Going Solar for most people is an investment – it provides one of the best returns (about 15% – 25% annual ROI for each of the about 25 year product lifespan) – and deciding how best to finance this investment is an important part of the Going Solar journey. You can purchase the solar system by paying cash or by financing it, or you can lease it. Purchasing allows you to take full advantage of available incentives and maximize financial benefits; whereas, leasing allows you to Go Solar with little to no upfront costs, at a cost of lower financial benefits and some conditions. Neither is inherently better or worse as long as you fully understand the choices and the choice meets your goals and situation.
Cash purchasing the solar system is the best choice if you have cash and want to invest it, especially considering the current low interest rates. This method also has the shortest payback period, fewest conditions, and qualification criteria.
FINANCED WITH BANK
FINANCED WITH BANK
Financed purchasing the solar system also provides many of the benefits of cash purchasing with the most salient benefit of not needing to pay the entire amount upfront. But, financing’s associated fees and interest payments will reduce the monthly savings and will make the payback period longer and will reduce your ROI, compared to a cash purchase. Also, most financing solutions will also have qualification requirements.
PACE financing is a program that allows homeowners to pay for solar through an increase to your property taxes. The PACE program does not have any credit requirements and it is based only on home equity and property taxes. This program is great for homeowners who do not qualify for traditional financing. Solar interest payments might be also tax deductible which is a great advantage.
Unlike today, Solar was new and uncertain in 2010. During this timeframe, Solar and 3rd party Finance companies started the leasing model to entice potential customers with reduced or no upfront cost, little risk, and minimal maintenance responsibilities. Twenty year leases or 20 year power purchase agreements, both with a 20 year “bumper to bumper” warranty and $0 down were almost a “no brainer” and these leasing options became very popular. Leasing may be the right solution for some customers but, as with any agreement, it is important that you understand the terms and conditions and their present and future repercussions – you should not be surprised.