Today, more than 4.2 million homes in the US have solar panels, as Americans across the country learn more about the benefits of switching to renewable energy. But as inflation rises, how are they paying for solar installation services? The answer is simple: robust solar panel financing options.
There are many ways to pay for solar panels: loans, leases, power purchase agreements — the list goes on. Understanding them all can get confusing. Let’s examine these options, why they matter, and how to benefit from them.
What Are the Solar Panel Financing Options?
You have three primary options regarding solar panel financing. There are solar leases, solar loans, and power purchase agreements. All of these options serve the same end goal. They enable you to install solar panels on your home, making your utility bills more affordable. However, the connective tissue of these options is different. They’ll determine how much you pay, what you own, and what you save.
Solar Loans
Solar loans are the most common solar panel financing options available. They’re similar to traditional loans in that interest rates are determined by your credit score, income, and the economy. However, their terms differ from home, personal, or car loans. Interest rates tend to be lower, and many loan terms are available. In short, solar loans are more flexible than traditional loans and are designed to fit homeowners of all income levels.
Solar Leases
A solar lease is similar to leasing a car. You get the benefits of solar panels at a lower price point, but you don’t own the hardware. Rather, you pay a fixed monthly rate for the solar panels, with most leasing terms lasting about 20 years. That’s a fair bit longer than solar loans, which tend to last 5-15 years, depending on the term you go with.
The prolonged payment period is just one of the many drawbacks of solar leases. The biggest is that you don’t own the panels. Considering that the primary point of going solar is to own your power source, leases defeat the purpose of going solar in the first place.
Power Purchase Agreements (PPAs)
PPAs are similar to solar leases, but rather than paying a fixed rate for the panels each month, you’re buying the power that the panels produce at a discounted rate. Like a solar lease, you don’t own the panels — whoever installed them does. You’re swapping one utility bill for another, albeit slightly lower.
It’s not worth pursuing a solar lease or a PPA outside extreme circumstances. The terms are too long, the prices are too high, and the drawbacks are too significant. You don’t qualify for solar tax incentives if you get a lease or PPA, either.
What Is Solar Contractor Financing?
Solar contractor financing involves getting a solar loan through the company you buy solar panels from. It works like this: A homeowner gets a quote from a contractor, decides they like it, and moves forward with the process. But they don’t have the cash to pay for their solar panels out of pocket, so they need a loan. This is where solar contractor financing comes into play. A solar contractor will have established loan partners for which it can serve as the middleman, streamlining the loan process. The homeowner signs a few documents, and poof. They have a loan.
This is an important step, so you should choose a good solar company to finance with before making any long-term commitments. Remember that solar loan providers are selective when determining which contractors they work with. If your solar financing options are limited because of your contractor, you may want to look for a different company to install your solar panels.
How Does a Solar Loan Work?
Once you’ve got a solar loan, you pay it off each month like any other. Your loan agreement states the financing charges, interest, and other details you must know about the financial aspects of the solar loan process.
The most important thing to note about these loans is how much you save overall by going solar. Work with your solar contractor to understand your payoff period, break-even date, and monthly payment. Compare that information to your utility offset, and you’ll begin to understand your total savings by switching to Green Energy.
Purelight Power Can Help You With Solar Panel Financing
If you still have questions about solar panel financing options, Purelight Power can help you understand what’s available. Our team breaks down the process of applying for a loan, taking advantage of solar incentives, and creating a design that works for your home. With that information, you can determine whether the switch is right for you.
Contact us today, and one of our representatives will reach out to schedule a free, no-pressure consultation.
