One of the disadvantages in having solar is that the sun ain’t always gonna shine. While that seems unfortunate, there are two solutions. At night your needs can be powered by batteries. But that has its own problems, battery cost and storage being the key ones. That is one reason most people opt for remaining tied into the utility grid, and tapping back into the grid is how they power up at night. They use stored up credits to take back some electricity from the utility company to power nighttime needs.
Fabrication of solar panels does make some pollution but compared to other energy sources, it is not that much. Solar panels do cost money because of the high cost of the semi-conducting materials used in building one, but they are a good investment and the prices are falling rapidly. Think of how much money you would save over the years.
Some solar panels may be harmful to birds and insects.
The bigger personal pros and cons have to do with how the solar panels are acquired.
While there are clear benefits to buying your own solar power system, about 75% of people lease solar power systems. That’s the reality of the almighty personal cash flow and savings or lack thereof. With leasing you can start saving money from day one and so a lot of people lease solar panels instead of buying due to the lower initial price.
When a homeowner leases solar panels, the leasing company installs a system and the homeowner pays a fee. In addition to this, they are put on a monthly payment plan. With most leasing plans the interest rates increase each year. This can offset the savings obtained from lower utility bills. And at the end of the contract the equipment may not belong to the homeowner. What will happen if the lease period is up and the homeowner doesn’t agree to the terms of the new lease? The leasing company will remove the equipment. Who will make the necessary repairs to the roof when the system is removed? These are the questions one should consider before coming to such an agreement.
Here are some things to consider/ask about:
- How much will your payments to the leasing company increase over time? (Referred to as a “payment escalator”.) By how much?
- How much are they assuming utility costs will rise by in order to make the lease look worthwhile? If it’s more than 3 or 4% be leary.
- What warranties does it come with?
- Under what circumstances or costs can you terminate the lease or transfer it to another person if you sell your home. (You’ve really got to wonder how easy it is to sell a home encumbered with such a lease. Maybe it is maybe it isn’t.)
- Are there any lump-sum payments due at the end of the lease?
One of the big problems with leasing anything is that the terms and interest rate and the actual cost of the whole thing is often fuzzy because it is often way more profitable for a company to lease you something rather than simply loaning you the money under regular loan terms and leasing terms are not as straight forward. It’s hard to compare a lease against a regular loan so they may get away with charging more. That is, more for the lease than a loan would be and the lease may be based on an overcharged price for the asset you are leasing because they may sell you on the monthly cost not the overall cost and so the overall cost may obfuscated and not compared as it should be.
Some people still find leasing worthwhile for them. One advantage to leasing for some is if their tax liability is low and the solar tax credits they would otherwise get are not needed because they don’t pay enough in taxes to fully take advantage of the offset against their taxes owed. If a person could use the tax break then a lease is a disadvantage. In addition to tax credit there may also be special solar rebate, which if leasing, the homeowner doesn’t get the rebate, the leasing company does. If when you go to lease, the company won’t tell you how much the tax credit and any rebates are worth that they will get instead of you, this may be a bad sign. The reason solar companies can offer a “zero down” option is usually because they are getting the tax credit and the rebate. If you are good with that it’s OK, business is business, a good deal is still a good deal and if you are still going to benefit overall with lower energy costs then that is what counts. But you just need to evaluate if a lease is really the best way to go.
One more advantage with a lease is that the company can maintain the panels for you, but this isn’t much of an advantage since maintenance is minimal.
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Financing solar panels with a loan instead of a lease
For people who can’t afford to buy a solar panel system outright, a loan may make better sense than a lease. This way you buy it at a cost based on its own merits and financing that is probably easier to understand. Your monthly loan payment should be less than what the utility bill would be.
Using a loan instead of a lease you also get many of the same benefits as buying the panels outright would:
1. Any tax credits
3. If selling house, add cost to home price and pay off loan
4. More cost effective long term
5. Lock in energy costs for the long term. Predictable, stable and affordable despite what else may go on.
The tax credits and rebates can be significant — you may get as much as up to half the cost of the solar panels back.
Buying solar panels with a financed loan is now the most affordable option for homeowners who don’t have the upfront cash and can be an investment of under $12,000. Making this one-time purchase may save up to $9,000. The biggest benefit is that the homeowner owns the solar power system, and once the loan is paid off; there will be little cost to sustain it.
Final word on leasing versus getting a loan for solar panels versus buying a system
In theory, a loan is better than a lease. In reality, it may or may not be. According to a study some people come out better with a lease and some with a loan and it varies according to these factors:
- Your tax bracket.— how much you could use a rebate and tax credit
- Your credit score
- Your geographical location and what deals are available in your area
- The specific terms of the lease versus the loan you could get
- The amount of your typical utility bill
In other words don’t close your mind to either option, but compare them both, it may come out better one way or the other.
According to studies the best long term option is always to buy outright if you can. You save the most over the long term. The one disadvantage there is the savings take a while to recover, whereas with leasing or loan financing the savings can start right way if the deal is right (see above factors).
Long Term Advantages and Disadvantages of Solar Panels
Solar power saves you money! The typical savings for people who went solar in 2011 were projected to be a little over $20,000 over the life of the solar panels. In areas of California, New York, and Florida, the projected savings were over $30,000. In the sunny but expensive paradise known as Hawaii, the projected savings were nearly $65,000! It may be much higher overall savings by now.
Beyond solar panels, it’s worth noting that solar energy can actually save you money in many other ways as well — with proper planning and household design choices. The long term disadvantages or a solar power system are negligible.
Solar Panel Installation —Tips for Choosing the Right Installers | back to top
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