Solar Loans vs. Solar Leases: What’s the Difference?

August 17, 2020

When searching for the benefits solar energy brings to the table, you don’t need to look far. The environmental, financial, and societal positives are apparent, but this won’t change the fact that solar is still an investment in need of careful consideration.HowtoFinance-LoanvsLease

Whether you choose to pay cash upfront for your solar project or opt for financing, getting to know the difference between a solar loan and a solar lease is an important first step.

Solar loans, leases, and PPAs

If you’re looking to purchase your solar panel system and own it outright someday in the future, a solar loan might be your best fit. These loans may be secured using your home or property as collateral or unsecured and uncollateralized. A wide variety of loan options may allow you to finance the entire cost of your system and installation.

On the other end of the solar financing spectrum are leases and power purchasing agreements (PPAs). These options provide the property owner with many of the financial benefits of solar energy, such as low cost electricity, without requiring you to pay out of pocket for the system. This is similar to leasing a car, where a third party owns the vehicle and you simply make monthly payments for the term of the lease. At the end of the lease, the third party owner will either renew the lease, sell it back to you at or near market valuation  or remove the solar installation from your property . 

With a lease or a PPA, however, you ultimately forfeit many of the tax incentives, rebates, or other enticing incentives offered by utility companies to the third party owner of the system. This can be a deal-breaker for those looking to cash in on the monetary benefits and pay off their solar panel system as quickly and efficiently as possible. However, it can be very attractive for some property owners who don’t want to cover the upfront costs of the system. 

Speak with your installer

For residential or commercial customers looking for a little more guidance, your solar installer may be able to help. Although they’re not licensed financial experts, your rep should be trained and knowledgeable in lending and financing and can help you find a lender to guide you through the process. 

For more on these points and other suggestions about financing your  solar energy, check out our eBook “How to Finance  Solar” here.


Download our eBook, How to Finance Your Solar, to learn more about the financing options available to you before kicking-off your next home improvement project! eBook_CTA_HowtoFinanceSolar

 

 

Categories: Financial