Solar Lease vs. Solar Loan: ReVision’s Guide to Solar Financing for Your Home
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Solar panels offer the best long-term price of electricity vs. any other way to get power, but upfront price is still a barrier for many people. Thankfully, solar loan products are available that let you trade your existing power bill for a payment on a solar loan.
A solar loan works similarly to another popular consumer finance tool, the solar lease, but with the powerful benefit: with a solar loan, you own your power.
Paying Rent vs. Owning Your Power
When you sign a solar lease, you are renting your solar panels from the company who installed and owns them. While both a lease and a loan will have monthly payments, the lease’s monthly payment will escalate over time to adjust for utility rate increases. What’s more, if the cost of energy doesn’t rise as fast as your monthly lease payment, your savings with solar will take even more of a hit.
A solar loan’s monthly payment is the same until the system is paid off, usually in about 7-15 years. ReVision is able to structure solar loans to closely match what you already pay for power. So, with a loan, you can effectively trade your power bill for solar.
After your solar array pays for itself, you enjoy free electricity for the remaining life of the system, which has an expected working life of 40 years.
After early dominance by leases, the solar industry nationwide is transitioning quickly to loans being the preferred financial tool. In 2014, leases accounted for almost 75% of solar agreements, but then several national companies exited the market and the few major installers that remained have begun offering loans instead. Many homeowners were entangled with solar leases that they could not get out from under once their installer went bankrupt.
It’s expected that by 2021, ~75% of solar arrays will be financed with loans — a complete reversal of the formerly lease-heavy marketplace. Local-level installers, like ReVision Energy, are well ahead of this curve.
Loans Bring Returns
Solar leases allow you to go solar and lighten your carbon footprint, but they do not allow you to enjoy the solar investment tax credit that covers 26% of the cost of your system. 2020 happens to be an important year to go solar with a loan, because the 26% tax credit will step down again in 2021.
You may wonder, “Should I do either if I might move someday?” We say, “Absolutely.” A recent study completed by a team of scientists from Berkeley Lab, in partnership with universities and appraisers, found that solar unequivocally improves the value of a home, on average by an amount of $15,000.
Studies like this make banks increasingly comfortable with solar, meaning it should continue to get easier to use a low-interest home equity loan or home equity line of credit product to invest in solar.
With a loan, you can feel confident that your solar investment will pay for itself, either over the life of the system as you live in your home, or by fetching a premium price should you need to sell your home. In comparison, it is harder to transfer a lease when selling your home — another Berkeley Lab study found that 1 in 5 study participants had potential buyers scared off because of the leasing agreement.
Price is No Obstacle
This much is certain: An upfront price for solar is no longer an obstacle. Leases were touted as the go-to for a no-upfront-cost solar array, but ReVision Energy is able to offer solar loans for no money down, with monthly payments the same as or lower than your current electric bill. We enable you to own your power.
When you produce more electricity than you use, you will send power back into the grid (powering your neighbors’ house!) and earn a credit. Those credits go against your electric bill at other times of the year. So for example, if you complement your solar array with an air source heat pump to provide heat, you can run this electric appliance off of stored sunshine from the summer, in the form of credits you banked with your utility. Many of our customers go from having electric bills of $100-200/mo, to the minimum fee to stay connected to the grid.
Get in touch to discuss how a solar loan works. We’ll go over your electrical needs and look at how to build the best loan package possible, often including complementary tech like water heaters and heat pumps, which accelerate the return of investment of solar — and rid your home of fossil fuels!