The 5 Ways to Pay for Your Solar Panel Installation

(And Which 3 to Avoid If You Want to Actually Save Money!)

Paying for a solar panel installation can be accomplished in five different ways. And since Americans love options, it’s tempting to think all five ways probably have their own set of pros and cons.

The truth is, there are only two ways worth seriously considering for the vast majority of homes, farms, and businesses.

Here’s the list of all five. See if you can guess the three you should avoid like the plague, then read on to see if you got them all right.

5 Methods to Pay for Solar Panel Installation

  1. Solar lease
  2. Solar financing
  3. PPA (Power Purchase Agreement)
  4. Cash upfront
  5. Solar panel kits – installation is DIY

Make your choices – which two are economically viable and terrific options for anyone looking to go solar? Let’s look at each solar payment plan in more detail to find out.

learn ways to pay for your solar installation

Solar Leases

A solar lease is just like rent. The solar panel installation company installs the panels, the inverter, and all the other components. And then, they own it.

The panels are on your property, and you benefit from the energy and cost savings – to a point. But you pay them a set amount per month regardless of how much power is generated. Some solar leases also have an escalation clause, because the term lengths are typically 20 years, and the ‘solar landlord’ doesn’t want to be locked into one price for that long.

Solar leases seem attractive to people who can’t afford a big upfront payment. The problem is, you don’t get to benefit from any of the tax incentives. The solar panel installation company gets all that money.

And in months with little sun and less power production, you’re still paying the full price of the lease.

In the end, will you save money then? If you do, it won’t be much.

Financing

Everything that’s good about solar leases also comes with financing.

  • Typically no large upfront payment
  • A professional installs your solar panels
  • Predictable monthly payment
  • Flexible terms to suit your individual needs
  • Clean energy that helps the environment and costs less

But the difference between leasing and financing is in the money you save.

First, with financing, you own the system once it’s paid for. Just like a car or a house. With a lease, you never own it unless you decide to buy it outright – which will cost you even more.

Second and most important – you get the tax incentives.

Federal, state, and local tax incentives, depending on where you live and other factors, can save you 26% to 60% on your solar panel installation bill. Yes, it’s big money. Thousands of dollars for home solar installations. Tens or even hundreds of thousands for big farms and businesses.

Even if the only tax benefit you get is the federal solar tax credit known as the ITC,  you will save 26% off your installation costs. A solar lease, on the other hand, can’t come close to making that 26% back. Not a chance.

So there’s just no reason to even consider a solar lease if financing is available– talk to your bank about a Home Equity Line of Credit (HELOC), a personal loan, or a second mortgage.   The interest may even be tax deductible! .

Get the difference? If you can’t afford the upfront costs of a solar panel installation, get a loan, not a lease.

PPA (Power Purchase Agreement)

A PPA is another way to avoid the upfront costs. The idea here is basically like getting a new power company.

The solar panel installer puts in the panels and all the components, and like a solar lease, they own your system, not you. But unlike a lease, you don’t pay a fixed amount per month. You pay for whatever your solar power system generates, at an agreed upon per-kilowatt rate.

So the solar panel installer essentially becomes your new power company, charging you for whatever power your system produces. Any power you still need to draw from the grid, you’ll get from your traditional power company. So it will be like having two power bills.

It’s likely that your power rates will be lower with the PPA compared to your normal power company. So over time, you’ll save a little money.

But not nearly as much as if you owned your solar energy system. And with a PPA, like a lease, you also get zero tax credits. The solar panel installer gets them all.

Cash Upfront

The benefits of cash upfront for your solar panel installation would take many articles to fully explain, but here are the main ones:

  • You own your system from the beginning
  • If you sell your house, you get the maximum value from your panels in the resale (with a lease or with financing, you have to transfer the remainder owed to the buyer)
  • You get all the tax incentives
  • You take maximum advantage over inflation – your power bill savings increase over time. Besides the tax credits, this is the single best advantage of paying up front. Your savings will compound over time
  • No recurring bills – just a much smaller power bill for whatever energy you need that your solar panels don’t produce

Every benefit of solar energy is yours when you buy up front.

Solar Panel Kits (Installation is DIY)

It’s a little sketchy to even include this one, because the idea of DIY (Do It Yourself) solar panel installation is laughable at best, and dangerously life-threatening at worst.

There’s a whole host of reasons for this – explained in-depth in this article about whether it’s wise to install your own solar panels. Short answer: It isn’t.

The only benefit offered by DIY solar kit peddlers is cost savings (other than the “pride” that you did it yourself – which doesn’t feel too good when you discover after trying to install them that you’re way over your head, and again years later when you find out you didn’t actually save any money).

The reality is, DIY solar panel installation will cost you more, not less, and not just because you don’t get the huge tax incentives, though that’s the main reason. Those incentives are only given out when a solar installation is done by a certified professional.

Why? Because installing solar panels is HARD. And when the system isn’t designed and installed properly (assuming no one gets hurt), your system will generate far less energy than it otherwise would have. That lost energy means lost savings.

So you lose the tax incentives. And you lose because your system doesn’t produce as much energy as it should. (And, you lose months and months of time scratching your head through all the installation and permitting processes, when a pro would have had it all done in less than a week). Again, if you need more convincing, click the link above and read the article.

Bottom line: DIY solar panel installation kits are the worst option of the five. By far. They have not a single advantage in their favor.

Did You Get Both of the Best Options Right?

When it comes to solar panel installation for your home, farm, or business, the best options for how to pay for it come down to two:

Pay for it in cash up front, or get financing.

All the other options range from dreadful to just not a very good deal.

As you saw, the clear number one reason these two are the best is the tax incentives. You want the tax incentives. Who would want to miss out on the thousands of dollars sitting there waiting for you in the form of solar tax credits?

But besides that, none of the other options have anything in their favor that isn’t also true with solar financing or cash up front. If you can’t afford the big payment, then finance it. That’s a better option than leasing or the convolution of a PPA.

If you’re looking to buy a solar panel installation for your home, farm, or business, contact us and have our certified team of professional installers and consultants come out to talk about it, make the plan, and start saving money and energy.

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How much does solar affect home values?

Click here to see the numbers (and yet another reason financing beats leasing)

 

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