Are Solar Panels a Good Investment if You Don't Plan on Staying in Your Current Home Long-term?


The average payback period on a solar loan is only seven to ten years, whereas solar panels have an expected lifetime of 25 to 30 years.

That makes solar power a potentially great investment if you're planning on staying in your home long-term.

But what if there's a chance you'll be moving in the next seven to ten years? Can solar power still make sense as a short-term investment?

The short answer is "yes." In fact, most homeowners who finance their solar systems wind up spending less per month paying off their solar loan than they used to spend on electricity. Since solar panels generate cost-free electricity once they're installed, that translates into immediate monthly savings.

Moreover, since your utility is all but certain to raise its rates each year, solar power also affords a nice hedge against inflation even in the short term.

Financing options

How much you'll save each month by going solar and when those savings actually kick in depends upon what finance option you choose

Most homeowners take out a solar loan. But some decide to use their own money and pay upfront in cash, instead.

Paying cash

But installing solar panels isn't cheap -- that's why it's an investment. In the U.S., the average price tag for a residential solar system is around $20,000.

So, the obvious disadvantage of paying in cash is that you'll be operating at a loss until the money you've saved by not having to pay for electricity each month balances out that initial outlay.

The advantage of paying in cash is, of course, that you avoid spending any money on interest or loan fees.

That makes paying in cash a good strategy for homeowners who aren't planning on moving anytime soon and are looking to maximize their long-term investment.

Solar increases the value of your home

But paying in cash can make sense even if you don't expect to be in your current home long-term.

That's because installing solar panels increases a home's value.

A 2015 study by the Lawrence Berkeley National Laboratory tabulated increases in home market value in terms of the size of its solar system. For every kilowatt (KW), the value of a home with a host-owned solar system increased by around $4000.

That means even installing a small 5 KW solar system would increase a home's selling price by $20,000. If you're dealing with a reputable installer and there's nothing unusual about your home making the job difficult, that ought to cover the full cost of installation.

So even someone planning on selling their home fairly soon is likely to recoup the initial expense of going solar when they do. At which point, their return on investment will be all the money they've saved not having to pay for electricity.

Immediate savings

Of course, if you're looking to start saving money immediately, paying for your solar system outright in cash won't be the way to go.

But it's possible to get a solar loan with little or no money down. In fact, many lenders are even willing to count the 30% Solar Investment Tax Credit you'll be getting when you file your taxes next year in advance towards any down payment.

Taking out a loan with a longer term means lower monthly payments.

So, thanks in large part to increased solar panel efficiency, nowadays it's very common for homeowners who finance their systems with a 20-year solar loan to wind up with lower payments than what they were previously spending each month on electricity.

That translates into immediate savings.

And since your panels should last at least 25 to 30 years if not longer, the amount of money you save each month is only going to increase as the cost of electricity rises. 

Even better, once that 20-year loan is paid off, you ought to get at least five to ten years of spending nothing at all on electricity before your panels need to be replaced.

Some homeowners may even be able to realize immediate savings with a shorter ten-year solar loan.

Whereas others who choose a ten-year loan may wind up paying a little more initially but start to see savings kick in as inflation increases the amount they would have had to pay their utility company each month.

So, whether you're looking for a long or short-term investment, solar power may be just the thing.

Share this post


Economists Are Predicting a Major Recession in 2023