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Leasing Solar Panels, Pros and Cons

Updated on May 15, 2014

Leasing Solar Panels – the Pros and Cons

Millions of people are investing in solar panels for electricity and hot water. Solar energy is free and nonpolluting. It will not destroy the earth (as in hydrofracking) and poison our air and water. The cost of solar panels is constantly coming down while the cost of electricity (from Central Hudson) will keep going up (especially after Fortis bought Central Hudson). A solar system will pay for itself in 4 or 5 years. Unfortunately for people like myself they are still unaffordable (I will also need a new roof before I put solar panels on my house.) Now, there is an alternative to buying solar panels, residential solar leases, with no money down (they tell us). What‘s not to like? In reality a solar lease will end up being much more expensive. Right off the bat, the 30% tax credit (which may be worth as much as $10,000), and the cash rebate you get from the gov’t goes to the leasing company because they, not you, own the panels. Electric rates will continue to rise but so will the monthly payments for your solar lease, as much as 3.9% a year for the life of your lease. How to lock in the loan for your investment? Check out a home equity loan with a fixed rate over the life of the loan. When you finish paying off the loan, you own the system and the electric is FREE. Also check out a $0 down FHA solar loan instead of a lease. It’s easier to qualify for than a lease and only a 650 credit score is required. You don’t need any home equity and the interest is tax deductible. Solar panels usually have a 25 year warranty and often last more than 40 years. They require a minimum amount of maintenance. If you sell your house, you can take the solar panels with you or you can use the panels to improve the marketability and price of your home. If you are leasing your panels the buyer of your home may not qualify for the lease or not even want to assume the burden of your lease. (They may want to buy their own system.) And you cannot break the lease without financial consequences. As with all legal contracts, have your lawyer read it, including the fine print. Talk to your accountant and compare the cost between leasing and buying.

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