Buying solar panels can be a daunting task, especially for someone who hasn’t done it before. Such a large purchase requires background research on how to buy and get the most bang for your buck. Here is more information on how to choose the right kind of solar product for you.

Buying With Cash vs Buying With Loan

The first step is to decide whether you would like to purchase your solar panels with cash upfront or finance them with a loan. Both options are good, but the difference lies in how much you save and when. Purchasing with cash allows for greater lifetime savings, while a loan can lead to immediate savings. With a cash purchase, it can take up to 10 years to break even, but with a financed loan, you will end up paying a few thousand dollars more in interest payments. Your choice should depend on your financial situation and saving goals.

Buying Solar Panels With Cash

Paying with cash is the simplest method and allows for the highest return on investment. You can pay for it in its entirety upfront. However, most choose to pay in 3-4 installments over a relatively short period of time. The installments are broken down like this:

• Down payment deposit: This is paid upon signing a contract that establishes your pricing and installation date (approx. 25% of the total price paid)
• Delivery of materials payment: This is paid when the materials are delivered, and the installation begins (approx. 50% of the total price paid)
• Final inspection payment: This is paid when your system is fully installed and passes city inspection (approx. 25% of the total price paid)

This schedule may vary depending on the installation company, but this outline is fairly standard. It’s important to remember that even though you won’t break even for approximately 6-10 years, most solar panels are warrantied for 25 years and last much longer. The longevity of this system leaves you plenty of time for savings.

Financing Solar Panels With Loan

Not having the cash up front shouldn’t stop you from buying a solar panel system. Financing with a loan lets you experience your energy savings immediately. For example, if your monthly electricity bill is $150 and your loan payment is $100 a month, you are still saving $50 monthly immediately. Of course this all eventually will even out with accumulated interest, but this is a better option for someone looking to reap the financial benefits of solar in the years after installation.

There are two types of solar loans: combo and reamortization loans—the terms for both of these range from 8 to 20 years. 

• Combo Loans: These are the preferred choice for buyers who have the tax liability to claim the full solar tax credit in a year. These are a combination of a primary loan for the net cost of the system and a bridge loan for the value of the tax credit.
• Reamortization Loans: These are preferred by buyers who may not have sufficient income to claim the 30% ITC solar tax credit in just one year. With this loan, you are able to make a lump sum payment at any time during the course of your loan term, which reduces the price of recurring payments.
  

Both of these types of loans are highly customizable to give you the most control over your monthly electricity bill. Keep in mind that your bank may not have loan plans specifically for solar panel installations. You may want an Energy Advisor to help you and your bank navigate this process.

Leasing Solar Panels vs Buying

Many buyers don’t know that you don’t necessarily have to purchase your own solar system. You can also lease them. The leasing option was more popular a few decades ago when the price of solar panels was much higher. Now that the prices have dropped, buying is not only more accessible for homeowners but also more financially beneficial long term.

Advantages of Buying

• Higher energy cost savings
• Increased home value
• Ability to claim tax credits and incentives
• Easier to transfer rights in a home sale

Advantages of Leasing

• No maintenance required

Leasing may seem like a better option because you don’t have to pay for the panels or installation, but in reality, you are missing out on most of the benefits of solar in the first place. While leasing, you are still paying a flat rate monthly payment to replace your utility bill, and this lease payment usually increases by 3% each year.

Choosing the Right Option for You

Incentives, zero-down financing, loan plans, and decreasing prices are making solar more affordable than ever. For many, figuring out the ins and outs of solar panels is the hardest part of the process. Luckily for you, there are options, and you are able to choose what works for you and your finances. Get a Free Assessment today to help find the best option for you,