What does it mean to lease or buy a solar power system?

Leasing: With a lease or Power Purchase Agreement (PPA), someone else (usually the leasing company) owns the solar energy equipment. With a solar lease, you make a monthly payment to use the solar system for a specified period of time, usually between 15 and 20 years. As soon as your lease is up, the system is removed from your home.

Buying: Another option is to buy your solar system outright, either by paying upfront or taking out a Solar Loan from BankFive. A solar loan allows you to spread the cost of the system over time, while still maintaining ownership of the equipment. When the loan is paid off, you continue to reap the benefits of solar energy for the lifetime of the system, typically 25 to 30 years.

Financial Advantages and Maintenance

Tax Credits: When you purchase your solar energy system, you’re eligible for federal and state tax credits that help reduce the cost of the equipment. These include a Federal Investment Tax Credit that rebates you 30% of the cost of your system and the Massachusetts Personal Income Tax Credit, which gives you back either 15% of the total cost of the system, or $1,000 (whichever amount is lower). On the other hand, if you lease your system you forfeit these tax credits, giving them away to the leasing company.

Energy Savings: If you’ve taken out a loan to finance the purchase of your solar panels, you’ll pay down the loan each month. Once it’s paid off, you’ll receive free solar electricity for the life of your energy system, without having to make any monthly payments toward the equipment. That can translate into huge savings, given that the average solar system lasts between 25 and 30 years. If you’ve leased your equipment, the savings won’t be nearly as large. For starters, you’ll never get away from your monthly payment. You’ll be paying your lease for as long as you use the solar panels. You can still save money if your monthly payment is less than your utility bill would have been, but it’s important to keep in mind that lease payments for solar equipment typically increase over time. You could actually end up paying more for your solar lease every month than you save on utility payments.

Increased Home Value: When you buy your system outright or finance it through a loan, you can breathe easy knowing that solar panels typically add value to homes. Even if you still have payments left on your loan when you’re ready to sell, you can usually pay off the remaining balance with the additional revenue you get from your home sale. On the contrary, if you’re leasing your solar panels, you may find it more difficult to sell your home. When your home has a solar lease attached to it, you can’t simply back out of the lease. You either have to convince your buyers to assume the lease (which many are hesitant to do) or you’ll be forced to make the remaining payments in one lump sum before you can sell your home. And even if your buyers agree to take on the lease, they must qualify with the leasing company before the deal can be finalized.

Maintenance Considerations: When you lease your system, the leasing company takes responsibility for all maintenance and servicing. This is appealing to customers who worry about maintaining solar equipment after purchasing it. However, consider that solar equipment is durable and carries warranties, which can greatly reduce maintenance. Unlike generators with moving components that require repair and replacement, solar panels have no moving parts that can break down. For the most part, maintaining your solar panels will involve cleaning them of dirt and other debris that can block the sun and affect performance. Most of the time, rinsing the panels with a garden hose will keep them clean and functioning properly.

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