Paying for solar: Should you own, loan or lease?

Feb 09, 2018

Paying for solar: Should you own, loan or lease?

The long-term savings make sense, but what about the upfront investment? You might be surprised to learn how easy it can be — on your wallet and on your brain — to power up with solar.

“One of the biggest challenges in increasing solar adoption is the financing. When a person decides to add solar, it’s really a financial question. It can be a big deterrent for people who want to get solar, and we need to make this process less intimidating,” says Enphase Energy financing expert Jeremy Richmond.


To own or to lease, that is the question - icon - scale

To own or to lease, that is the question.

For many homeowners, getting the right solution for your specific home is priority number one. You compare different washers, look for the right smart appliances, and hunt for the perfect furniture. Having control over what goes into, and on top of, your home matters. By purchasing your solar solution, you get to choose the equipment that you want on your roof, making sure that these tools are the right ones for you. Beyond customization, ownership also gives you a light at the end of the tunnel. As soon as your financing option is paid, you’ll see dramatic reductions in your energy bills.

Depending on your needs and financial situation, paying for solar typically follows one of three paths: cash purchase, institutional lending, or PACE (Property Assessed Clean Energy). With a cash purchase, you pay your installer for equipment and installation outright, and immediately enjoy the energy savings. Installers may even offer discounts for cash purchases — they’re often simpler transactions with little to no additional administrative work.


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Loans

If you don’t want to tie up your savings, owning your solar solution is still very achievable. Lending, in the form of either secured or unsecured loans, is the fastest growing avenue for purchasing solar. Working with a bank or credit union, homeowners are able to access the funds for equipment and installation. And many financial institutions are creating innovative new products to meet the growing demand. With secured loans, the security is typically on either the home or the solar equipment itself, and often takes the shape of a home equity line of credit with up to a 10 year term. And, because your home is backing the loan, interest rates tend to be lower than unsecured loans.

If secured loans don’t suit your needs, an unsecured loan has grown to become a viable option for many. Many lenders are seeing very low default rates and are finding solar to be a really safe bet. Because of that, and with the inherent appreciation value of solar, lenders are able to offer homeowners financing for 3-5 year terms with payments that really aren’t dramatically higher than their current energy bills. So, you can get the solar solution you want, minimize your up-front investment, and pay close to what you’re currently paying for your utilities. Once the loan is paid in full, you’ll see big savings in your energy bills.

Property Assessed Clean Energy (PACE) is a unique loan from the secured and unsecured options above in that loan debt and repayment are determined through biannual property tax and only available in certain states like California and Florida. The product of private sector efforts with some government support, PACE is administered through third parties like Renovate America. The PACE program allows for financing of a wide range of energy efficiency home upgrades with no down payment. For information about whether PACE is right for you, check out Renovate America’s website and learn more.


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Leasing

Now, if none of these options for financing your solar solution work for you, leasing might be the right way forward. About 10 years ago, leasing emerged as a great alternative for homeowners interested in equipping solar, but without the up-front costs. Leased equipment is put up with no cost to you, is reliably maintained, and you’re free to sell the energy it produces. By leasing, you’ll see immediate savings over your current energy bill, but you do lose the flexibility to choose your own equipment. Plus, a lease typically comes with a 20-year term, which is quite a bit longer than a standard loan and can also make selling your home a challenge. If you try to sell before the lease term is up, you’ll need to transfer the lease to the new owners, which can be a little daunting.

Paying for solar, while certainly a big part of the decision process, doesn’t have to stop the conversation. Over the years, the costs have come down considerably and more and more homeowners are exploring how to get solar solutions on their roof. And, whether it’s buying or leasing, secured loans or PACE, the options for financing solar continue to grow.


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