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Should I buy or lease a solar energy system?

If you’re considering going solar, there is one question that you’ll have to answer, and it can take a bit of research and number-crunching to come to a conclusion. But it’s important to do your homework and go solar as an educated consumer who knows that you’re getting the most bang from your buck. Exact Solar is here to help you figure out if buying or leasing a solar energy system is right for you!

Now let’s get into the nitty gritty of it all…

When you lease a solar energy system, a company finances the installation and maintenance of the system. Homeowners do not pay any upfront capital costs for the installation. Instead, the energy produced by their “third-party owned,” or TPO solar panels, is used to decrease the homeowner’s monthly energy bills in return for a monthly leasing fee that is paid to the provider. Leasing contracts are generally for 20-25 years.

Leasing solar panels is extremely common in states that have attractive solar energy incentives, such as California and New Jersey. This is because the companies that are installing the leased panels get to take advantage of these incentives including the 30% Federal Solar Investment Tax Credit (ITC), as well as income generated from the sale of Solar Renewable Energy Credits (SRECs).

Leasing a solar energy system can be a good option for new homeowners who don’t have much equity in their home yet, and therefore are not eligible for a home equity loan that can be used to purchase their own system. Leasing is also a good option for those with low credit scores or an already existing abundance of debt, as it allows them to go solar without taking on the financial burden.

On the other hand, for homeowners who are able to purchase a solar energy system outright or with the help of a loan, the return on investment (ROI) can be much greater than that of a lease.

By buying your own solar energy system, you get to take advantage of the same financial perks that the leasing companies get. For example, you’ll be eligible to receive a Federal tax credit of 30% of the installation cost. However, it’s important to keep in mind that the solar ITC is set to expire at the end of 2016, and your solar energy system must be up and running before the end of the year to take advantage of that tax credit.

You will also generate additional yearly income from the sale of the SRECs produced by your solar panels. Owners of solar energy systems accumulate one SREC for every 1,000 kilowatt hours of energy their systems generate. In New Jersey, where SRECs currently sell for $230-$250 each, the income from selling the credits produced each year can dramatically offset the costs of installing a solar energy system.

Buying a solar energy system also adds value to your home, because your home’s energy costs are lower than your neighbors’ costs. Adding a solar energy system to a home can be a great option for even those who are planning to sell in the near future.

On the other hand, leasing a solar energy system creates a debt liability. If you end up wanting to sell your home before your solar lease is up, that lease is going to have to be transferred to the new homeowner. Be sure to investigate the possibility of any fines that come with breaking or transferring the lease agreement. An enthusiastic, potential buyer who is excited to buy your solar-powered home may be turned away by these complications.

To see through the eyes of two New Jersey homeowners—one who decided to own and another who decided to lease a solar energy system—check out this NPR article.

When it comes down it to, the answer to this important question boils down to a homeowner’s financial goals and flexibility. Buying a solar energy system is ideal for those looking to maximize the financial benefits that come with going solar, as long as they have the ability to get a loan or put money upfront for the installation. However, if financial obstacles stand in the way, leasing a solar energy system can be a great way to cut your carbon footprint and your energy bills! Contact Exact Solar today so we can help you figure out which option is best for you.

Written by Sarah Bergen. Sarah is the Office Manager at Exact Solar. She has a background in journalism and is passionate about fighting climate change. She can be reached at [email protected].

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