Until a few years ago, most solar systems were purchased. Back then, solar systems were more expensive and there were fewer financing options like there are today, so it made it difficult for many home and business owners to afford solar.
Around 2008, solar leases and power purchase agreements (PPAs) began growing in popularity. Suddenly, homeowners could install a solar system for as little as no money down. At the same time, they often started saving money right away, particularly in places like California where electricity costs are high.
In the last couple years, however, lending institutions are increasingly seeing solar as a low risk, high return investment, so more attractive solar financing programs became available. Customers could get a relatively low interest loan with a 20-year payback term, thus paying for the system over its design life. This was also a game-changer since the loan payments are often lower than the reduction in the electric bill.
So is it better to lease or own a solar system? Answer: It depends on your situation.
Advantages of Solar System Ownership
There is a 30% tax credit available for solar systems that are purchased, but it is not available to the homeowner for systems that are leased. A tax credit is different from a mere tax write-off, and is also more valuable to the taxpayer. A tax credit is a dollar-for-dollar reduction in federal income taxes owed.
If you install a $10,000 solar system, for example, you’d be able to take advantage of a $3,000 tax credit available which lowers your tax burden by that amount. Currently, the 30% tax credit is set to expire at end of 2016, so we recommend installing solar systems before 2017 to take advantage of this excellent cost-saving opportunity, unless the tax credit is extended.
Another big difference between most purchased and leased residential solar system in the Bay Area and beyond is the responsibility for maintenance and repairs. At West Coast Solar, we take responsibility for system maintenance and repairs on leased systems, and offer a 10-year limited warranty for purchased systems.
Purchasing a solar system also typically adds more value to your Northern California home than does leasing a system. If you decide to sell your home while leasing one of our system, West Coast Solar offers the ability to transfer your solar lease to the homebuyer, which may be an appealing option for both you and a potential buyer. We can work with a new homebuyer and realtor for a seamless transition.
Advantages of Leasing a Solar Energy System
If you don’t qualify to take advantage of the solar tax credit, then leasing a solar system is probably your best option. Solar installers are usually eligible for the federal tax credit on leased solar systems that they install, thus the saving from the tax credit are passed onto you indirectly.
Some Northern California homeowners don’t want any responsibility for maintaining or repairing a solar system. Other homeowners may also be uncomfortable using financing programs that use their homes as collateral, as some of the financing programs do. In both cases, a leased solar system is a more attractive option.
At West Coast Solar, we are always happy to speak with you about the benefits and drawbacks of leasing or purchasing a solar system–our goal is to find the best solar ownership arrangement for you. Contact us to learn more about which option would work best for you.