A lot of homeowners misunderstand how they actually pay for their solar system. I’ll explain the three main methods commonly used to purchase a solar panel installation. Cash deals and loans involve you owning the system while a lease is more like renting it.
Solar Cash Deal
A cash deal is quite simple. You pay the total sum up front, and then you receive a local solar panel installation that is warrantied to generate your home’s electricity for 25+ years. This option is ideal for those with disposable income looking to break even in about 6-8 years. It would also be ideal for those that know they will be staying in their home long term. If you know that the home will stay in the family for generations, you could realistically save $20,000-$50,000 or much more in the panel’s lifespan.
If you plan on moving, yes, you will regain some of the initial investment because the system is an improvement to the house and therefore adds value to the home. That being said, If you plan on moving before your 6-8 year ROI, speaking from a purely financial point of view, I don’t recommend this option for you. I would consider looking at the next option.
Summary: If you have money to spend, don’t like monthly payments, and don’t plan on moving any time soon, I would suggest getting a quote for a local solar panel installation.
Solar Loan
I get it. Loan is a scary word, especially when considering it can be a 10-25 year loan for your solar system. However, say your current average bill was $200 and every year that bill went up 3% due to inflation (which is currently over 7%). By year 10 your bill would be $268. By year 25 it would be $419. For a qualified home, the payment for a local solar panel installation might look something like $162 a month on day 1, $162 a month on year 10, and $5-8 after year 25.
The total savings you earn are dependent on how long you stay in the house but with this method, you can basically guarantee that you’ll save money. It’s simple, easy, and gives homeowners independence from fluctuating energy prices. You may ask “but what happens when I move?”. You simply transfer the system payments to the new owner of the house and they enjoy the energy savings in your place.
This is my personal favorite to recommend to homeowners who can’t write out a 5-digit check for a cash deal and also want the flexibility to be able to move without missing out on savings.
Summary: With this option, you’ll likely pay less per month, your bill won’t go up at all, and after you pay it off, you will be generating clean energy at no cost. You also have the flexibility to move and you will own the system. I would suggest this option to most people for their local solar panel installation.
Solar Lease
A lease basically means the solar company will own the system on your roof and you’ll pay them monthly for the energy it produces. Generally this option is used by customers who don’t want to commit to long term payments, however it is important to note that since you won’t own the system, you won’t see any additional value added to the home when selling like you would with a cash deal or solar loan.
Companies are willing to do this because the energy they produce with solar is valued higher than what they will pay to install it. That just means the install company will see the savings you would have if you went with a loan or cash deal. You also won’t receive the 26% federal tax credit because again, you won’t own the system.
Your monthly payments for energy would be way down, potentially at $155 when using the previous example. However it is important to note that this may go up anywhere for 0-3% per year just like conventional electricity from the grid would.
Personally, I’m not a fan of this method. It’s just like the loan option but worse and personally i wouldn’t want anything installed on my home that I didn’t own
Summary: This method works for those that don’t like the idea of long term loans but generally speaking, it lacks many of the benefits you would receive from a local solar panel installation.
Conclusion
If you own a home, have a credit score above 650, and get abundant sunlight on your roof, I would look into getting a quote for a local solar panel installation. One decision you make today could save you tens of thousands of dollars down the road.