Residential solar benefits: Is it better to lease or take out a loan to purchase the system

While Residential Solar PV installation is increasing and on the minds of more and more homeowners, the way to finance the projects remains a hot button topic. The final decision on whether to take out a loan and purchase the system outright vs. the decision to lease a Residential Solar PV system depends on many factors. What is better for you may not be better for your neighbor and vice versa.

Renewable Asset Management Company, LLC (RAMC) and their SunLender financing program better serve residential homeowners, by providing homeowners with a solar loan and a solar lease within the same proposal, in approved states, thereby allowing the consumer to choose the financing product best suited to their needs; and providing Installers the tools and financing options to close more deals.

The primary difference between buying and leasing a Solar PV system is in ownership. If you buy a solar panel system, you own the system, either outright (if purchasing with cash) or after repaying your solar loan. You also bear the responsibility of maintaining it,  If you lease the system, a third party owns the solar panel system and it is professionally managed.

This distinction impacts the cost, maintenance, terms, financial offsets, and savings/returns on investment of your solar panel system. In addition, not all companies offer solar leases; confirm that your chosen provider offers the financing option that you want most. Note that PPAs are not legally permitted in many areas.

According to the California Solar Initiative, current trends show that, leasing accounted for 13% of the residential installed capacity in California (the largest residential solar market in the US) in 2009; it then soared to over 70% in 2012 and 2013, before declining slightly to 66% in 2014. GTM Research confirms this trend: they forecasted that 2014 would be a peak year in terms of TPO financing in the US (72% TPO share) and expect direct ownership to surpass TPO by 2025.

If the trend continues, an increasing proportion of consumers are expected to choose to own the PV systems on their roofs rather than lease such systems or buy power from third party developers. If the current residential system price trends continue, this shift in financing could be significant, with homeowner financed systems potentially dominating the financing landscape in 3-4 years.

But the choice to lease or own comes down to the situations a homeowner finds himself in, and how much ready cash is available.

The basics are these:

If the homeowner wants to maximize the financial benefits of installing a solar panel system, rather than solely benefitting from the system’s environmental benefits, there is more money to save (in the long run) if you purchase a solar system in cash. As the owner of the solar system, you are eligible to reduce your federal and state tax liability through the federal investment tax credit. Additionally, homeowners will increase the market value of their home by installing a solar panel system.

Also, when considering a loan-purchase, long-term financing is available at very affordable rates. For example, SunLender offers a spectrum of interest rates and terms that are based on the strength of homeowner’s credit. Some rates for excellent credit start as low as 1.99%.

Add to that, SunLender offers loans with no money down and no out-of-pocket expenses required.

Conversely, for homeowners that are looking for a worry-free, professionally managed solar solution, with predictable monthly payments, and/or can’t use the income tax credit, leasing may be the best choice.

A cost-saving venture from the very beginning, no out of pocket expenses are required for SunLender leases, and System production performance is monitored on a daily basis and any underperformance issues are addressed immediately.

Additionally, the SunLender lease offers low predictable payments for a 20-year term. And that rate is typically less than the typical energy consumption rate was prior to installation.  And utility rates will continue to rise, while your lease cost remains constant.

The choice is up to the homeowner, who benefits either way from installing a Solar PV system on their roof.

Next week: We will discuss LOANS.