Solar panel lending or a PPA agreement basically means you are renting the solar panel from the manufacturer and that the manufacturer still owns the solar panel. On the other hand, if you install your solar panel system on a loan agreement, then it belongs to you. It can be pretty difficult to make the decision whether to loan or lease your solar panels.
Pros and Cons for Solar Renting
This write-up will examine the pros and cons of both methods and provide you with all the information you need to know to help ease your decision.
- The financial implications of a lease or loan agreement: both the lease and loaning of the solar panel help you save money. Both the leasehold agreement and the loan agreement lead to a reduction in your energy expenditures. In both forms of solar panel agreements, you pay less than your usual electricity bills. The loan agreement, however, saves you more money than the leasehold agreement. This is so because you pay for the panel loan over the course of 7 to 15 years, whereas, you have to continue paying a leasehold agreement all through the term of the agreement. Solar panel owners get a solar investment tax credit (ITC) which is the value of 30% of the cost of solar installation and some states also provide Renewable Energy Certificates (SRECs). Interest accrued on a solar panel loan can be tax deductible.
- Cost of maintenance of the solar panel: solar panels generally do not need much maintenance, but when maintenance is required, a loan agreement means the owner of the solar panel has to pay for such maintenance while the manufacturer pays for maintenance of the leasehold agreement since the solar panel is still a property of the manufacturer.
- Does the amount payable increase over time in leasehold or loan agreement? : The answer to this is “yes” for the former and “no” for the latter. The premium paid monthly on a leasehold agreement increases annually based on the initial agreement reached or changes in company policy, while the agreed premium on the loan agreement is fixed during the duration of payment and cannot be increased.
- Processing time involved in leasehold or loan agreement: leasehold agreements typically do not take time and can be concluded in just a visit whereas the opposite applies for the loan agreement. The loan agreement usually takes time to be concluded.
- Ease of selling buildings with solar system leasehold or loan agreement: for you to sell your home with a solar panel leasehold agreement attached to it, you have to either buy out your leasehold agreement or transfer the new lease to the new owner of the building. In the case of a loan agreement, your options depend on if the loan is secured or not. It is far easier to sell a property with a solar loan agreement than that of leasehold agreement.
- Ease of obtaining a leasehold or loan agreement: All fifty states in the U.S. allow for the loan agreement of solar panels ownership, while some regions and state frown upon the leasehold agreement of solar panel ownership. Washington DC is one of the regions that allow for a leasehold agreement.
These are the factors you should consider before opting for either leasehold or loan-based agreement.