If you have a tax appetite and good credit, a solar loan is an attractive option to be cashflow-positive day 1 with solar with no money down and save more money than a PPA or other financing options. Call EcoMen Solar at 732-SOLAR-NJ.
No-money-down solar was truly a revolution in clean energy in America.
When good financing options came along a few years back that allowed homeowners to get solar panels at home without an upfront cost of $20,000 or more, it changed everything.
In a relatively short period, no-money-down financing made solar into a mainstream option for millions of middle-class families. Especially in states like New Jersey with relatively high electricity rates, solar became a viable way to save money on home expenses every month by cutting electric bills in a way that many families could now afford.
At the beginning of this no-money down solar revolution, two of the most popular options were power purchase agreements (PPAs) and solar leases. When other financing was still complicated and hard to get for solar panels, PPAs and leases made it easy for homeowners to get started with solar at no money down because the solar companies would continue to own the solar panels after they were installed on a home.
Decline of the PPA and Rise of the Solar Loan
In the last few years, we’ve seen even more changes in solar financing. In that time, PPAs and leases have actually gotten less popular and buying solar with a loan has gotten more popular. That’s because, for qualified homeowners, owning your own solar panels offers key benefits that you don’t get with a PPA or lease. Also, a loan through a solar company can have advantages over a loan for solar panels from your bank or credit union.
Here are the top six reasons why, in our experience, so many homeowners in New Jersey have chosen to get solar panels with a solar loan:
- Owning solar panels saves you more money than getting them through either a lease or a PPA. Over the last few years, several companies that used to offer PPAs have stopped offering this type of financing to homeowners. With a market that’s shrunk down to just two or three PPA companies, the market has gotten much less competitive. That’s helped the companies turn the tables against consumers, making PPA terms less favorable to homeowners and more profitable for the companies. And while leases are still a good option in New Jersey for certain homeowners, especially those who pay a low rate of federal taxes, if you do have a tax appetite, you’ll get a higher return on your solar investment by owning solar panels rather than leasing them.
- If you own your panels, you can get additional value by selling the solar renewable energy certificates (SRECs) that your solar system produces. In the past, SRECs from the average home solar system in New Jersey have been worth $1,000 a year or more. While the SREC program in New Jersey will change in the future due to legislation passed earlier this year, I’m confident that the state will come up with another way to offer value to rooftop solar owners for the clean power they produce. If you live in New York City, instead of SRECs you can qualify for a tax credit of up to $5,000 as well as a property tax abatement that may be extended into future years.
- A solar loan is easier to get than a loan from your bank or credit union. While a home equity loan (also known as a second mortgage) or a home equity line of credit (HELOC) can offer a better interest rate than a solar loan, bank loans are a bigger hassle, with more paperwork and a more rigorous approval process that can take a couple weeks or more to get a decision. By contrast, you can apply for a solar loan in a few minutes online and, with good credit, your chances of getting approved are very good.
- Even if you qualify for a loan from your bank or credit union, you won’t get the money right away. It can take another couple weeks or more for them to send you a check. That can delay your solar installation or mean that you have to put up some of your own money up front to get started. But a solar loan which you get from a loan provider focused only on financing solar installations will be integrated into the timeline of installing your solar panels.
- You have to start paying off a bank loan right away, from the first month you get it. But since a solar loan assumes that you’ll get proceeds from the 30% solar federal tax credit at the end of the year, it figures the tax credit in to give you more convenient repayment terms. Since your solar loan payments will be tied to your solar installation and your solar savings, your loan payment will be lower than the amount of money you’re saving on your electric bill. So, you’ll save money starting from the first month you get solar with a loan, even with the loan payment figured in.
- Unlike many common consumer loans these days, such as adjustable rate mortgages, solar loans are predictable, with a fixed interest rate, fixed monthly installments and no balloon payments. Buying solar panels with a solar loan will allow you to be cash-flow positive on the first day as you’ll be every year for the term of your loan. And since there are no prepayment penalties with a solar loan, if you want to realize even more economic value from your solar panels, you can pay off your loan early and not worry about any extra costs.
Solar loans are usually a good option for homeowners with good credit and a tax appetite. If you don’t have that tax appetite and can’t benefit from the 30% federal solar tax credit, then you may be better off with a solar lease, which will still save you money on electricity every month.
Owning Your Panels Gives You More Control
Other advantages of owning your own solar panels vs. leasing or a PPA include getting more control over equipment choices and where and how they’re installed.
Owning panels also makes it easier to sell your home when the time comes, especially compared to a PPA, which can scare off some potential home buyers. With a loan, a homeowner is not locked into a long-term agreement with a solar-as-a-service provider. This means they can do what they want with the system (including moving it) and that upon selling the home, the next homeowner need not pass credit checks to assume the remaining time left on a PPA or lease.
“But what if my solar panels break? If I own them, won’t I be responsible for repairs myself?”
It’s true that one advantage of a PPA is that, since the solar company retains ownership of the solar panels, they should fix anything that breaks in your solar system. But in a properly installed solar array using high quality equipment, maintenance is usually not much of an issue.
Solar panels have no moving parts and they rarely fail. Nonetheless, it’s comforting to know that most panels come with a 25-year warranty from the manufacturer. New inverter technologies (SolarEdge in particular) also offer excellent reliability and for a small fee their warranties can be extended to a full 20 years.
To add further reassurance, like other reputable solar installers, EcoMen offers a five year warranty on our work installing a solar system. People sometimes wonder what happens if their roof leaks after a solar array is put on their roof? The good news is that these kind of leaks will appear fairly quickly, and always within the five year period covered by our installation warranty.
Overall, there are few downsides to owning your own solar panels, if the finances work for you. Learn more about loans and other financing options for solar from New Jersey’s Clean Energy Program.
And if you contact EcoMen Solar for a free quote, we will be happy to discuss the financing options available to help you go solar at home with no money down and the best return on investment for your situation.
— Joe Aurilia, Jr, EcoMen Solar