Solar Panel Purchasing Options
So you’ve decided to make the switch to solar power. You know that solar energy saves you a lot of money on your electric bill, and is considered to be much better for the environment since it’s a renewable resource. You’ve probably thought long and hard about whether you are willing to take the step and invest in solar power, but have you considered your purchasing options?
There are a great number of options available. The normal choices like buying, and leasing are the most common. But what are the exact financing options available to you, and how do they compare?
What You Need To Know First
Before you delve into the different ways you can finance your new solar energy system, let’s take a quick look at how to figure out if you really want to do it. When you evaluate the cost of energy to see if purchasing a system will save you money, you’ll take a look at your electric bill. A common mistake is that people don’t know which part of their bill to look at. The only part of your bill which will be reduced are the components priced per kWh. This acronym ‘kWh’ stands for Kilowatts per hour.
Read all of the contracts presented to you carefully and completely. Every homeowner’s situation is different, and only you are fully capable of discerning which option is best for your personal circumstances.
It is also a wise idea to speak with your tax advisor prior to making any final decisions. They can discuss with the tax implications associated with the various purchase options. It is important for you to understand these prior to entering into a solar contract, so that you don’t have any surprises later on.
Option #1: Own, Loan, Refinance
If you take this route, then you are paying for the system up front. This includes the purchase of equipment, and cost of installation. This can be done in a few different ways. The first way is to pay for your system in cash, which is really the best option. Unfortunately, the average Joe doesn’t have a ton of money laying around, so there are very few who can go this route.
The other options include borrowing from our sources to pay for the solar energy system. This could include taking out a loan, opening up a line of credit, or refinancing your home. Although you will own the system outright with these options, it is important to realize that you will have monthly payments after the fact. Make sure you are able to pay these prior to taking out a loan.
The US Department of Housing and Urban Development, better known as HUD, offers loans for Home and Property Improvement. They also have useful information on how to finance your home improvement.
Also keep in mind that since you own the equipment, you are responsible for it’s operation and maintenance. For this reason, you may want to think about entering into a service agreement with a trust company for maintenance and repairs on your system.
Option #2: Leasing Your System
When you lease a solar energy system, you do not own the equipment. You agree to pay a lease, which is basically a monthly rent payment to obtain the rights to use all the power generated by the system. This will require you to enter into a contract, which averages around twenty years.
Since there’s not usually large upfront cost associated with leasing, it helps to reduce the initial costs associated with these systems. But be warned: solar system leases might include a yearly raise in price on the monthly payment, which is called an escalations. These are risky, as they may exceed the rate at which the electrical company’s rates are going up.
The majority of commercial solar companies provide a guaranteed production amount for annual energy production for their system. Take into consideration what your energy needs are to decide on what size system you personally need. It is of the utmost importance to remember that the total energy your family uses can change from month to month, and the output of your solar system also varies. A lease payment, however, will be the same amount month in and month, no matter other changes.
Before entering into any kind of contract, ask what happens if the solar system breaks, or stops functioning all together. Also get the details on how repairs and upkeep are handled.
Something many people fail to think about are the downsides and/or conequences of a lease if you decide to move. Make certain you talk to your lease provider to see if new buyers must qualify to assume your lease, and ask what happens if the new owners don’t qualify.
Always be sure that you know all the terms of your lease agreement, and your obligations as part of that agreement, before signing on the dotted line. This will enable you to have a safe, productive solar system installation – without any surprises.
Option #3: Incentives & Tax Credits
Some qualifying installations might be eligible for incentives and/or tax credits that can help to offset the initial cost of purchasing a solar system.
Incentives include the solar solution incentive. Funds have also been earmarked to help offset the costs of solar system ownership by the Emergency Economic Stabilization Act of 2009, and the American Recovery & Reinvestment Act of 2009.
Another option is the Federal Tax Credit. This credit is available to the owner of the system. It can be used towards the purchase and installation of eligible solar systems that were installed prior to December 31st, 2016. Another tax credit option you may want to check out is the Federal Business Energy Tax Credit, although this is very hard to qualify for.
If you’d like more information on the federal tax credit, you can check out the Go Solar California Tax Credit website, or consult a tax professional. Either source should be able to answer all of your questions sufficiently.