How did solar leasing start?
In the early days of home solar (2001 – 2007) solar leases were just a concept kicking around MBA programs in the Silicon Valley, and few homeowners had even considered the idea of installing solar panels. If you wanted to go solar before 2007, there were a few traditional solar financing options available. You could (and still can) write a check or take out a bank loan (home equity lines of credit and collateralized seconds being the most popular) to pay for your solar panels. Rates were low and credit was easy to come by. Yet even with light underwriting standards, solar was still very expensive (about 3x today’s cost) and the solar investment tax credit (Solar ITC) was capped at $2,000.
In 2008, solar leases and PPA’s (power purchase agreements) blazed onto the scene just as traditional financing methods dried up in the wake of the Financial Crisis. At the same time, Congress’ decision to lift the cap and make the Solar ITC a straight 30% made solar panels a lot more affordable. When combined with solar rebate programs in California, New Jersey, and a handful of other states, solar leasing companies could now offer monthly payment plans that promised substantial savings over many local electric utilities. Over the next several years, installations really took off. Solar panel installations boomed as homeowners took advantage of the lower cost and greater monthly savings versus staying with the electric utility. From 2008 through 2012, solar leases and PPAs outpaced all other financing methods. At one point, they exceeded 70% of all residential solar systems installed. Then in 2013, traditional credit markets thawed and it suddenly made more sense to buy solar than lease it. After all, the loan payments were now equal to or less than comparable lease payments and in many cases qualified for additional taxes incentives not available to leases (such as the home interest deduction). As a result, solar customers came to understand that if the cost was the same or less, buying and owning solar made much more sense than renting or leasing it.
Why is Solar Leasing so Popular?
It’s baffling that solar panel leasing is still as popular as it is considering solar loan payments are usually equal to or lower than solar lease payments, are often tax deductible (for qualifying loan products), and provide greater lifetime savings than leasing. In a recent Consumer Reports study, buying solar panels with cash saved a NJ customer $60,000 over 20 years while a purchase with a loan saved the same customer $40,000. Savings with a leased solar system over the same period? Just $20,000. Thus, according to Consumer Reports, a customer can save up to 3x more money when paying cash and twice as much money buying solar with a loan versus leasing! That is compelling math for every family considering solar panels for their home!
What Are The Advantages of Owning Solar Panels?
When you buy solar panels for your home, they lower your home’s operating costs while increasing its value. Solar is also attractive to potential home buyers (since they will also enjoy lower housing costs). Even better, your home will appraise higher when you sell it and therefore, you’ll potentially get your solar investment back in the sale price (even after enjoying years of energy savings).
Do Leased Solar Panels Add Value to My Home?
Fannie Mae issued an update to its Buyer’s Guide in 2014 redefined how solar leases impact home value:
- Leased solar panels can no longer be included in home appraisals
- If you are considering buying a home with a leased system:
- The solar payments must be incorporated into the buyer’s ‘debt to income’ ratio
- The leasing company must carry third party insurance in the event the solar system damages the property
Selling a home is tough enough. Why layer on additional complication when today’s traditional home and solar loans give you everything the lease offers with far greater lifetime savings, increased home value, and less hassle? At SolarShoppers by ReVolt Electric, we advocate for solar ownership and our solar loan ownership program is among the most innovative in the industry. Call SolarShoppers today and discover if you qualify for solar ownership.