The Benefits of Working with a Local, All-In-One Solar Company
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May 2, 2024Buy, Lease, or PPA: Which is Best for Solar?
Going solar has become an increasingly popular option over the years as the world moves toward green, renewable energy solutions. Even as prices have dropped dramatically, and despite the long-term savings, going solar is still a very costly investment. No matter how you cut it, going solar is likely going to cost you tens of thousands of dollars, so buying solar panels outright is an expensive option that many cannot afford.
Thankfully, there are other payment options available that can ease the pressure that a solar panel system puts on your bank account. Two of these options, leasing or going with a power purchase agreement (PPA), both involve signing a contract with your solar company that will then allow you to make monthly payments to make going solar more affordable. But these options have their limitations, and finding a way to purchase your solar panels may still be the best way to go. Let’s take a look at each option.
Leasing Your Solar Panels
The first option available to you is to lease your solar panels. In this scenario, you are not purchasing your solar panels, and are making a monthly payment to your solar company. You are essentially paying a monthly fee to rent your solar system, often on a 20-to-25-year contract. With virtually no upfront costs, leasing will make going solar much more affordable in the short term, and you’ll be paying over time at a reliable, fixed rate. When you lease, your solar company is also responsible for all necessary maintenance. This may or may not be a good thing, depending on the company, as you’ll be at their mercy if and when your system needs servicing.
Power Purchase Agreement (PPA)
A power purchase agreement (PPA) is an arrangement that, on the surface, appears to be similar to a lease agreement. Both involve signing a contract with a solar company and paying monthly installments for use of the solar panels. However, the main difference is in what you are paying for. With a lease, you are paying a monthly payment regardless of how much energy you use. With a PPA, your payment is based on the amount of energy your system produces each month. In this regard, you are more likely to save more money with a PPA than you are with a lease. As with a lease, there are virtually no upfront costs, and your solar company will be responsible for maintaining your solar panel system.
Purchasing & Financing
The last option is to purchase and own your solar system. Paying for your solar system outright is likely the best option available when it comes to the return on your investment, as you won’t have to pay interest and can take advantage of all tax credits and other incentives. However, paying for your system upfront is a significant cost that most will not be able to afford.
If paying for your solar system all at once is too big of an expense to take on, financing may be a good option. When you finance, you take out a loan and pay it out over time. You will own the system outright, allowing you to reap the benefits that come with purchasing a solar panel system.
Which is Best: Buying, Leasing, or PPA?
There are many pros and cons to consider when choosing the best way to pay for your solar system. Leasing and PPAs give you the ability to avoid large upfront payments, but in the end, we would recommend financing your solar system. Here’s why:
- Services & Maintenance. With a lease or PPA, you don’t own the solar panels, meaning you aren’t responsible for servicing or maintaining your system. On the surface, this sounds nice, but it can be a nightmare. If, for example, your system stops producing power, you have to wait until your solar company is able to fix it. Sometimes, this means you have to wait a long time. As you don’t own the system, you are not allowed to find another provider to fix it. Similarly, if you needed to do repairs on your roof, you’d have to wait for your solar company to remove the panels before doing so. This can be further complicated by the fact that it’s unfortunately common for solar companies to go out of business.
- Tax Rebates & Incentives. When you own your panels, you are eligible for tax incentives. With a lease or PPA, you don’t own them, and are therefore not eligible. In the end, you’ll end up saving a lot more money if you finance your system than if you go with a lease or PPA.
- Escalation Rates. Most leases have a 2.9% escalation rate, so the cost of your system goes up every year. Solar systems also degrade over time as your rates are going up, meaning you’ll be paying more for less as your system ages.
- Selling Your Home. Selling your home can be difficult with panels that don’t belong to you. Potential buyers will need to have a high credit score in order to take over your lease, which can complicate the sale. If the system belongs to you, it makes selling your home much easier.
- Return on Investment. At the end of the day, the goal is to make the best financial decision, and purchasing your system, whether outright or via financing, is the best way to maximize your savings.
Financing with Solar Discovery
Solar Discovery is an all-in-one solar, roofing, battery, and services company that offers options for financing your system. We understand how costly going solar can be, and will walk you through all of your options to ensure that you’re able to get what you’re looking for at a reasonable price. Get in touch with us to learn more about how we can help you affordably go solar.
