Obviously, it would be nice to be able to stroke a check for the purchase of solar panels. And there is no doubt that a cash purchase provides the best return on investment. But most people don’t (and can’t) purchase solar panels this way. As they say, it takes money to make money – or does it?
An investment in solar panels is not a get-rich-quick scheme. Wealthy people realize that. They have many alternatives when it comes to investing, so solar panels have to fit into their portfolio in a useful way. While solar panels pay for themselves through reduced utility bill savings, that isn’t the only reason to invest in them. One of the best features of a solar panel investment is how they help you hedge against utility rate increases over time.
You’ve heard of how the wealthy get rich with hedge funds. While a hedge fund is a risky investment involving speculation and volatility, hedging with solar panels is super safe. You lock in your price of electricity for the foreseeable future. There is little risk that the utility company will suddenly drop their rates, making your solar panels look like a mistake. And anyone can do it.
Proof That Solar Panels Aren’t Just For The Rich
We did a little experiment and pulled some permit data from the local market. We will focus on one jurisdiction that is representative of the results.
In unincorporated Lee County in July 2024, there were 164 permits issued for solar electricity installations. Despite the market having a down year due to high interest rates and consumer confidence issues, that is a huge number! A decade ago, it would be pretty wild to see a dozen or two permits in a month.
But what’s interesting is where these permits were pulled. If you break it out by zip code, roughly 50% of the permits were for homes in Lehigh Acres. A big chunk of permits were in the San Carlos Park zip code of 33967. The next most significant area was 33905, the Fort Myers Shores area that includes Buckingham and Riverdale. These are all wonderful places to live, but they are hardly where the wealthiest Southwest Floridians congregate.
It seems odd that such a pricey purchase is being made in high percentages by people in these zip codes. But they do have a really good reason to invest in solar power.
Why Solar Panels Aren’t Only For The Rich
Let’s face it – a wealthy person with a $300 monthly electric bill probably isn’t going to lose sleep over it. But if you are working hard to support your family or retired with a fixed income, that monthly bill is annoying, if not painful. And it’s only going to get worse.
As electricity increases in cost, people are faced with the impossible choice of whether to foot the bill or sacrifice quality of life. Electricity drives our lives.
So it makes sense that people with less disposable income would want to hedge against rising utility rates. And if they do it right, they will look like geniuses years from now when everyone else continues just to take whatever the utility company hands them.
How To Invest In Solar Panels If You Are Not Rich
The majority of solar panel owners finance their purchase. The financing frenzy over the last decade was responsible for the explosion in solar panel sales and installations. Innovative financing products hit the market that allowed just about anyone to get involved with solar energy.
But solar financing has all sorts of pitfalls. One of the worst ways to invest in solar panels right now is solar leasing. But we suspect that many of the people in the aforementioned areas are getting bamboozled into a long-term payment that they will regret. When you go back to the permit records, roughly half of the permits were issued to companies that are known to be big in the leasing game.
Leasing became popular recently because interest rates are higher than a few years ago. Back then, it was easy to get a loan with rates as low as 1%. Granted, these loans were subsidized by dealer fees that made the purchase price higher, but reasonably so. Now, for a solar dealer to offer a low interest rate, they have to build in all kinds of costs to make the numbers work. And that makes the monthly payment higher.
So bankers figured out that they could simply lease solar panels to people. The concept is that someone else owns the solar panels on your roof. You pay the bank monthly for the lease rate. The bank maintains the panels and has rules regarding what happens if you move or sell the house. The devil is in the details, however.
They gaslight people with “advantages” that aren’t significant. And most importantly, they have insane escalation clauses that mean your monthly payment goes up every year – even if utility electricity rates are stagnant or decreasing! You could end up paying way more for your solar lease than you would have paid the utility company for the same energy years from now.
And did I mention that they keep the tax credit?!
Traditional solar loans are still available, with subsidized rates and relatively low payments. By spreading out payments over the 25+ year lifespan of the panels, the bank can offer a reasonable alternative to your utility bill. The loan rate stays the same over the term, you get the tax credit, and you get the advantage of hedging against utility rate inflation. This type of loan works well for people who intend to make the minimum payment every month for the term of the loan. It reduces the overall cost of ownership because of the relatively low rate. But you typically have to turn your tax credit over to the bank to make the numbers work out well.
The Best Way To Afford Solar Panels If You Are Not Rich
If you are not rich, the next best way to buy solar panels is with a loan that features no upfront costs and has the same price from the solar dealer as a cash purchase. It does exist, and we offer it through a bank in Florida that specializes in these loans.
While the interest rate is not subsidized, it is slightly higher than a traditional solar loan, and it is much more flexible. The terms are very clear, and the concept is simple. You can choose to make minimum payments or you can pay it down faster. You can choose whether to keep your tax credit or pay down your loan with it. The best part is that you can re-amortize the loan as many times as you want with the same term and interest rate, which can bring down your payments significantly and reduce your overall cost of ownership.
The Key To Looking Rich And Being Rich
Those shiny new solar panels are going to make you look rich in your neighborhood. But we want you to be rich. As I mentioned, solar energy is not a get-rich-quick scheme. It’s a long-term investment that acts as a hedge against rising utility rates. Years from now, when those low utility bills come in, you won’t know what to say to your neighbors who are exasperated over the ever-increasing cost of operating their homes. You made the right choice.
So, if you are not in a position to write a check for your solar panels, there is nothing wrong with financing a purchase. But you really need to understand what you are getting into and the pitfalls that could be part of your financing paperwork. Look for transparency and a solar dealer you can trust. Never get pressured into signing a contract or loan documents that you do not understand.
We are concerned about the high number of permits being issued to contractors that have a reputation for not-so-truthful business dealings and financing practices that get people into trouble. If you’re looking for a second opinion before you sign on that dotted line, we are here to help. As Southwest Florida residents, we are your neighbors and simply want you to have a wonderful experience with solar energy. It is absolutely enriching when done right.
