As the world increasingly embraces renewable energy, solar power has emerged as a leading choice for both homeowners and businesses. The decision to transition to solar energy often involves a crucial financial consideration: how to fund the installation of solar panels. Two popular options for acquiring solar panels are solar leasing and solar financing. Each option has its own set of advantages and considerations, making it important to weigh the pros and cons when deciding which path to take. There is a third option, cash up front, but for this article we are assuming you don’t want to part with the lump sum of cash and prefer to do a little or no cash out of pocket option. Cash up front will give you a shorter return on investment, but it can be a considerable outlay of money that most people want to avoid. So let’s dive into the little or no cash up front financing options!

Solar Lease: A Brief Overview

A solar lease allows you to use solar panels without purchasing them outright. Instead, you enter into an agreement with a solar leasing company, which installs and maintains the solar panels on your property. In return, you agree to pay a monthly lease payment for the use of the solar energy system.

Advantages of a Solar Lease

One of the main advantages of a solar lease is that it requires little to no upfront cost. This makes solar energy accessible to a broader range of homeowners and businesses. Additionally, the leasing company is responsible for maintenance and repairs, relieving you of these responsibilities and costs.

Considerations for a Solar Lease

However, with a solar lease, you do not own the solar panels during the lease, and therefore, you cannot take advantage of tax credits or incentives available to solar system owners. The solar company takes that tax credit and usually uses part of it to lower your monthly costs and part of it for their internal costs and/or profit. In most all cases, after the lease term, usually 20 or 25 years, the solar system completely reverts to you, meaning you own it and benefit from all the energy it produces from that point forward! Most panels are rated for 25 years, but they can produce for much longer periods of time, and panels can always be replaced. The system stays with you and if its maintained, should produce for many more years after you take full ownership of it.

Solar Financing: A Brief Overview

Solar financing involves purchasing a solar energy system either through a loan or a cash purchase. With a loan, you can choose from various financing options, including solar-specific loans, home equity loans, or personal loans.

Advantages of Solar Financing

The primary advantage of solar financing is ownership. When you finance a solar energy system, you become the owner and can benefit from tax credits, incentives, and potential energy savings over the system's lifetime. Financing also allows you to choose the components and installer that best suit your needs and preferences.

Considerations for Solar Financing

On the flip side, solar financing may require a small upfront investment (depending on the loan you choose) and a commitment to regular loan payments. The responsibility for maintenance and repairs falls on you, but almost all systems have a 20-30 year warranty, so costs should be minimal. It's important to evaluate your financial strategy and long-term goals before deciding on a financing option.

Choosing the Right Path for You

The decision between a solar lease and solar financing ultimately depends on your financial situation, goals, and preferences. If you seek to minimize upfront costs and maintenance responsibilities, a solar lease could be a suitable choice. However, if immediate ownership and tax benefits are your priorities, solar financing is likely the better option.

In either case, the shift to solar energy is a step toward a more financially stable future, not to mention the cleaner energy choice. All financing options should save you money immediately or minimum break even on your monthly electric bill, or solar may not be the choice for your situation. Take the time to evaluate your options and choose the one that aligns with your financial and environmental objectives.

Authored by The Energy Independence Foundation