Solar Leasing – A Bad Idea For Florida

Why Solar Leasing is a Bad Idea in Florida: Exploring Better Financing Options

In recent years, solar energy has become an attractive option for homeowners looking to reduce their electricity bills and carbon footprint. However, when it comes to financing a solar panel system, not all options are created equal. One of the most common yet controversial methods is solar leasing. While it may seem like a hassle-free way to go solar, especially in Florida, it often comes with hidden drawbacks that can outweigh the benefits. In this article, we’ll delve into why solar leasing is a bad idea in Florida and explore alternative financing methods that are more beneficial for homeowners.

The Pitfalls of Solar Leasing in Florida

Solar leasing allows homeowners to install a solar panel system with little to no upfront cost by entering into a long-term agreement with a solar provider. However, this seemingly attractive offer often includes features that are not in the best interest of consumers.

1. Lack of Ownership. When you lease a solar system, you don’t own it; the leasing company does. This means you won’t be eligible for federal tax credits. The bank gets to keep that money.
2. Escalating Lease Payments. Most solar leases include an annual escalation clause, typically around 2-3%, but sometimes more. This means your payments will increase every year, potentially outpacing the rate at which your electricity savings grow. Over the life of the lease, these escalating payments can add up to significant costs. In fact, you could end up paying far more for your solar lease than you would for utility electricity in later years.
3. Complicated Transfer Process. Selling your home with a leased solar system can be a headache. Prospective buyers may not want to take over the lease, or they may require you to buy out the remaining contract, adding an unexpected expense. This complication can delay the sale of your home or reduce its market value. That’s why owning your solar panels outright or having a simple loan is better if you think you might sell your home one day. There have been many nightmare stories about solar leasees who can’t sell their home because they do not have the money to pay off the lease.
4. Limited Savings. While leasing might reduce your energy bills, the savings are often less than what you’d achieve with a purchased system. The leasing company sets the terms and benefits from any energy produced over and above your needs, reducing your potential financial gains. The bank makes all of the money, while you take the risk.
5. Maintenance and Performance Risk. Although leasing companies often advertise that they take care of maintenance, the reality is that you may still be on the hook for some issues, depending on the lease agreement. Additionally, the performance of the system may not be guaranteed to meet your expectations, leaving you with less savings than anticipated. Leasing companies are almost never local, so getting service can be a time-consuming process because leasing companies often hire reluctant local contractors to take on their service problems. We routinely get contacted when leasing companies aren’t fulfilling their obligations and system owners are exasperated over the lack of timely service.

Better Financing Options for Solar in Florida

Given the drawbacks of solar leasing, exploring other financing options can provide more benefits and long-term savings.

1. Cash Purchase. Paying for a solar system upfront offers the most reliable return on investment. You own the system outright, allowing you to take full advantage of all available tax credits, incentives, and energy savings. In Florida, this also means benefiting from property tax exemptions on the added value to your home.
2. Traditional Solar Loans with No Dealer Fees. Solar loans are a popular financing option that allows you to pay for your system over time. Traditional solar loans with no dealer fees are straightforward, with interest rates based on your credit score. They offer the benefit of ownership and the ability to claim tax credits and incentives. Dealer fees can increase the purchase price of a system, so a no dealer fee loan is a great option if you don’t want to end up upside down in a loan if you need to sell your home early in the loan term.
3. Solar Loans with Dealer Fees to Buy Down Interest Rates. Most solar loans include dealer fees to buy down the interest rate, making monthly payments more affordable, but the purchase price higher. While this may increase the overall cost of the loan, it can make going solar accessible to more homeowners by lowering the barrier to entry. This loan type will result in the lowest cost of ownership for people who plan to pay the minimum payment over the term of the loan. Because the interest rate is lower than a no dealer fee loan, the payments are lower. If you don’t plan to sell your home, and want to stretch out the payments as long as possible, this is the right loan for you.
4. Home Equity Line of Credit (HELOC). Using a HELOC or other consumer financing options can also be an effective way to fund your solar system. Lots of people have equity in their homes due to increasing home values over the last several years. These options often come with competitive interest rates and flexible terms. Since they are tied to your home’s equity, they can offer significant borrowing power at relatively low costs. These loans are good in a time of decreasing interest rates, because as interest rates go down, your minimum payment will also decrease.
5. Other Consumer Financing. Sometimes there are other circumstances that make other financing the best option. You may have access to low personal loan rates, or you might roll a solar energy purchase into a primary mortgage when you are buying a home or refinancing. If you are just waiting for a short period for a windfall of cash to pay off a solar purchase, a simple consumer loan might be the best option for you.

Conclusion

While solar leasing might seem like an easy way to go solar without the upfront cost, it’s often not in the best interest of homeowners, especially in Florida. Don’t fall into the leasing trap that has been the subject of many evening news segments across the state.

The lack of ownership, escalating payments, and potential complications with home sales make it a less attractive option. By considering alternative financing methods like cash purchases, traditional solar loans, solar loans with dealer fees, or HELOCs, homeowners can enjoy the full benefits of their solar investment, including tax credits, incentives, and greater long-term savings.

For more information on the best solar financing options for your home, feel free to contact us. We’re here to help you make the most informed decision for your energy needs and financial well-being.