“How much can solar save me?” That seems to be the overriding question on most consumers’ minds as they delve into the fascinating (and rewarding) world of solar energy and solar financing options. Here’s the good news: the majority of homeowners find that, regardless of how they pay for their system, they can reduce their electric bill and dependency on their utility company by installing solar panels on their property.
Solar panels cost factors
So just how much money can solar save you? The cost of installing solar panels depends on a number of factors. Generally, these include your monthly energy usage, the size of the system you install, and how you plan on paying for it—cash purchase, leasing or financing.
While other factors may come into play when determining your monthly energy savings with a residential solar system, we can give you a basic idea of how much money solar can potentially save you with these examples. Generally, we tell prospective solar customers that if their electric bill is $100 a month or more it’s likely we can save them money with a solar installation.
Now let’s look at the various solar panel financing options one by one:
Pros: lowest cost per kilowatt hour; potential tax deductibility
Cons: highest upfront costs
With a cash purchase, you buy and own the system, along with all the energy it produces. A cash purchase requires the highest upfront costs of all the options, but will generally pay for itself in five years, and provides you with the lowest cost per kilowatt hour.
A cash purchase also makes you the full beneficiary of any solar tax credits, state and local solar incentives, along with product warranties on the system which generally span 20+ years.
Pros: same as a cash purchase
Cons: small interest rate on the loan
Many consumers find that financing their solar system makes the best sense because it offers many of the same benefits of a cash purchase, but without the upfront costs.
When you pay for the cost of installing solar panels through a loan from your solar provider, you own the system just as you would with a cash purchase. You also get to take full advantage of any solar tax credits along with state and local solar incentives.
Loans can span anywhere from 5 to 20 years; you can generally pay off your loan at any time without penalty.
You may find that a home equity loan is the best way to pay for the cost of solar panels, and that loan may be tax-deductible. The financing is secured with a lien on the property.
Pros: zero upfront costs
Cons: you forego any solar tax credits along with state and local incentives
Leasing is an attractive way for homeowners to pay for the cost of solar panels because it requires no money up front. With a leasing option, you don’t own your solar system, but basically pay a monthly “rent” on it to your solar provider. System performance is typically guaranteed for the life of the system, and your solar provider is obligated to incur the time and cost of maintaining it.
Should you decide to move, many lease agreements allow you to reassign the lease to the new homeowner.
Financial incentives, tax credits and utility rebates
As you consider the three main types of solar financing options, keep in mind that there are many financial incentives, tax credits and utility rebates available depending on where you live. Typically, you can only make use of these incentives if you purchase or take out a loan for your solar system.
We can help with solar financing options
Solar panel financing might seem daunting at first. But each option is designed to address the specific needs of individual homeowners. Each has its pros and cons; yet they all offer a way to reduce your electric bill, help the environment by using renewable energy, and gain long-term energy independence.
Whether you lease a residential solar system with either a prepaid or monthly payment option, get financing to purchase it, or pay cash to buy it outright, we can match you with the option that best fits your needs and your goals.
Don’t hesitate to call one of our expert consultants.