Personal Lease Myths
Any home improvement lease (solar or otherwise) is a personal lease that you are liable for directly.
There are a lot of myths out there about leasing. Below are the questions we think everyone should ask before considering a home improvement with personal lease financing. These Questions Can Literally Save You Tens Of Thousands Of Dollars!
MYTH: A home improvement lease is different than a personal lease.
REALITY: A personal lease and a home improvement lease are almost the same thing. You personally are 100% liable and you do not own the improvement … so therefore you do not receive any of the financial incentives or tax breaks.
MYTH: A personal lease makes home improvement more affordable.
REALITY: Actually a personal lease is one of the most expensive ways to add a home improvement on your property. Want proof ? Simply add up your payments on that zero down personal lease and then add in the 30% federal tax credit that you’ll be giving away to the leasing company and you’ll find that you’ll be paying up to triple the cost for a home improvement system when compared to purchasing a system.
Why do the leasing companies charge you so much more for their systems ? Because their Wall Street investors get a bigger tax credit when they charge you more for your leased system.
MYTH: If you sell your home, your personal lease can easily be transferred to your home buyers.
REALITY: Homeowners and even real estate brokers are now reporting that it has been or may be more difficult to sell their homes with a personal lease attached to it.
For one, your home-buyers must qualify to assume your lease with an excellent credit rating. If they can’t qualify, then you will be forced to pay off your lease in a lump sum in order to sell your home. You’ll have to disclose your personal lease obligation when selling your home.
Second, You’ll hear the home improvement leasing companies argue that that a home improvement system on your property should make your home more desirable. This would be true if you owned your home improvement system, but it’s the furthest thing from the truth when your home-buyers discover that they have to take over your remaining lease payments.
Would you want to take over, let’s say 12 years of remaining lease payments on a 20 year lease on an outdated, 8 year old home improvement system when you could buy a brand new home improvement system for tens of thousands less ? Of course you wouldn’t. And neither would your potential home-buyer. So you just delayed or may have even lost the ability to ever sell your home at the price that you wanted.
MYTH: You’ll get to claim a tax deduction if you lease a home improvement system.
REALITY: This myth is entirely false. Homeowners that lease a home improvement system, not only forfeit the 30% federal tax credit which is worth thousands of dollars but they also cannot claim their personal lease payments as a tax deduction.
When you finance the purchase of a home improvement system using a $0 down FHA home improvement loan or PACE (Property Assessed Clean Energy) $0 down home improvement loan, in almost every case you can deduct the interest and you’ll get to keep the 30% federal tax credit. These benefits alone gives home improvement system ownership a tremendous financial advantage over a lease.
MYTH: Zero Down Solar Lease.
REALITY: It’s absolutely NOT a zero down home improvement and here’s why.
As a down payment, you’re giving away your 30% federal tax credit for solar electric panels. Just how much is that worth? Well, simply take the average cost for a home improvement system as reported by the CSI, ($6.19 a watt) and even if you subtract a gracious 50 cent per watt rebate, your still looking at $5.69 per watt.
Next multiply an averaged sized 4 kW solar system by this $5.69 per watt cost and you get an average system price of $22,760. Next multiply the $22,760 time the 30% federal tax credit and you’re looking at a federal tax credit of $6,870 that you’re handing over as just part of your down payment. With an 8kW system, you’re providing a down payment of $13,740!
It gets even worse depending on how much your state or utility offers as a cash rebate. If there is a rebate, you’ll be handing over another $4,000 down payment on that 4kW system or $8,000 on an 8kW system.
Zero down home improvement ?……..NOT!
MYTH: We’ll install “your” home improvement system for free !
REALITY: Again, it’s not “your” home improvement system. In fact, after making 20 years worth of lease payments it still won’t be “your” home improvement system.
After making all those monthly payments or even after pre-paying your lease, it won’t be “your” home improvement system until you’ve purchased it from the leasing company at fair market value. That’s the law.