I'm not too sharp on financial math. We're getting solar panels through a deal with our electric company. After tax credits they are costing $10,000. The electric comapny will buy our electricity for 15 years at a rate where we expect to make about $1500 per year.
The question I have is whether it makes sense to just buy the panels or take their loan. My math says the loan is the clear choice, but I fear I'm missing something in my math.
If we pay out of pocket we start $10k in the hole, here's how the payback would work over the 15 years
Year Money Made Payback
2017 $1,500.00 -$8,500.00
2018 $1,500.00 -$7,000.00
2019 $1,500.00 -$5,500.00
2020 $1,500.00 -$4,000.00
2021 $1,500.00 -$2,500.00
2022 $1,500.00 -$1,000.00
2023 $1,500.00 $500.00
2024 $1,500.00 $2,000.00
2025 $1,500.00 $3,500.00
2026 $1,500.00 $5,000.00
2027 $1,500.00 $6,500.00
2028 $1,500.00 $8,000.00
2029 $1,500.00 $9,500.00
2030 $1,500.00 $11,000.00
2031 $1,500.00 $12,500.00
If my math is right, that is a measly 1% annualized. however, the loan is going to cost us 1319 yearly for 10 years. Here's how that breaks down.
Year Money Made Loan amount Total $ made
2017 $1,500.00 -$1,319.00 $181.00
2018 $1,500.00 -$1,319.00 $362.00
2019 $1,500.00 -$1,319.00 $543.00
2020 $1,500.00 -$1,319.00 $724.00
2021 $1,500.00 -$1,319.00 $905.00
2022 $1,500.00 -$1,319.00 $1,086.00
2023 $1,500.00 -$1,319.00 $1,267.00
2024 $1,500.00 -$1,319.00 $1,448.00
2025 $1,500.00 -$1,319.00 $1,629.00
2026 $1,500.00 -$1,319.00 $1,810.00
2027 $1,500.00 $- $3,310.00
2028 $1,500.00 $- $4,810.00
2029 $1,500.00 $- $6,310.00
2030 $1,500.00 $- $7,810.00
2031 $1,500.00 $- $9,310.00
So after 15 years I've made almost $10k with zero of my money tied up, plus the $10k that I didn't spend on the panels is still accumulating (would stay in my vanguard account).
Again, this seems like a no brainer, but I wanted to make sure I wasn't missing something. Thanks for the help!