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Solar Loan vs. Solar Lease - Which one is right for you?

Solar Loan vs. Solar Lease – Which one is right for you?

The easiest part of going solar is deciding to do so. Going solar reduces your carbon footprint and offers the best long-term price of electricity than any other way of generating power. The hardest part is figuring out how to finance it: solar lease or solar loan.  

There are two paths you can take to finance your project – buying or leasing. Buying your own solar system may involve taking out a solar loan. Leasing involves signing a solar lease or entering a PPA (power purchase agreement).

What is a Solar Loan?

If you finance your project through a solar loan, you own the solar panel system. A solar loan is where you borrow money from a lender, such as bank or a solar company, and you agree to pay that money back plus interest through monthly installments for a set period of time. 

A solar loan differs from other home improvement loans because with a solar loan, you get to own an asset that provides you significant financial value. The value comes from the electricity that the solar panel system produces and the solar incentives, such as tax credits and rebates, that you can redeem. 

What is a Solar Lease and Solar PPA?

If you finance your project through a solar lease or PPA, you are renting your solar panel system. The solar leasing company owns the solar panel system and receives the solar incentives that comes with owning the system. However, you will stilget the benefits of the system such as the electricity that the system generates and the overall lower electricity rates for a certain period of time. This time period is often around 20 years.  

A solar lease is when you agree to a fixed monthly payment, which is calculated by an estimate of how much electricity the system will generate. A PPA is when you agree to pay a set per-kWh price, which essentially means you are only paying for the energy that is generated monthly by the solar panel system.

Key Consideration When Choosing Between a Solar Loan and Solar Lease

The main difference between a solar loan and a solar lease is that through a solar loan, you are looking to own the solar panel system. An additional key difference between a solar loan and a solar lease is that a solar lease may require a down payment or to pay an upfront costAnother big consideration is maintenance. Since a solar lease company owns the solar panel system in the solar lease financing option, it is also in charge of the maintenance of the system. However, in the solar loan finance path, since you own the system, you are in charge of maintenance—though you will get the eligibility for tax credit and other financial incentives.  

What is the Best Decision for You?

There best financial option for you will depend on your preference and financial goals. Regardless of what financial option you choose, your decision to go solar will save you money and help save the environment.