Solar Financing: Lease, Purchase or PPA Your Solar Panel System?

Solar Financing: Lease, Purchase or PPA Your Solar Panel System?

If you are interested in going solar but can’t seem to figure out what financing options are best for you, you came to the right place! In this blog, we will walk through all solar financing options available for solar systems: Leases, PPAs, and Purchases.

 

Most of us are familiar with the main differences in leasing and purchasing through our experience with buying a car. Purchasing outright means you end up owning the system. Leasing means you are paying to use someone else’s system on your roof. PPA stands for Power Purchase Agreement, where you agree to purchase the power that someone else’s system produces on your roof.

Break it Down for Me

If you lease your solar system (this is called a solar lease), you are renting the solar panel system from the company that owns it. If you sign a PPA, you are purchasing the energy produced by the solar system from the company that owns the system. In both scenarios, you lock in your monthly utility payment and protect yourself from rate hikes that the power company may enact. Both a PPA and a lease provide you with a discounted kilowatt rate which ultimately saves you money. 

If you decide to purchase your solar panel system you have a couple of options. You can pay cash and own your solar system immediately and reduce your monthly electric payment to $0. You can get a loan to finance the cost of the system.  Here at SAVKAT our most popular loan product is with Mosaic for a 20-year solar loan. Two other loan options are taking out a home equity line of credit (HELOC), or signing up with an independent solar loan. In the case of the HELOC, your home is the collateral for the loan, which will reduce your interest rate (less risk for the bank). The great thing about our solar loan program through Mosaic is that there is no lien placed on your house, and there are no pre-payment penalties.

Purchasing your system or doing a loan program allows you to take advantage of the Federal Solar Tax Credit. The tax credit amounts to 26% of the cost of your solar system and acts as a credit against your tax liability. You have 18 months from your agreement date to apply this tax credit to your loan product. This locks in your low monthly payment and gives you more savings!

System Maintenance

Who covers the expense of solar panel maintenance? Generally, if you enter into a solar lease or PPA agreement, the owner of the system maintains the equipment for the term of the agreement. In some cases, this is bundled into the cost of the system or offered as an additional item.  There is very little annual maintenance on SunPower solar panel systems, you can read more about that in our Maintenance blog.

Which option is best for resale?

Good question! The purchase option is the best option for the resale of your home. If you have a solar loan, banks should have no issue extending a mortgage to the buyer. PPAs and leases generally have a transfer clause included to make it easy for the home buyer. Either way, your home is much more valuable with a solar panel system installed; the new homeowner will have no utility bill and a locked in electric rate for the lifetime of their system.

 

Whichever option you choose you are taking control of your carbon footprint and reducing your reliance on the utility company. Deciding on your solar financing ultimately comes down to your financial position and goals.

At SAVKAT Solar, we help you make the best choice for your particular situation and the environment.

Are you ready to learn more? To find out how you can go solar and become less energy independent, request a free quote from us at SAVKAT Solar. Also check out our Solar 101 page or our FAQ page, and give us a call at 800-860-6932.

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