Solar Energy for Your Home: Lease or Buy?
An SLFCU Home Equity CreditLine Helps You Avoid a ‘Power Struggle’
Thinking about converting to solar? You’re not alone. Today, there are more than 2 million solar installations in homes and businesses across the U.S., and the $17 billion industry is on track to double again in five years.1
As solar technology has improved, the average cost of solar panels has dropped by nearly 50% since 2014.2 A federal tax credit lets residential taxpayers (based on eligibility) claim 26% of installation costs for systems placed into service by the end of 2020. The credit drops to 22% in 2021 and expires at the end of 2021.3 New Mexicans can enjoy an additional 10% state tax credit through 2028.4
A new home solar system is a major purchase decision. In 2020, a system can cost $15,000 to $30,000 before rebates and incentives.5 The Center for Sustainable Energy estimates an average of six to nine years to recoup the costs.6
SHOULD YOU LEASE OR BUY?
The choices can be confusing. Paying cash or financing, leases, and power purchase agreements (PPAs) are all popular options. However, when leasing or utilizing PPAs, you don’t own the system – the solar company who installed it does. You’ll pay them a fixed monthly fee for your power usage at a rate that is typically lower than what the utility company charges, but the company retains ownership of the system – and they receive the tax credits, not you.
You will likely maximize your financial benefits if you buy a system outright (by financing or paying cash), in part because you will be eligible to take advantage of the tax credits. Combined federal and state tax credits, along with paying cash or by using a home equity line of credit (HELOC), can reduce the system cost between 40-50%. The market value of your home may also increase.7 Solar power production is also a way to avoid paying more for electricity if the utility company raises rates in the future, offering inflation protection for years to come. But if you decide that purchasing a solar system is the best option for you, what’s the best way to finance your purchase?
CREDITLINES GIVE YOU PURCHASING POWER
A great option for SLFCU members could be to finance your system with a Home Equity CreditLine (HELOC).
Mark, an SLFCU member for more than 30 years, recently installed a new solar system on his house in Albuquerque. He weighed his choices carefully and decided an SLFCU Home Equity CreditLine was the most cost-effective way to complete the purchase and start saving on his utility bills – which are now $0. Mark could use his CreditLine to pay the solar company in full for the purchase of his system, and have up to 20 years to pay back the loan at a much better interest rate than the solar company offered.
“When you have a Home Equity CreditLine, the solar company treats the sale as a cash purchase, which could save you money if they offer cash discounts – and don’t forget about the tax credits you’ll get,” says Mark. He estimates he saved at least $2,500 on his system by putting down cash instead of using the financing offered through the solar company.
He adds that owning your solar panels can make selling your home a much less complicated process later on, too, since lease agreements must be paid off or transferred before closing. “I contacted a respected real estate agent friend for advice and added a new roof before adding solar panels to maximize my solar investment,” he notes.
NOT JUST FOR SOLAR – CREDITLINES CAN HELP WITH ANY 'RAINY DAY' EXPENSE
SLFCU Home Equity CreditLines can help you with unexpected bills or major expenses like home improvements. Once approved, you can borrow what you need, pay it off, and borrow again without having to reapply. You'll save with competitive rates and low closing costs, too. Learn more at slfcu.org/HomeEquityCreditLines.
*Consult your tax advisor regarding tax deductibility.
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