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Solar Financing and Leasing Considerations
For people who want to make the change to renewable forms of energy in order to vastly reduce their carbon footprint, but who do not have the economic means to pay outright for a complete solar panel system, there are vast arrays of financing and leasing options that will help you to do your part to combat global warming. Below, we look at the pros and cons of leasing and financing a photovoltaic system for your home.
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Assess Your Energy Needs
Before making a decision between financing and leasing your solar panel system, it is important to know what it might cost you to install a PV system. It is important to state from the outset that the most effective way of reducing the cost of a complete solar system is by reducing your energy needs. The average home in the United States consumes near 1000 kWh per month. With this in mind, most homeowners could cut their energy needs to under 500 kWh hours per month. This reduction in energy use can be achieved by switching to more energy-efficient appliances, lighting fixtures, and making your home more energy efficient for heating and cooling. If you are considering building a new home, opting for a smaller home will also vastly limit the electricity needed to power your home.
How Much Do Solar Panels Cost?
The average solar panel system for American homes is five kWh (5,000 watts). The cost of solar has decreased significantly (around 20%) in the past five years. Now, the average cost per installed watt comes out to be between $2 and $4, in both the United States and Canada. This cost includes both the cost of the panels themselves, other electrical equipment, and the installation. Before subsidies, this means that you would be paying between $10,000 and $20,000.
With government and municipal subsidies, however, you should be able to reduce that cost by up to 50%, bringing the total cost to as low as $5,000. If you save around $1,300 per year on your electricity bill, the solar panel system will pay for itself in between four and ten years. This solar power calculator will help you determine what type of system is best for you and how much you could save.
How Residential Solar Financing Works
Pros of Financing Solar Panels
If you purchase your solar panels outright, this is an investment opportunity that will yield monthly earnings for decades. You will be the sole owner of your panels and will have the freedom to do whatever you wish with the panels. Leasing companies do make money off the monthly repayments they charge you, and they also will pocket any incentives that come with those panels.
Cons of Financing Solar Panels
The disadvantages of financing solar panels are that you will have to come up with the money to pay for them. You will also pay for any maintenance if the system breaks down (with leasing, the owners are generally responsible for any maintenance cost). Fortunately, most banks and lending institutions will allow you to apply for a home equity line of credit (HELOC) to finance your solar panels. HELOCs allow you to secure credit through the equity in your home and thus receive a much lower interest rate. Often, the monthly payments on this type of loan might be equal or even lower than the monthly repayments on a lease.
Thus, financing your own solar panel system is usually a good option for homeowners that have good credit and a valuable home that allows them to apply for a home equity line of credit.
Tobias Roberts
Tobias runs an agroecology farm and a natural building collective in the mountains of El Salvador. He specializes in earthen construction methods and uses permaculture design methods to integrate structures into the sustainability of the landscape.
