Solar SME, Inc.
Solar Financing
Make the switch to solar easy with our flexible financing options
At over $10,000 or more, a solar installation is still a big investment. If you want to go solar but don’t want to buy a solar PV system with cash, solar financing through SolarSME gives you a lot of options. SolarSME can help you understand and choose which options are best for you.
These options include $0-down solar loans, solar power purchase agreements (PPAs) and leases. Each will help you save money on your electric bill while still allowing you to benefit from producing your own energy.
Solar Loans
Solar loans are a great choice to finance a solar system if you want to purchase it. Most solar energy loans, secured or unsecured, will fund the entire cost of your system. You can borrow such loans through a bank, local entity or, in some cases, from the federal government. Solar loans can also be part of a home improvement loan and can be rolled into a refinanced mortgage.
Since solar systems are known to increase property value, a solar system that was financed through a solar loan will add value to the home at time of resale. Since it’s not owned by a third party under a PPA or lease that makes it easier to sell and for a new buyer to purchase.
Points to consider for solar loans:
- Using a solar loan to finance your panels can help you save 40% to 70% compared to what you would have paid for electricity over the lifetime of your system.
- Solar loans use the same general framework, terms, and conditions as most other home improvement loans. Some states and counties also offer subsidized solar energy loans with interest rates below the cost of other home improvement loans.
- By financing a solar system with a loan, you are considered the owner, qualifying you to experience the full benefits of financial incentives such as the Federal Investment Tax Credit (ITC). Interest paid on solar loans can also be tax-deductible, which reduces your income tax.
Solar Leases and PPAs
Solar leases and PPAs are other ways to finance a solar installation. They give you a lot of the financial advantages of installing a solar panel system without paying for it up-front or owning it. This is one of the easiest ways homeowners can finance a solar energy system. With solar leasing or PPAs, a third-party finances and owns the system and pays for the installation. You pay a fixed price for the system or for the solar power produced by the system on a monthly basis.
Points to consider for Solar Lease and PPAs:
- With a lease or PPA, the third-party owner (TPO) will install and own solar panels on your property. In return, you agree to pay them for the use of solar energy for the duration of the agreement.
- Selecting a PPA or lease as a solar panel financing option can help you save 10% to 30% percent a month on your electricity bills with no upfront investment needed from you.
- The TPO is responsible for the maintenance of solar panels. At the end of the contract they will either uninstall them or sell the system to you at the fair market value of the system at the end of the contract, like leasing a car.
- Since the TPO owns the solar panel system, it receives the benefit of the incentives offered by the government, the state, and any local utilities and shares those savings with you.
Pros and Cons of PPA Solar Financing:
Pros
Cons
No initial investment, making solar accessible for most homeowners.
Providers handle maintenance and repairs, relieving the burden from the homeowner.
Lower electricity bills from day one, reducing costs.
Assurance of optimal system efficiency and energy production.
Adjustable contracts provide purchasing options.
Long-term commitment. Contracts often span 15-25 years, limiting flexibility.
No direct tax incentives or ownership advantages for homeowners.
Price increases built into the contract may impact long-term savings.
Specific location requirements may limit installation possibilities.
The homeowner is vulnerable to a renegotiated agreement or loss of maintenance if the TPO goes out of business.
What is the best way to pay for going solar?
The best way to fund your solar array depends on your capabilities and what you want to do. The main options are financing it or paying for it upfront. Each has positives and negatives.
If you have a great credit score and/or cash on hand, it might be cheaper overall than financing options. Paying for it up front or financing it with a solar loan gives you ownership and allows you to take advantage of all the incentives like the 30% investment tax credit and local rebates directly. However, it also subjects you to the risks of ownership and maintenance that other options don’t.
If you don’t have cash on hand and have a lower credit score you may still qualify for a solar loan, often at a higher interest rate or for solar lease and PPAs. These give you the benefits of solar and some of the incentives that the financier uses to bring you solar at a lower cost. Depending on your location and your financing agreement you may have access to additional benefits like net-metering. With a lot of solar financing agreements you can get one additional benefit buying them outright doesn’t often come with—a maintenance program.
Buying them outright or financing a solar array with a loan may be less expensive and the quickest way to recoup your investment and start saving money, but it comes with more risks. Financing solar with a lease or PPA may be more expensive but it doesn’t cost anything right away and small monthly payments are easier for many people, plus the third-party owner should maintain the system for you. You should still see your overall energy costs reduce and they’ll drop more over time.
The best advice is to speak with a well-respected solar installer who will take the time to explain all the options to you as well as how much the different financing options will cost you. They’ll help guide you to a solution that helps you enjoy the sun in a whole new way!
Frequently Asked Questions
Zero-down solar means financing solar through a loan, lease or PPA. Financing is a popular way to go solar because the cost of going solar is spread out over years and plans are designed to help you save money compared to your electric bill, and those savings grow each year you have solar. So, yes, good zero-down solar options are worth it.
Under solar leasing options there are some drawbacks. You don’t get the up-front benefits of most incentive and rebate programs. The leases have terms of 5-15 years and you will end up paying more than you would for buying a solar system outright. At the end of the lease you usually have an option to buy the system outright or have it removed. There’s also the risk that the company that financed the system could go out of business, which could cause you some headaches down the road.
If you have the cash to purchase a system outright it will be less expensive than financing it with a lease or loan and you get the benefits of all the incentives and rebates you can qualify for. But you’re also responsible for maintenance and damages. You can purchase insurance and service plans, but they are additional costs. As long as you're ok with those risks, paying for a system with cash is a good option.
In some cases, the interest on solar loans is tax-deductible. Before purchasing a solar system it’s wise to talk with solar installers and tax professionals to help you understand how a particular solar loan is or is not tax deductible. Tax incentives and laws vary by state and county and that can impact what you can and cannot claim on your taxes.
When you move, the options include transferring the lease to the new homeowner, fulfilling the lease as part of the buyer’s new mortgage, or arranging for the solar company to remove the system. Terms vary, so consult your lease as well as the solar provider for details on how the lease can affect your sale of the house and your options.
