Financing

Cash

Buying your solar electric system is your best option. Systems generally cost $10,000 to $30,000 after tax credits and can reduce your electricity bill by 70 to 100 percent,. Most systems pay for themselves in three to six years. The bigger the system the faster they pay themselves off. Purchasing outright gives you the full benefit of the federal tax credit and any other incentives that your state may offer.

Home Equity Loan

If you need to finance your solar panel purchase, the most cost-effective way to do it is to use a home equity loan or a home equity line of credit. Because your house serves as collateral, these options have low interest rates (currently about 3 to 5 percent). The interest you pay is tax deductible. Equity loans range from 5 to 20 years and usually have fixed interest rates. Equity lines last 10 years and have variable rates (so the interest may increase).

Solar Loan

There are unsecured and secured solar loans. With an unsecured loan, your house doesn’t act as collateral and the interest isn’t tax deductible. Many solar installers work with lenders that offer solar loans, but you’ll probably find better rates by directly checking with banks, and credit unions. Watch out for high origination fees and gimmicky buydown rates. That’s why Sungenia works with local credit unions which offer special solar loans at very low rates with no fees. The loans have no early payment penalties and can be refinanced once. We manage the loan process for you. Learn more about Wheelhouse Credit Union.

Up-front Costs

The steep up-front costs for a residential solar system can make a leasing company’s sales pitch sound pretty appealing: Pay little or nothing and save hundreds of dollars per year on average. (The premise is that you save because the combination of your lease payment and your electric bill is less than what you currently pay for power.) Leasing can also look seductively simple compared with buying: There’s no need to shop separately for an installer and financing; you just sign on the dotted line. So it’s not surprising that 72 percent of the people who installed residential solar systems in 2014 did so through leasing or another type of third-party arrangement. But the reality is not quite so sunny.

Your Savings Will Be Modest

People who lease their solar systems save far less than those who buy them outright or with a loan.For one they miss out on federal tax benefits and any local incentives that may be available. In addition, many leases contain an escalation clause that can further reduce savings by increasing payments 2-3 percent per year. That means that if the cost of energy doesn’t rise as quickly as the contracted lease payments increase, your savings be even less than they already are.Given these factors the effective cost of solar energy from a leased system is 50-80% higher than from a purchased system.

Leases Can Scare Off Home Buyers

If you put your house on the market before the lease is up (usually 20 years), you will either have to buy out the lease or the person purchasing your home will have to assume it—which some potential buyers and mortgage lenders are reluctant to do.The result is that most homeowners have to buy out the lease on the solar system before they can close escrow. This isn’t cheap as you will not get a fair market valuation on the used equipment but rather the price will reflect the leasing company’s lost earnings.

And remember: At the end of the lease, the solar company could remove the system—and your savings along with it unless you pay the residual value or sign a new lease.

Service Plans Don’t Serve You

Though leasing companies tout their service plans, maintenance is a red herring. “Generally, there’s really no scenario where the maintenance plan is going to kick in,” says Joshua Pearce, an engineering professor and solar expert at the Michigan Tech Open Sustainability Technology Lab. Equipment problems aren’t covered by the maintenance plan, they’re covered by the warranty. And if a storm destroys your panels, the damage may be covered by your homeowners insurance.

Power Purchase Agreement (PPA)

A PPA is nothing more than a lease in disguise. You’ll see many of the features of a lease agreement in a power-purchase agreement. Non-ownership, escalating payments, higher cost of energy, and lower savings.