There are 3 ways for homeowners to go solar

July 13, 2023
Alex Miller

Understanding the 3 payment options that homeowners have to install solar panels

Solar panels are a great way to save money on your energy bills and reduce your carbon footprint. But how do you go about installing them on your home? There are three main ways to do it:

  • Solar loan: This is a loan that you take out to pay for the cost of installing solar panels. The loan payments are typically lower than your current energy bills, and you'll start to see savings right away.
  • Solar lease: This is an agreement where you rent solar panels from a company. The company installs the panels on your roof and you pay them a monthly fee. You don't own the panels, but you don't have to pay for their installation either. Instead, you pay for the electricity that they provide, at an agreed upon rate.
  • Cash deal: This is where you pay for the cost of installing solar panels outright. This is the most expensive option upfront, but you'll save money in the long run because you won't have to pay any interest on a loan.

Which Way is Right for You?

The best way to install solar panels on your home depends on your individual circumstances. Here are some factors to consider:

  • Your budget: If you don't have a lot of money to spare, a solar lease or loan may be a better option for you.
  • Your credit score: If your credit score isn't great, you may have a hard time getting a solar loan. A solar lease may be a better option for you.
  • Your long-term plans: If you plan on staying in your home for a long time, a cash deal may be the best option for you. You'll save money in the long run, but you'll have to pay for the installation upfront.

Solar Financing Options

There are a variety of solar financing options available, so you should be able to find one that fits your budget and needs. Here are some of the most common options:

  • Solar loans: Solar loans are typically offered by banks, credit unions, and other financial institutions. The terms of these loans vary, but they typically have fixed interest rates and terms.
  • Solar leases: Solar leases are offered by solar companies. Under a solar lease, you don't own the solar panels, but you pay a monthly fee to the solar company to rent them.
  • PPAs: Power purchase agreements (PPAs) are similar to solar leases, but under a PPA, you agree to purchase the electricity generated by the solar panels.

What is the Best Option for Someone With a Considerable Savings Account?

If you truly want the lowest cost and highest long term value from your solar panel installation, then a Cash Deal or Upfront Payment might be a great option for you. If you've found your dream home and plan on staying a while, then ca cash deal is a great value long term investment. The ROI on a solar panel installation could range anywhere form 5-15 years depending on a multitude of factors. It is important to note that the ROI goes up over time at a rate proportional to the yearly inflation of energy prices. The IEA has reported that we should expect a 3.8% increase per year for residential energy costs. At this rate, someone with a current $200/month average energy bill could be paying up to $290/month in 10 years and $508/month after 25 years. This is notable because the industry standard for warrantees solar panel installations is 25 years however they generally continue producing power for much longer, just at a slightly lower rate.

What if I Plan on Moving?

If you are not planning on staying in your home long-term, then it may be worth considering a solar panel loan or a solar lease. If you purchase the system with upfront payment and move after 5-10 years, you will likely recoup your initial investment in savings however, as we discussed previously, the cash deal becomes a more valuable investment over time so selling the home early would be much more beneficial to the new homeowners than it would be to you. In these circumstances, it is generally recommended to choose a loan or lease option that is lower than your current average electricity bill so that you see immediate savings. Solar loans and leases payments are completely transferable to the next homeowner once they buy the home. We would not recommend uninstalling your solar system and taking it with you to your new home because each solar panel system is custom built for the home that it's designed for. However, if you have paid off your solar panel loan or upfront payment, you do own the panels and you can theoretically do that. It just makes more financial sense to sell the home with the solar panels attached and install a new solar panel system for your new home.

Do Home-Buyers Want to Purchase Homes with Solar Panels on Them?

According to several studies by Zillow, homes with solar panel installations sell for 4.1% more than their counterparts without solar. The value that your solar system adds to your house depends on several factors including type of equipment, back-up power options, System age, and which of the 3 methods of solar installs you chose. Fully paid off solar systems are much more financially beneficial to the home-buyer so this method should yield the highest added value to your home. The added value of a solar system paid for via loan would be determined by the percentage of the system that has been paid for. Because you don't actually own the panels in a lease, it would not raise the value of your home by that.

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