Prospective clients often ask, “What is the best way to pay for a solar PV installation?”
But honestly, there is no single “best.”
Every customer is different, and each financing option offers its own unique advantages. Below are 3 of the most popular ways customers “go solar.”
1. Financing Your System with a Solar Lease
Similar to car leases, a solar lease allows you to “rent” your PV installation. The actual parts and labor come free (or nearly free). You simply pay for the clean solar electricity that your rented panels produce.
Below are some of the main benefits of solar leasing:
- Cost. You don’t need a lot of money to get started. A third-party (“lessor”) takes care of all the financing and installation on your behalf.
- Ease. Getting started is a cinch. You don’t have to deal with inspections, permits, or excessive paperwork. The lessor handles all of this.
- Maintenance. Malfunctions are exceedingly rare. But if anything happens to your installation, the lessor will repair your PV system’100% free of charge.
- Many solar leases also come with an option to buy the system after the 10, 15, or 20 years of the contract are up.
Because of these benefits, solar leasing is one of the most common ways to finance a new PV installation. Minimal hassle, long-term savings, and zero startup costs. But believe it or not, leasing isn’t necessarily the “best” way to go solar.
2. Financing Your PV System with Cash
Many solar customers choose to pay for their PV systems out of pocket (using cash). The benefits of this approach include:
- True energy ownership. You’re not simply “renting” energy. You own all of the clean electricity that your solar panels generate.
- Incentives. As the system owner, all solar incentives come directly to you. These incentives currently include a 30% tax credit which can be used to offset any federal tax liability you may have. This makes installing your PV panels incredibly affordable. But with the tax credit due to drop or expire in 2016, now is the time to act.
- Guaranteed returns. True solar ownership offers predictable payback periods and a guaranteed return-on-investment (ROI). Once installed, your PV system offers decades of free electricity (even as utility companies continue raising their rates). Your savings actually grow larger with time. Read this article to learn more.
- Increased property value. According to the National Renewable Energy Laboratory (NREL), for every $1 in annual electricity bill savings that your solar PV system offers, the property value of your home increases by an average of $20.
The main drawback of this financing option? Not everyone has cash on hand to pay for a system outright.
Enter the solar loan.
3. Financing Your PV System with a Low-Interest Solar Loan
With a low-interest solar loan, you essentially borrow money from the bank to pay for your PV installation (parts and labor). But why go into debt when you can receive a new PV installation for free (with a solar lease)?
It’s a bit counterintuitive. But solar loans actually offer advantages of leasing and cash purchase options.
Let’s see how this works:
- Because you’re borrowing money to install the panels, your upfront costs are minimal (just like with a solar lease).
- You send monthly payments to the bank to pay off your loan. These payments are less than what you currently send to the utility company. Thus, you enjoy instant electricity bill savings.
- Just as with cash, solar loans offer predictable payback periods and a guaranteed ROI. It takes anywhere between 7 and 15 years to fully pay off your loan (depending on your state, the size of your installation, and the structure of your loan). Thereafter, the solar installation belongs to you—100%.
- You enjoy decades of free electricity, with no more payments to the bank (or utility company—if your system is large enough).
Solar loans are extremely popular because they allow you to affordably install PV panels while still enjoying the benefits of true system ownership (including incentives and increased property value).
Which Solar Financing Approach Is Best for You?
All of the options above offer both immediate and long-term savings. And all 3 allow you to reduce your carbon footprint. But which option should you explore?
Ultimately, it depends on your budget and financial goals.
If you need help deciding on the best way to finance your solar PV installation, contact us today for a free consultation. At Direct Energy Solar, we specialize in all 3 of the approaches listed above (i.e. leases, cash, and loans).
To schedule your free consultation today, click here.