Good time for a loan purchase of solar?

[Mikey Bee]

Might it be a good time to take out a loan (3% interest or close ain’t bad) to buy residential solar? Thoughts?

[Ampster]

Especially if one has a good NEM arrangement or high enough electrical rates. With a low enough cost of capital, some previuosly marginal investments can be positive.

[solarix]

Solar is always a good LONG term investment and even a bad loan will be cash flow positive. The tax credits are tapering off so doesn't pay to wait. Don't recommend leases any more however unless you have no way to use the tax credits yourself. The best (unsecured) loans I know of are from a Colorado credit union run by solar people. cleanenergycu.org.

[azdave]

Since you asked...I don't encourage people to borrow money for anything except a house but especially not for going solar. Being in debt is very rarely a benefit to your life.

[J.P.M.]

Might it be a good time to take out a loan (0% interest or close ain’t bad) to buy residential solar? Thoughts?

Treat it like a business decision: Will borrowing to have an asset sooner, rather than using other resources such as savings, or delaying asset acquisition until enough is saved or some mix of various resources for acquisition result in a higher probability of meeting your future goals (such as having greater financial security) sooner or more easily ?

Life is full of choices. Fortune favors the bold but slaughters the foolish. Do the homework. Decide what you want. Know your options and their consequences. Then do the math and take your best shot.

Take what you want of the above. Scrap the rest.

[macaddict]

I would suggest getting a home equity loan (if you have equity). You will probably get a low interest rate (since it is a secured loan) and you get to deduct the interest in your taxes in the same way you get to deduct your primary mortgage interest.

[John_Dumke]

Since you asked...I don't encourage people to borrow money for anything except a house but especially not for going solar. Being in debt is very rarely a benefit to your life.

Well, Dave in general I agree, don't borrow money for consumption type items. However solar should be treated as a business decision. While I don't have an MBA. I can tell you in general it is a good idea to borrow money to buy an asset that produces a greater return than the rate at which you borrow. Now I did do my solar project my self, 10kW for about $16,000. With an after tax of more like $11,000 since it was done in 2018. The system saves me about $3,500 in electrical costs per year. (SoCal prices).

The return on the system, even without the tax break would be $3,500 / $16,000, which equals about %22 percent return on capital. Bottom line is if you can borrow money at 3-4 % and generate 10% + return on that borrowed money, you should do it. If you have the money fine, but if you don't, still borrow money to open up a business venture that would triple your return on the borrowed money. You would be a FOOL not to. This principle applies to ANY business venture and is a cornerstone of when to borrow money.

[Mike90250]

I would suggest getting a home equity loan (if you have equity). You will probably get a low interest rate (since it is a secured loan) and you get to deduct the interest in your taxes in the same way you get to deduct your primary mortgage interest.

Well, you sure have to have a BIG interest payment to be able to deduct interest off your taxes with the new "standard" deduction. Big mortgage, property tax, generous donations and medical didn't tip me past the standard deduction this year,

[SunEagle]

Well, you sure have to have a BIG interest payment to be able to deduct interest off your taxes with the new "standard" deduction. Big mortgage, property tax, generous donations and medical didn't tip me past the standard deduction this year,

Same here. With the standard deduction it is now even hardy for me to justify a solar install

[azdave]

...solar should be treated as a business decision.

Except that way too many people don't know how to do that and end up taking on long term debt and risk for the sake of a fractionally smaller electric bill each month.

I know these people well. With the jump in their home's value, purchased only 5 years ago, they have already taken out a 2nd mortgage and used it to renovate their nearly new kitchen and bought a Polaris 4x4 with matching trailer and a 4 x 4 truck to tow it. They come to work each day in their other car, a leased $60,000 SUV while chatting on the latest Iphone using matching $200 wireless ear buds. They hang out in the break room during lunch and complain how they don't make enough to contribute to their 401k (with a company match) let alone have a small savings account for emergencies. I hear all these stories about their financial woes while I'm eating a sack lunch I brought from home. They are waiting for Door Dash to deliver take out.

These are the people who have no business borrowing to go solar and yet these are mostly who I see signing contracts.

[SunEagle]

Except that way too many people don't know how to do that and end up taking on long term debt and risk for the sake of a fractionally smaller electric bill each month.

I know these people well. With the jump in their home's value, purchased only 5 years ago, they have already taken out a 2nd mortgage and used it to renovate their nearly new kitchen and bought a Polaris 4x4 with matching trailer and a 4 x 4 truck to tow it. They come into work each day in their other car, a leased $60,000 SUV while chatting on the latest Iphone using matching $200 wireless ear buds. They hang out in the break room during lunch and complain how they don't make enough to contribute to their 401k (with a company match) let alone have a small savings account for emergencies. I hear all these stories about their financial woes while I'm eating a sack lunch I brought from home. They are waiting fort Door Dash to deliver take out.

These are the people who have no business borrowing to go solar and yet these are mostly who I see signing contracts.

The sad part is there may be a lot of those people now out of a job due to the Covid-19

[J.P.M.]

Bottom line is if you can borrow money at 3-4 % and generate 10% + return on that borrowed money, you should do it. If you have the money fine, but if you don't, still borrow money to open up a business venture that would triple your return on the borrowed money. You would be a FOOL not to. This principle applies to ANY business venture and is a cornerstone of when to borrow money.

Yea, MBA 101. But from what I've seen, if businesses make financial decisions the way most folks manage their personal finances, the businesses wouldn't exist for long, or the CEO's would be walking the streets in short order.

[Mikey Bee]

Same here. With the standard deduction it is now even hardy for me to justify a solar install

Harder to justify due to the interest? If my monthly solar loan/payment amount (which includes the interest) is still half of what I’m paying for traditional/utility company electricity, why would it matter if I can’t deduct the interest from taxes?

[macaddict]

Harder to justify due to the interest? If my monthly solar loan/payment amount (which includes the interest) is still half of what I’m paying for traditional/utility company electricity, why would it matter if I can’t deduct the interest from taxes?

Agreed. I just mentioned a home equity loan as an alternative of a regular solar loan if you are able to deduct the interest. Whether you go with solar shouldn't be based on if you can deduct the interest...

[macaddict]

Well, you sure have to have a BIG interest payment to be able to deduct interest off your taxes with the new "standard" deduction. Big mortgage, property tax, generous donations and medical didn't tip me past the standard deduction this year,

Move to NJ and you will hit that in no time. Just with the property taxes, you will hit $10k (SALT limit) with an average house. Primary mortgage interest, home equity loan (for solar), charitable contributions, etc. get added on top of that...