Complete Guide to Solar Panel Financing in 2018

Jason RothmanApril 30, 201824340

We know that solar is only getting more popular, but the major hurdle people still have with solar, is that it is expensive. Currently, there are three ways to get solar power, pay everything up front, lease the solar panels, or finance them. Because most people don’t have the money sitting around to buy a residential solar system outright, we will break down the advantages and disadvantages of buying versus leasing solar panels.

Solar leases, in which homeowners agree to pay a third party solar company for the right to use their solar panels. This option has really propelled the growth of residential solar. In light of recent states (like Florida) allowing solar leases, the growth is expected to continue.

 What Is A Solar Lease? 

A solar lease is when someone else owns the solar energy equipment (usually the leasing company) installed at your home to produce your electricity. You pay a monthly payment to lease the equipment for a period. Those terms usually last 10 to 15 years and often the lease payment increases over time.

 Solar Lease Advantages 

A solar lease has payments that are usually lower than the electric bill from the utility, and that is why a lot of people lease their solar power. Many people live in situations where they still want to be independent of the utilities, and they want to lower their carbon footprint, but they don’t have the means to budget a solar panel installation. They do, however, pay their bills every month. If they can have solar power installed without the huge upfront cost, they can use all the power they want, and they will still pay less than from the utilities, people will line up for that deal forever.
Leasing also makes it easier to upgrade when newer, more efficient panels come on the market. This is a good thing because the industry is changing and improving every day.

 Solar Lease Disadvantages 

When you lease the solar panels, you don’t own them. A solar lease is basically an agreement to rent the panels and pay for that rental every month until they are removed from the home. Because of this, a lease adds no value to your property and may actually reduce property value or become a problem if you try to sell your home. The leasing company also owns the solar panels, so they receive all the federal tax credits, state incentives, and programs. They Increase their bottom line, while you pay them every month.

 Power Purchasing Agreements (PPAs) 

These are similar to leases, except that in leases you pay for the equipment leased and you get to pocket the power savings. If you have a PPA, then you don’t have to pay for the equipment, you have to pay for the power you use, just like you do with the utility. The difference is that lease payments are about the same every month, and PPAs vary each month based on the amount of energy produced by the system. Under a PPA, a customer pays only for what is produced during a given month, and will, therefore, pay more in summer than in winter.

 PPA Advantages 

Again, if you don’t have the means to finance your own solar panels, then a PPA contract might work in your situation. In many cases, it is still less expensive than power from the utility. You just pay for the power you use, and it might be a beneficial deal in the right circumstance.

 PPA Disadvantages 

Just like leases, you don’t own the solar panels, and you are providing the leasing company the money for those solar panel payments. You don’t get the tax incentives, and sometimes you don’t even receive the net metering benefits.

 Own Your Power 

It is better to own your solar panels. It just is. We know that many people do not have the savings, the assets, or the credit score to get favorable rates when financing, but if you do have the means, it is much better to own the system and finance it over a few years When you own something like solar, it is an asset. Cars are also assets, but they are depreciating assets, meaning they are worth less over time a solar investment is an appreciating asset, that adds to the value of a home. A lease or a PPA contract are just other ways to say that you pay to use someone else’s asset.

 Solar Finance Programs 

Like we mentioned earlier, most people don’t have a bunch of money lying around, so most people will want to finance their purchase. The good news is that banks are warm to solar, and there are a lot of companies that even specialize in solar loans.

 Home Equity Loans 

Every bank and credit union has a version of the home equity loan. It is a great way to use the home itself as collateral to procure a loan to install solar. Installing solar increases the value of the home, and every bank knows this. If you have good to great credit, and you don’t have a lot of credit card debt, most banks will give very favorable rates and terms for these loans and explore what your bank can do for you is a great option.
There are also many solar power finance companies. All they do is work with homeowners to get solar loans for their homes. Companies like GreenSky Finance or Ygreen are more than willing to look at your situation and see if a solar loan is right for you. The great thing about the solar loan is many times the payments are less than what you would have paid for power from the utility anyway.

 Some Utilities Get into the Finance Game 

Pacific Gas and Electric, located in California, offers a zero percent loan on solar panel installations on the home, and many others are following suit. They know that solar is the future, and unless they are a part of it, they will be outside the revolution looking in.

SMUD, located in Sacramento offers help for both homeowners and installers. They can help people find financing for the projects too.

With any of these financing options, you get to retain the 30 percent federal tax credit and any other financial incentives. The interest on the loan is tax deductible, and you own your solar system instead of renting it. The end result is your return on investment with a loan is far greater than a lease.

Solar is a viable solution for energy, it can significantly increase your property’s value, and reduce your carbon footprint. When considering installing solar power for your home there are financial options for the homeowner to study. It makes sense to understand what advantages and disadvantages exist for leasing or financing to purchase solar.

Thank you for reading and we hope this helps you make an informed decision when purchasing a new solar system. For more information relating to going solar don’t forget to visit our solar blog section for more handy guides.

At HahaSmart Solar, we work with installers that can also point you in the right direction when it comes to financing your residential solar system. Centering its main value proposition on making it easy and affordable to go solar, HahaSmart lets homeowners easily get started using online tools such as Design DIY and Solar Price Checker.

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