Consider Your Purchasing Options

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So, you’ve decided to go solar. There are a number of financing options, the typical choices include – buying, and leasing. What are they and how do they compare? 

When evaluating the cost of energy and considering if purchasing a system is right for you, use the cost of a kilowatt hour (kWh) as your basis for analysis and comparison. A solar system will reduce only the components of the bill that are priced per kWh.  

Read all contracts carefully and completely. Each homeowner’s situation is different. Only you can discern which option is best for your circumstance.

It is wise to speak with your tax advisor about the tax implications associated with the various purchase options before you enter into a solar contract.

1. Own, Loan, Refinance
 
When you purchase a solar system, the purchase of equipment and the installation is paid for up front and you own the equipment.
 
Ownership can come in a variety of ways – you may pay cash for the system, take out a loan, open a line of credit, or refinance your home.
 
The US Department of Housing and Urban Development (HUD) offers FHA Title 1 Home and Property Improvement Loans and information on how to finance a home improvement.

You own the equipment and are responsible for the operation and maintenance. You may consider entering into a service agreement for maintenance and repairs.

 
2. Lease

When you lease a solar system you agree to pay a monthly rent (lease) payment in exchange for the right to use all of the power produced by the PV system.  You do not own the equipment.

Leasing a solar system requires a contract, usually for 20 years.  Typically there is no large upfront cost associated with a lease, easing the initial burden of ownership. The lease may include an annual price increase, called an escalation, on the monthly payment. Escalations are risky, and may exceed the rate the utility energy (kWh) rate is going up. Ask about pre-paid leases and how that may affect the contract and financial burden.      

Most companies provide a guaranteed minimum annual energy (kWh) production for the solar system. Consider various size systems to meet your energy needs. Remember, your energy use changes month to month, and the solar system output varies month to month, but a lease payment is the same each month. Some months you will receive more energy production for your lease payment and other months you will receive less energy for your lease payment. 

Talk with your provider about how maintenance and repairs are handled, and what happens if the solar system stops functioning. Before signing the dotted line make sure you understand the terms of the lease agreement and your obligations to ensure a safe and productive solar system installation. 

Consider the consequences of the lease contract if you decide to sell your home. Will it be easier or harder to sell? Talk with your lease provider to investigate if the new buyers must qualify to assume your lease and what happens if they don’t qualify.

3. Incentives and Tax Credits

 
Qualifying installations may be eligible for incentives and/or tax credits to help offset the initial cost of solar system ownership. 

Incentives: Solar Solution Incentive

Federal Tax Credit:  The federal tax credit is available, to the system owner, for the purchase and installation of eligible solar systems installed prior to December 31, 2016. For more information on the federal tax credit, please refer to the Go Solar California Tax Credit webpage or consult a tax professional.