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Solar Lease Versus Solar Loan

Solar LoanVersus Solar Lease

If you are considering solar panel installation for your home or business, there are many different financing options available to you. You can pay in cash, take a state-sponsored solar loan, take a private solar loan, lease a system, or enter a Power Purchase Agreement (PPA).

It is important to understand your options in order to make a decision that is best for you.

Solar Lease: With a solar panel lease, the property owner does not own the solar system. They are borrowing the system from a solar company for a set rate per month. Property owners are usually given the option of buying the system at the end of the lease. Sungevity and Solar City are known for their solar lease programs and many smaller installers are starting to get in on the action as well.

Solar Loan: Solar loans are private or state-sponsored loans in which home owners borrow the capitol they need in order to install their solar panels. Monthly payments will be made for the principle amount (the amount borrowed) plus accrued interest. State-sponsored loans provide very low interest rates (usually 0-5%), making solar financing more enticing to property owners. Private loans work in much the same way, but often at higher interest rates. Both usually require an initial down payment.

Power Purchase Agreement: A solar power purchase agreement (PPA) is a long term contract to buy electricity produced by a solar system. As with a solar lease, the system is not owned by the property owner; the owner is simply buying the energy produced at an agreed upon rate for a certain period of time. Individuals in a PPA are often given the option to purchase the system at the end of the agreement.

Payment in Full: This is clearly the most cost-efficient way to finance your solar system, but most homeowners do not have the cash they need in order to pay out of pocket for the initial installation. Property owners own their solar system outright from day one and don't have to pay any interest.

Related Articles: Solar Panel Benefits; Home Solar Panels: An Overview; Is Solar Right For Me?; How to Choose a Solar Installer

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