After sitting down with three residential solar installation companies and attending one Central Valley home & garden show, I now feel informed regarding solar panels. I’m still not sure, though, whether or not I want to go there. A great deal of information is out there—and none of it is completely accurate.
An outright purchase of a solar system sounds the best. I’d avoid any marked-up long-term payments and, overall, the system would be cheapest this way. One bad aspect is that I’d be stuck with my system. What if a sleeker, more efficient system became available in a year or two? Also, will I live in my home long enough to recoup my investment (or sell my home for enough to offset the cost)? On the positive side, homebuyers I have spoken to show more enthusiasm towards homes with owned rather than leased systems. Additionally, various tax incentives are available to homeowners who purchase solar systems.
Not having the spare thousands of dollars to splurge on solar panels, I was intrigued by the available lease options. Some companies offer deals for as little as $0 down to get started. You pay a monthly rate for use of the solar panels, and with many companies the rate is guaranteed at either a fixed amount or with preset annual increases for the length of the contract. The leasing customer does pay interest to the solar company at a rate that was likened to that of a credit card. While the cost is significantly higher than that of purchasing, leasing can still make sense if your home is outfitted with the right number of panels, your home has good exposure to the sun, and your lease is drawn up with favorable terms. Tax incentives for going solar may not apply to leasing customers, but I was not able to confirm the details of this with a tax professional.
Prepaid leases were another option presented to me. You can save on the interest versus a standard leasing option; however, you don’t have the satisfaction of owning your equipment and you also don’t realize the full savings of purchasing. Usually, customers are either prepared to purchase a system or they only have enough discretionary income to allow for leasing. I was not able to find any homeowners who had gone with a prepaid lease option. All of the solar company representatives I spoke with confirmed that this was the least popular financing method.
One of my current clients is selling a home with a leased solar system. As I’ve discovered, the quick numbers you have to explain to a potential buyer are the lease payments and the electricity bill. This particular home is new, so there are no old electricity bills to compare to the current ones. A buyer basically has to look at the lease payment (say $100) and whatever minimal electricity bill (say $50) remains as the true monthly cost of electricity in the home ($150). The math is easy, but dealing with buyer concern is hard—especially when a solar lease comes with annual rate increases. Now, some contracts do have fixed rates—but preset annual increases seem to be the norm. In many cases, the solar panels provide such a tangible benefit (as compared to no solar) that these factors are not an issue.
Given that I am looking to sell my current home in the next few years, I was not comfortable pulling the trigger on solar. Enough of the buyers I work with have concerns and apprehensions about solar to make me shy away. Leasing contracts or outdated purchase systems were true points of contention for buyers. Most buyers want to be involved in the leasing or purchase negotiations when it comes to solar—not just stuck with whatever the previous homeowner had signed on for. On the other hand, many buyers expect their new or recently built home to be equipped with solar. It’s impossible to please everyone.
If nothing else, when deciding to go solar make sure to have multiple companies bid on your job. This process will go a long way in helping you decide whether or not solar technology is right for your home and finances. There is no doubt that, given the right sun exposure and the proper amount and placement of panels, good terms on a lease or purchase of solar could be a great investment.
William Menke is a realtor with the Guarantee Real Estate Flex Office. He can be reached at [email protected].