solar panels on a rooftop of a arizona homeHow to Pay for Solar Panels: Leasing & Financing Explained

You’ve decided to install solar panels—congratulations! The next step is to figure out how you’re going to pay for your solar installation. Of course, you can always pay cash, but as with most big purchases, a cash payment isn’t your only option. 

In this guide, we’ll explain all your options for buying solar panels in Arizona so you can choose the best way to pay for your residential solar panel installation. 

Cash Purchase 

The best way to purchase solar panels is with a cash payment. 

Paying for your solar installation upfront with cash has many benefits. First and foremost, you will own your system outright. As the direct owner, you’ll receive all the rebates and tax incentives your solar installation is eligible for, including the 30% federal solar tax credit. When thinking about leasing vs buying solar panels remember: If you lease your solar panels, the company you lease from receives the tax incentives, not you. 

You’ll also save more when you buy your solar panels with cash. You won’t have a monthly loan payment offsetting your savings, and you won’t have to pay interest on your purchase. 

Solar Loan 

If a cash purchase isn’t feasible, a solar loan is also a great option. Financing your solar installation with a loan has similar benefits to paying cash and doesn’t require a large upfront investment. 

A solar loan allows you to own your solar panels without buying them outright. You will be the direct owner of your system and receive all the incentives it qualifies for, the same way you would if you paid cash. 

You will, however, have to make monthly payments on your system. In most cases, you can finance your solar installation for little down with a fixed monthly payment. The monthly payment will likely be less than what you currently spend on electricity, so your electric bill savings will offset the loan payment and you’ll be saving money right away. 

Most homeowners use either a personal loan or a home equity line of credit (HELOC) to finance their solar panel installation. Personal loans do not require collateral, while a HELOC uses your home as collateral. Both have benefits and drawbacks, and the right option for you depends on your credit score, budget, and personal preferences. 

SouthFace Solar & Electric can help you compare your options and choose the best financing plan for your solar installation. Schedule your free consultation today to talk to an expert! 

Solar Lease or PPA 

Solar leases and Power Purchase Agreements (PPAs) are not exactly the same, but they are extremely similar which is why we grouped them together. With a lease or PPA, you do not own your solar panels. Instead, a third party installs solar panels at your house and you pay to use the solar panels. Under a solar lease, you pay a fixed monthly rate to use the solar panels. With a PPA, you pay a fixed rate per kWh of power you use from the solar panels. 

We do not recommend solar leases or PPAs, for a few reasons. The most important is that, under a lease or PPA, you do not own your solar panels. That means you aren’t eligible for any of the rebates or incentives your system qualifies for—the third-party owner will claim them instead. You will also save less over time since you will have a monthly payment for the entire lifespan of your solar system (this is different from a loan, where you will only have a monthly payment until your system is paid off). Leases also often have an escalator clause where the monthly payment increases over time.

Solar leases and PPAs can also make selling your home more complicated. Solar panels typically increase home value, but only if you own the system outright. Most homebuyers do not want to inherit a lease and will think twice about making an offer on a house with leased solar panels. 

Talk to an Expert About Your Solar Financing Options 

SouthFace Solar & Electric has been installing solar panels in Arizona since 2008. We will help you choose the best solar financing option for your project, based on your specific preferences and budget.

Interested in off-grid solar? Call 480-405-6105 or contact us to schedule a free consultation.

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