Let’s explore the 2024 best finance options for solar panels. The majority of solar panel suppliers provide two or more financing choices. Your installation cost, eligibility for solar incentives, and return on investment (ROI) are all impacted by each choice. The common solar financing alternatives offered by solar providers are broken out below.
- Cash Acquisitions
The simplest payment method is cash for the item. By paying for your solar system upfront, you do away with credit score checks, loan costs, and interest rates. Given that solar panels have a 25–35 year lifespan, purchasing with cash is the same as prepaying for your solar energy. The drawback is that a substantial sum of money—between $18,000 and $25,000—is required.
- Solar Credit
If you are unable to make such a sizable upfront payment, a solar loan is an excellent choice. Homeowners who take out solar loans can spread out their tiny monthly payments over time. To be eligible for the greatest rates, you must have a high credit score. With a solar loan, just like with a cash purchase, you become the owner of your system and are eligible for rebates and incentives.
Loans for solar panels are provided by independent lenders and occasionally by the lenders themselves. The most typical loan option kinds are shown below:
- Loans without collateral: These loans let you borrow money from a lender. They may not require a down payment and offer speedy approvals. This includes loans for personal use.
- Secured loans: The collateral used to secure the loan may be sold if you are unable to repay it. These loans usually have longer terms but lower interest rates. Moreover, interest rates on secured loans are tax deductible. Home equity lines of credit and loans are examples of secured loans.
Examining the loan terms is crucial, as should the origination charge, repayment plan, and annual percentage rate (APR). To maintain maximum consistency in payments, the majority of loans include set, low-interest rates.
- Solar Contracts
If you are unable to obtain a solar loan or make a cash purchase, you may consider solar leases. This entails leasing your solar energy system from a solar energy supplier. Each month, you pay a set fee to use the solar panels. Typically, a lease is for ten to twenty-five years. The maintenance of your system is at the purview of the solar business during this time. The majority of businesses combine regular servicing, maintenance, and power production assurances with warranty coverage. A power production clause states that the corporation will either replace or repair your panels, or it will guarantee a certain output from your system.
You will have to either buy out the remaining balance on your solar lease or have the new buyer take it over if you do not intend to move your services. The amount of money you must pay to break your lease will depend on how long it is still in effect. If you choose to assign the lease to someone else, they will have to fulfill the requirements, which can include passing a credit check.
PPAs, or power purchase agreements
PPAs, or power purchase agreements, are an additional type of solar panel leasing. Rather than shelling out a set amount of money for every panel, you only pay for the energy you consume. Each month, you’ll pay according on the kilowatt-hour (kWh) that you consume, and your bill may vary. These payments don’t involve repayment terms and are far smaller than the monthly payments associated with a loan or lease. These contracts, which often run between 20 and 25 years, are also the longest.
Regretfully, PPAs are limited to certain states. Less than thirty states permit PPAs, according to the Database of State Incentives for Renewables and Efficiency (DSIRE). Restrictions on the PPA terms, such as limitations on the size of your solar installation, may be imposed even by recognized states. PPAs offer the least financial benefits and exclude you from solar credits and incentives.
Solar Panel Financing Options
Most solar panel providers offer two or more options for financing. Each decision you make will affect your return on investment (ROI), installation costs, and eligibility for solar incentives. Below is a breakdown of the common solar financing options that solar suppliers offer.
Purchases with Cash
Cash is the most straightforward way to pay for the goods. You can avoid interest rates, loan fees, and credit score checks by paying for your solar system in full up front. Considering that solar panels last 25–35 years, paying cash for your purchase is equivalent to prepaying for your solar energy. The disadvantage is that a sizeable payment—between $18,000 and $25,000—is needed.
When you pay cash for the solar system, you officially become its owner. If you are the sole owner of your system, you may be eligible for solar credits and incentives that will pay for the entire system. For example, the federal solar tax credit offers first-time solar owners a tax relief equal to thirty percent of their installation costs. Your state or municipality may offer further incentives and rebates.
Credit for Solar
A solar loan is a great option if you are unable to make such a large upfront payment. Solar loans allow homeowners to gradually spread out their meager monthly payments. You need to have a high credit score in order to be qualified for the best rates. Like with a cash purchase, you own your system when you take out a solar loan and are qualified for incentives and rebates.
Solar panel loans are offered by independent lenders as well as on occasion by the lenders themselves. The following lists the most common types of loan options:
- Collateral-free loans: These loans enable you to take out a loan from a lender. They might provide quick approvals and waive the down payment requirement. Personal loans are included in this.
- Secured loans: Should you be unable to repay the loan, the collateral used to secure it may be sold. These loans typically offer lower interest rates but longer periods. Furthermore, secured loan interest is tax deductible. Secured loans include home equity lines of credit and loans.
It is important to review the loan terms, origination fee, repayment schedule, and annual percentage rate (APR). Most loans have fixed, low interest rates to ensure maximum consistency in payments. The APR will raise the total cost of installation and lengthen your repayment duration. Find loans with the lowest rates if you want to ensure that the total amount of your loan stays within a reasonable range.
Solar Agreements
Consider solar leases if you can’t get a solar loan or pay cash for your system. To do this, you must lease your solar system from a provider of solar energy. You pay a fixed amount to utilize the solar panels each month. A lease usually lasts between ten and twenty-five years. At this time, the solar company is responsible for the upkeep of your system. Most companies bundle warranty coverage with routine servicing, maintenance, and power production guarantees. A power production clause guarantees a specific output from your system or the company will replace or repair your panels.
Power purchase agreements, or PPAs
Power Purchase Agreements, or PPAs, represent yet another variety of solar panel leasing. Instead of paying a fixed price for each panel, you just pay for the energy you use. Your bill may change each month and your payment will be based on the kilowatt-hour (kWh) that you use. These payments are far less than the monthly installments connected to a loan or lease and have no terms of repayment. These are also the longest contracts, typically lasting 20 to 25 years.
Unfortunately, PPAs are only available in a few states. According to the Database of State Incentives for Renewables and Efficiency (DSIRE), less than thirty states allow PPAs. Even recognized jurisdictions may set restrictions on the PPA terms, such as caps on the size of your solar system. PPAs exclude you from solar credits and incentives and provide the least financial rewards.
How Much Do Solar Panels Cost?
As a result of regional variations in cost and availability, solar panel prices vary across the country. The Solar Energy Industries Association (SEIA) states that the typical cost of solar panels in the United States for a 6-kilowatt (kW) installation is between $16,000 and $21,000. The type of panels you select, the amount of energy you use, and your overall spending limit all have an impact on the total cost.
Solar Energy Credits and Rebates
Solar tax credits and incentives are an excellent way to lower the cost of moving to solar electricity. These incentives are available to qualifying solar customers on a federal, state, and municipal level. As previously mentioned, homeowners get reimbursed for thirty percent of the installation costs by the federal tax credit. This credit is applied to your federal tax liability at tax time. This is not a refund; it just reduces the amount of taxes you owe. If the amount you owe is less than the credit, the remaining debt may be rolled over to the next year.
Several states also offer state tax credits. Similar to the federal tax credit, these apply to your tax liability at the state level. Furthermore, governments, city-based incentives, and local utility companies could provide their customers with extra credits and rebates. To find out the full list of solar incentives available in your area, visit the DSIRE website.
Conclusion
Regardless of the caliber of the solar panels you buy, your total cost will be greatly impacted by the financing arrangement you select. Think carefully about your budget and long-term financial objectives. Choose Black Sun Roofing and Solar if you want to pay just for the energy you use and don’t have to worry about system maintenance.
