positive reviews on Yelp and elsewhere online, a high customer satisfaction rate, and get many new clients based on referrals from past clients.
Sun Solar Electric can help you every step of the way in getting your new solar system installed. We can help you select and configure equipment as well and will always be there to assist with any maintenance needs, should they arise, in the future.
Also, we are adept at finding ways to help you save. Our rates are very competitive, we help you choose affordable yet efficient panels and accessories, and we get you the maximum savings through tax credits, tax incentives, and local rebates.
We offer affordable plans where you can own your own solar system within 5 to 7 years in most cases, and we encourage people to take advantage of the benefits of buying versus leasing. But we also accommodate those who wish to lease with reasonable, affordable leasing options.
The bottom line is Sun Solar Electric helps you save the environment and save the maximum amount on electricity.
Solar Panels & Solar Systems Specialist Near Me
Whether you want to purchase or lease your solar system, we at Sun Solar Electric can help! We have excellent programs we can connect you to that will make owning your own solar panels affordable so you can ultimately save the maximum amount on your power bill. But, if you prefer to lease, we can assist you with that too.
To learn more, contact us today by calling 707-658-2157 for a free solar energy consultation. Sun Solar Electric is located in Sonoma, CA, and we serve all the surrounding counties of the SF Bay Area.