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Solar Financing: Buy, Lease or Loan?

While Unbound Solar does not provide financing, we understand this is an integral part of many solar installations, so we want to help you understand the different financing options available.

Solar panels are an asset to your home that can increase its value, save you money, and increase your energy independence. For many homeowners, there are two important factors to consider: the cost of entry and the ease of installation. To choose the best option for solar panel financing, you’ll need to figure out the estimated costs, what you can afford, and the different reasons to finance before deciding to invest in solar.

Solar Finance Calculator

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* Default interest rate based on credit score of 700 or above. Excludes loan origination fee.

Does Solar Financing Make Sense?

Solar loans are a great solar panel financing option when you want to purchase a system but don’t have the cash up front to buy. With many solar energy loans, you can finance the entire cost of your system in exchange for a lifetime of savings on your energy bills.

Let’s see how the loan payments might stack up against your energy savings when you take out a $10,000 loan at 5.75% interest over 7 years to finance your solar system.

What you pay in loan interest & fees
$2,171
How much you save on energy bills
$29,000+

You’ll pay a few thousand dollars more in loan interest and fees, but you stand to save over $29,000 in energy bills over the life of your system.

Three Reasons for Solar Financing

There’s a lot to consider with financing: you’re probably not buying solar purely for the return on investment (ROI), but getting this return is certainly one of the more enticing factors. Here’s are three reasons you should consider solar panel financing:

image of a calculator

1. Ditch the Utility Company

Start rolling back your meter the moment you flip the switch. You can reduce or completely eliminate your electric bill from day one. Take into consideration how much you’re going to spend buying the solar system and how long the system is going to take to pay for itself by offsetting your utility bill costs over the years.

graph of solar tax incentives

2. Keep the Incentives

If you take out a loan, you can still claim the 30% Federal Tax Credit as a reward for investing in renewable energy. Applying that credit to your loan can help accelerate the payback schedule.

Companies who offer solar leases or PPAs keep the credit for themselves, which dampens the value of your investment.

solar payback period graph

3. It Pays to Go Solar

Even with loan payments, a $10,000 grid-tied system can pay for itself in about 6 years. Since most solar panels are warrantied for 25 years, there’s plenty of time left to reap the rewards of cheap, renewable energy.

Solar Financing: Buy, Loan, or Lease?

If financing your solar system is your best option, three main financing solutions are available to help alleviate some of the costs, all with their own advantages and some disadvantages.

Why Buy Solar?

There are many reasons to buy; most importantly, when you buy it, you own it. Of course, solar panel financing can be expensive, so the money you put upfront will be a substantial investment. In most cases, you can claim the interest on your loan to purchase the system as a deduction on your taxes, something you cannot do with the solar lease program.

Systems are very reliable; they hardly ever need maintenance aside from a scheduled inverter replacement a decade or two later. Inverters come with a warranty of 10 years (upgradeable to 20 or 25).

Why Lease Solar?

Solar panel leasing and PPAs (power purchasing agreements) are options if you’re more concerned about offsetting your power bill and using renewable energy sources instead. Solar PPAs vs. leases vary to some degree, but they both allow you to have solar power installed without having to pay for a system. However, you’ll discover that you paid the leasing company more than twice as much as it would have cost you to purchase the system yourself with solar financing.

One of the main advantages of leasing of solar system is that you are not responsible for the maintenance, upkeep, and operation of it. That falls under the responsibility of the lenders, giving you some added peace of mind, especially if your solar system is on a vacation home or summer getaway.

Why Solar Loans?

FHA PowerSaver Loans are available to qualified applicants in many states. These loans help cover the cost of solar panel financing and installation (among other green energy improvements) and come with a reasonable interest rate.

With a loan, you’re paying back both the solar system’s costs and anything you owe on your mortgage, property taxes, etc, making any ROI or utility bill offset negligible until the loan is paid.

Loans can often be paid off in as many as 10 to 20 years, which means you may be paying them off for the entire life of the solar system. By the time your loan is paid off, you may need to replace vital components to keep your solar system functioning.

Buy, Loan, or Lease?

Here’s a side-by-side comparison of some of the advantages and disadvantages of buying, loan, or leasing options when you go solar:

Buy

Pay the full amount up front.
You own the system.
Keep the federal tax credit and any local incentives.
Maximize your long-term savings.

Loan

You take on loan payments.
You own the system.
Keep the federal tax credit and any local incentives.
Lower ROI than cash, but you still make a healthy profit off your system.

Lease

Pay nothing up front.
You do not own the system.
You can not claim any tax credits or incentives.
Much lower ROI than loan or cash purchase.
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