About Solar Panel Payment Options

Professional solar companies like Sunrun and SolarCity offer a wide variety of payment and financing options. Naming conventions vary and can be quite confusing, but you generally have the following options:

100% Upfront

In almost every scenario you’re going to save more if you buy your solar system upfront. This isn’t surprising to most people, but the upfront cost is significant.

Pros

  • Eligible for state & federal tax incentives
  • No interest paid
  • Own the system and any increase to home price in a home sale

Cons

  • High upfront cost
  • Maintenance and monitoring done by you

Get a Loan to Buy the System

Loans are the next-best option as far as savings go for most people. Generally the interest will not be tax deductible unless secured by your home in something like a home improvement loan.

Pros

  • Eligible for state & federal tax incentives
  • Payments are fixed and predictable each month
  • Own the system and any increase to home price in a home sale
  • Interest can be tax deductible if secured as part of a loan tied to the home

Cons

  • Need to qualify for a loan
  • Interest increases total system cost over time
  • Maintenance and monitoring done by you

Solar Leasing

For anyone who’s ever leased a car, the idea is roughly the same. You’ll pay lower monthly payments with a lease than if you were to get a loan for the system, reap many of the same benefits during the lease, but not own the system at the end of 30 years.

Pros

  • No/low upfront cost
  • Payments are fixed and predictable each month
  • Maintenance is free from the provider
  • Production monitoring and adjustments done by provider

Cons

  • Payments are fixed, but may be increased yearly (usually up to 3%)
  • Tax incentives go to the provider
  • You don’t own the system, even after the lease is over
  • Lease must to transferred to home buyers in the event of a sale
  • Because solar increases home value, in some states you will end up paying higher property tax for something you don’t own. Check for property tax exemptions in your state here

Solar PPA (Power Purchase Agreement)

Solar PPAs are very much like a lease, but you pay per kilowatt-hour produced (kWh) instead of by month. So instead of making equal payments each year, you’ll pay for the benefit received. You’ll almost always pay less in January than in August, but an unusually cloudy/rainy summer month will also mean you pay less. Of course the reverse is also true.

Pros

  • No/low upfront cost
  • Maintenance is free from the provider
  • Production monitoring and adjustments done by provider
  • Pay only for what the system produces (i.e. pay less in low-sun months)

Cons

  • Payments may be higher than expected in high-sun months
  • Tax incentives go to the provider
  • You don’t own the system, even after the contract is over
  • PPA must to transferred to home buyers in the event of a sale
  • Because solar increases home value, in some states you will end up paying higher property tax for something you don’t own. Check for property tax exemptions in your state here

Still Not Sure?

PPAs generally have the lowest amount of risk and the lowest potential return. Most PPAs will allow you to buy power below the utility rate, but you will not benefit from tax incentives. PPAs work best in states where utility prices have increased over time. Find your city for information on historic pricing (look under the pros/cons section for average increase stats).

Buying the system outright makes the most financial sense, but because most people don’t have tens of thousands of dollars sitting around, a loan is the next-best option for most people. Before going to the bank speak with a solar provider, as they’re likely to have lenders they work with regularly to speed the process along, often at comparable or lower interest rates.

Get a Quote on Various Payment Options