Your Guide to Financing Your Home Solar System

Solar Financing

As energy costs rise and concerns about climate change grow, more homeowners are turning to solar power to save money and reduce their environmental footprint. With advancements in solar technology and government incentives, rooftop solar systems are becoming increasingly accessible. If you’re considering making the switch to solar, understanding the various financing options available is crucial. In this article, we’ll break down the different solar financing structures for homeowners in the U.S., helping you find the best fit for your needs and budget. 

Exploring Solar Financing Options: An Overview 

When it comes to financing your solar system, there are several important factors to consider, each playing a crucial role in determining the best option for you. 

Firstly, consider ownership. Do you want to own your solar system outright, or are you comfortable with a third-party ownership model? Owning your system can offer the best value, especially if you qualify for financial assistance from federal and local solar incentives. Additionally, owning your system can increase the value of your property, providing both financial and environmental benefits. 

The average cost of a home solar system is approximately $20,000, which can be a significant upfront expense. While paying in cash offers the highest savings in the long run, it may not be feasible for everyone. In this case, a solar loan could be a viable alternative, allowing you to spread the cost over time while still maintaining ownership of the system. Keep in mind that your creditworthiness may impact your eligibility for a loan. 

Alternatively, if you prefer not to own the system yourself, you can opt for a third-party ownership model through a solar lease or a power purchase agreement (PPA). With these options, a solar financing company or another third party covers the upfront cost of the system and maintains ownership throughout its lifetime. This means that any maintenance or repairs are the responsibility of the third party, while you enjoy the benefits of renewable energy generated by the system. 

Evaluating Solar Financing Options: Pros and Cons 

Let’s take a closer look at the primary factors of each financing option in detail: 

Cash Purchase

Opting for a cash purchase offers you the opportunity for maximum savings and ultimate ownership of your solar system right from the start. By paying for your system upfront, you secure approximately 25 years’ worth of electricity, shielding yourself from fluctuations in utility rates and achieving energy independence. Additionally, purchasing outright allows you to take advantage of various incentives and rebates, such as the federal investment tax credit (ITC), which can help offset the initial cost. Plus, with ownership comes the responsibility for maintenance and repairs, but the absence of regular payments or long-term contracts provides peace of mind and full control over your energy production. 

Solar Loan

For those seeking ownership with minimal upfront costs, a solar loan may be the ideal solution. With a solar loan, you gain immediate ownership of your solar system while spreading out the cost over time through manageable monthly payments. Similar to a cash purchase, owning your system makes you eligible for incentives and programs like net metering, which can further enhance your savings. However, it’s essential to consider your creditworthiness and loan terms carefully to ensure that your system costs align with your long-term budget. Secured loans, which require collateral such as your home, typically offer lower interest rates compared to unsecured loans. 

Solar Lease

If you prefer to avoid the upfront cost of a solar system altogether, a solar lease may be the right choice for you. Through a solar lease, you pay fixed monthly installments for the electricity produced by the system, based on its estimated annual production. While you won’t own the system, a lease provides a hassle-free way to benefit from solar energy without the responsibilities of ownership. However, it’s important to note that as a lessee, you may not qualify for certain incentives and programs available to system owners, potentially resulting in lower lifetime savings compared to owning your system. 

Power Purchase Agreement (PPA)

Like a solar lease, a power purchase agreement (PPA) offers a third-party financing option where you pay for the electricity produced by the system, typically at a fixed rate. While you won’t own the system, a PPA provides predictable monthly payments based on your energy consumption. However, unlike a lease, PPA payments may fluctuate depending on your monthly energy usage, resulting in slightly higher payments during peak seasons. Despite this variability, PPAs often include annual rate escalators that are lower than utility electricity rate increases, ensuring long-term savings on your electricity bills. 

In summary, whether you choose to purchase your system outright, finance it through a loan, or opt for a leasing or PPA arrangement, there are financing options available to suit your needs and preferences.  

Here is a table below summarizing the above information: 

Financing Option System Ownership Upfront Cost Monthly Payments Agreement Duration Credit Check Eligibility for Incentives Maintenance Responsibility 
Cash Purchase Homeowner High NA NA NA Yes Homeowner 
Solar Loan Homeowner Varies Low to Medium 10-15 years Necessary Yes Homeowner 
Solar Lease Third-Party None Low to Medium 20-25 years Necessary No Third-Party 
Power Purchase Agreement (PPA) Third-Party None Low to Medium 20-25 years Necessary No Third Party 

Choosing the Right Option for You 

When deciding on a solar financing option, consider factors such as your budget, long-term savings goals, and preferences for ownership and maintenance responsibilities. Take advantage of resources like our online solar calculator to estimate costs and explore financing structures that align with your objectives. 

Current Trends in Solar Financing 

Solar financing is experiencing a dynamic evolution to cater to the ever-changing needs of homeowners. Recent trends highlight the increasing availability of solar loans featuring favorable terms, alongside the surge in popularity of solar leasing and Power Purchase Agreements (PPAs). Additionally, there’s a notable expansion of government incentives aimed at encouraging solar adoption among households. 

Moreover, advancements in technology, particularly improvements in solar panel efficiency and battery storage capabilities, are revolutionizing the solar financing landscape. These innovations are playing a pivotal role in making solar energy more accessible and affordable for homeowners nationwide, ushering in a new era of renewable energy. 

Impact of Rising Federal Interest Rates 

As Federal interest rates continue to rise, it’s natural to wonder about the implications for solar financing. Higher interest rates can indeed escalate the cost of borrowing money for solar loans, potentially diminishing their attractiveness compared to alternative financing options. However, the actual impact on your overall savings hinges on various factors, including the specific terms of your loan and the rate at which electricity prices are increasing. 

To counteract the effects of rising interest rates, consider strategies such as securing a fixed-rate loan or exploring alternative financing avenues with more favorable terms. Additionally, leveraging available government incentives and tax credits can help alleviate upfront costs and alleviate the overall financial burden associated with solar installation. 


Congratulations on reaching the end of our comprehensive guide to solar financing options! We’ve covered a lot of ground, exploring the various ways you can finance your home solar system and discussing the pros and cons of each option. 

From cash purchases to solar loans, leases, and power purchase agreements, there’s a financing solution tailored to fit every homeowner’s needs and preferences. By understanding the key factors such as ownership, upfront costs, creditworthiness, and incentives, you’re equipped to make an informed decision that aligns with your financial goals and values. 

Now, it’s time to take the next step towards a brighter, more sustainable future. Whether you’re ready to go solar or still have questions, we’re here to help. Connect with us to discuss your options further and get started on your journey to energy independence. 

Let’s harness the power of the sun together and make a positive impact on our planet. Go solar today! 

Frequently Asked Questions About Solar Financing

Here are answers to some common questions about solar financing: 

What rebates and incentives are available?  

Incentives vary by location but may include the federal solar investment tax credit (ITC), property tax exemptions, and net metering. 

What financing options are available?  

Options include loans, leases, and power purchase agreements, each with its own benefits and considerations. 

Should I buy or lease a solar system?  

Buying offers ownership and immediate savings, while leasing provides low upfront costs and maintenance support. 

How do I find the best solar loan?  

Consider your objectives for going solar and compare loan terms, rates, and repayment options to find the best fit for your needs. 

  • by Understand Solar
  • |
  • May 1, 2024