It’s true of just about anything you might buy.
Chances are if you pay cash, you’ll get a better deal.
In the current resurgent housing market, those having to deal with banks and property appraisers are at a distinct disadvantage when competing against cash buyers.
The same is true for solar.
This isn’t necessary because you’ll get a cheaper price since solar companies can command the same price for systems regardless of finance mechanism.
I also would lump HELOCS, PACE, and other types of traditional financing into the ‘cash’ bucket.
Why? It isn’t about how much you’ll save upfront, but how much you’ll save over time.
First, solar companies are incentivized to install cash customers first.
Why? Third party leasing companies can take months to pay solar installers for systems they finance.
With cash customers, solar installers typically receive their final payment when your newly installed solar system passes the city/county’s final inspection.
As a result, customers paying with cash and traditional loans get bumped to the front of the queue.
Second, when you pay cash you receive all of the incentives directly.
If you can take a 30% federal tax credit, why pass that benefit to a banker in a high rise in New York City?
You also receive any state and local incentives, as well as, any renewable energy credits (RECs) that may be available to you.
Third, if you are financing through traditional means or using an innovative program like HERO, you can deduct the interest from your federal taxes.
If you lease the same system, while there is an interest rate associated, you cannot deduct the interest you are paying month in and month out.
Last, when you own the system, you receive the full benefits of ownership.
In other words, all of the savings and returns (often in the teens as measured by percentage rate) accrue to you. Best of all, there are no lingering questions about what happens if you sell your home or whether you own the solar array at the end of the 20 year lease.
You own it – plain and simple.
If you sell your home, you have an attractive revenue generating feature for your buyer. If you stay in your home for the next several decades, you’ll have a home improvement that pays for itself over and over again.
Having said all of this, there are times when combining cash with a pre-paid lease or power purchase agreement makes sense. When? Typically, this combination makes the most sense for those who do not have the ‘appetite’ to take the tax credit.
This means that the customer is not currently paying federal income taxes or paying sufficient federal income taxes to need a tax credit to offset the liability. For these individuals and families, allowing a third party to take the tax benefit and pass the savings on to the customer is a win-win.
Thus, it pays to know your federal tax exposure before you commit to anything. Knowing this will guide you toward the right solution for your individual situation.
To Knowing All Your Options!
P.S. – Pay attention to our next secret! I will be going into the real cost of a Solar Lease, I promise it’s not what you think…
Are You Considering Solar?
Have one of our Solar Energy Consultants come give you a custom solar design and proposal. Our consultants will always show you a full cash price so you can compare it against any financing options and will guide you to the best options based on your tax appetite.