How to pay for a solar system Cash finance lease or Buy? Which is better?

The main distinction between buying and leasing a solar system is in ownership. Whether you choose to buy your solar panels outright or lease them you’ll still get the same, clean solar electricity powering your home. But the finances and ownership of your solar system will change depending on whether you choose to own them outright or not. If you buy a solar panel system, either you need to purchase with cash or after repaying your solar loan. If you lease the system or sign a power purchase agreement (PPA), a third party claims the solar panel system.

This distinction between buying and leasing a solar system impacts the cost, support, terms, financial offsets, and returns on investment of your solar panel system. All companies don’t offer solar leases or PPAs. You should ensure that your provider offers the financing alternative that you want.

What’s the difference between a lease and a PPA?

Leases and PPAs are almost similar. The main difference is – with a solar lease, you’re paying a fixed monthly payment for the solar panels and system equipment, with a PPA, the solar provider normally maintains all the equipment and you need to pay for the power that the solar panels produce.

Are you keen on receiving the rewards of solar power source, but not interested in owning the solar panel system? If you want that then leasing solar panels or buying power through a PPA (Power Purchase Agreement) could be an alternative option.

Here’s the reason solar lease / PPA is the best option instead of purchasing or financing them for you

  • When you are keen on using electricity generated from renewable resources, rather than the financial benefits of installing a solar panel system.
  • If you want to avoid repairs or any kind of maintenance responsibilities, then solar lease/PPA is your best option for you.
  • When you are ineligible for federal or state investment tax credits resulting from your investment in a solar panel system
  • Additionally, you don’t want to wait until the next year to get the financial benefits of tax credits.

Here’s the reason for buying a solar panel system with cash, or financing a purchase with a solar loan, is the best option for you

  • If you want to be the owner of your solar system
  • If you want to maximize the financial benefits of installing a solar panel system,
  • When you’re eligible to decrease your federal and state tax liability through federal investment tax credit;
  • When you can realize tax benefits by treating the solar panel system as a depreciable asset
  • If you want to increase the market value of your home by installing a solar panel system

Difference between buying and leasing solar

Here we’ll discuss the differences in cost, maintenance, terms, and savings/returns on investment, depending on the financing decision that you make.

Maintenance:

Solar loan/cash purchase

  • You own the system and you are responsible for maintaining it. Since solar equipment is durable so you need little maintenance for solar panel system
  • Your buy may exclude an app to track your solar system’s performance.

Solar lease/PPA

  • The solar company owns and maintains the solar power system.
  • Leases include free apps that track the performance of your system.

 

Terms

Solar loan/cash purchase

  • Loans are generally available for 10 to 20 years terms at which point you own the solar panel system
  • Interest rates range from 3 percent to 8 percent, depending upon a number of factors including your credit score and the length of the loan

Solar lease/PPA

Solar leases and PPAs are generally for 20 to 25 years, at which point you can renew your agreement or purchase the system outright.

Savings/ROI

Solar loan/cash purchase

  • You can save between 40%-70% on electricity costs over the lifetime of your solar panel system, depending on your property and other incentives in your state.
  • You receive free electricity for the life of the solar energy system (usually 25 years)

Solar lease/PPA

You can save between 10 percent and 30 percent off the prices you pay your utility for electricity, depending on your property and the incentives in your state.

Installation cost

Solar loan/cash purchase

A decent-sized (6.5kW+), good quality home solar power system can cost around $6,000 before rebates and incentives in Australia. Cash rebates can decrease the total cost by up to 50 percent. Most solar installers will deal with the administrative work and modify the price tag to reflect the net sum.

Solar lease/PPA

  • No upfront cost to get solar energy
  • You don’t qualify for tax credits, rebates, or incentives –because those belong to the third party owner of the system.

 

Whether you decide to buy or lease solar panels or choose a solar PPA, solar will help you reduce your carbon footprint. Here we’ve discussed everything about solar financing options. Find your best financial option depending on a wide range of factors like area, financial objectives, etc. So before making the decision you need to explore all the finance option which is available for you.

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