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Your Guide to Purchasing Solar Panels

Choosing to invest in solar panels is a significant decision that many homeowners may only make once or twice in their lives. This can make the process seem overwhelming, and knowing where to start can be challenging.

Choosing Solar Panels: Cash or Financing Options

If you are considering buying solar panels, a key decision to make is whether you will pay upfront in cash or finance the purchase with a loan. Paying in cash results in more significant long-term savings, while financing the panels with a solar loan can provide instant savings on energy costs. Based on data from solar.com, around half of their customers opt to pay in cash, and the other half choose to finance the purchase with a solar loan.

In the given scenario:

Using cash for payment (represented by the purple line) results in an additional savings of around $4,500 in energy costs, although the break-even point occurs after roughly 7 years. On the other hand, the 12-year solar loan (depicted by the pink line) provides instant monthly savings, but comes with approximately $4,500 in interest payments over the loan's duration.

Paying Cash for Solar Panels

Paying cash for solar panels is a straightforward approach that yields the highest return on investment. Cash purchases usually occur in three to four payments. For instance:

Initial deposit: A down payment is required when signing the contract to secure an installation date.
Due upon delivery of materials: When the materials arrive and installation commences, around half of the remaining balance is due.
Due upon completion: The final payment is made once the system is installed and passes the necessary city inspections.

Each installation company may have different payment schedules, but this provides a general idea of the process.

While cash payments offer significant long-term cost savings, it can take around 6 to 10 years to recover the initial investment. Since solar panels have a lifespan of over 25 years and often come with long warranties, there is ample time to benefit from accumulated savings.

Financing Solar Panel Purchases

Let’s be realistic: not everyone has $20,000 to $30,000 in cash available, but that doesn't mean you can't invest in solar panels.

Solar loans offer a manageable monthly payment structure that can enhance your savings on energy costs. For instance, if your monthly electricity bill averages $125 and your solar loan payment is $100, you could start saving $25 a month, equating to $300 a year, right from the start.

The appeal of solar loans lies in their adaptability. There are two primary types of loans—combo and reamortizing—with terms ranging from 8 to 20 years. Most solar loans do not require a down payment, though making one can reduce your monthly payments.

By choosing your loan type, term length, and down payment amount, you can tailor your monthly electricity costs to suit your budget and goals.

As a general guideline:
- Longer loan terms mean lower monthly payments but higher overall interest costs.
- Shorter loan terms result in higher monthly payments but lower overall interest costs.

Many solar.com customers opt for a 12-year loan because it offers a good compromise between manageable monthly payments and long-term savings.

### Finding a Solar Loan
You can obtain a solar loan through several channels:
- Search online, use your primary bank, or contact different lenders.
- Consider the lender recommended by your solar installer.
- Partner with a solar.com Energy Advisor to explore various loan options.

Keep in mind, not all lenders offer combo and reamortizing loans specifically for solar financing, so having an Energy Advisor can be very beneficial.

### Solar Loan Qualifications
Getting approved for a solar loan is similar to qualifying for a mortgage or car loan. Loan requirements vary by lender but generally include:

- A FICO credit score above 650.
- A debt-to-income (DTI) ratio below 50%.
- The primary borrower must be listed on the home's title where the solar panels will be installed.

Check whether you meet these criteria before investing too much time in the solar process. If your qualifications are borderline, you can add a co-borrower with strong credit and DTI to boost your chances of approval.

Solar Panels: Leasing or Buying - Which is Best?

Given the basic understanding of purchasing solar panels, let's delve into the benefits of buying versus leasing your solar system. The key distinction lies in ownership. When you purchase solar panels outright or with a loan, you take ownership of the system. Conversely, when you lease solar panels, the ownership remains with the leasing company. In the past, leasing was a more popular option due to the high upfront costs of solar panels. However, with the significant decrease in the cost of solar panels and the availability of federal solar tax credits, buying a solar system has become a more affordable and attractive option for many homeowners.

Leases are often marketed with terms like "free solar panels" or "zero-down solar," which can be misleading. In reality, solar panels are not free, and there are alternative options, such as a zero-down solar loan, that provide a way to purchase solar panels without an upfront payment.

Both solar leases and loans offer fixed monthly payments to offset your utility bills, but they differ in how payments change over time. With a solar loan, payments remain stable throughout the loan term, while lease payments typically increase annually.

Most solar leases include an escalator clause that raises your monthly payments by around 3% each year. Over a lease term of 20 to 25 years, these increases can lead to much higher overall payments compared to a solar loan, potentially surpassing the rate of energy inflation.

The graph below illustrates how a lease (represented by the green line) might initially seem like the most cost-effective option, but over time, it becomes the most expensive choice without the benefits of owning the solar system.

Purchasing a Solar-Powered Home: What You Need to Know

Buying a home that already has solar panels installed can be a smart way to incorporate renewable energy into your life. According to Zillow, homes equipped with solar panels and other energy-efficient features tend to sell faster and at a higher price than similar homes without them.

Solar panels offer homeowners the advantage of lower electricity costs and instant energy savings upon acquiring the property. When considering a house with solar panels, it's important to address the following points:

- **Ownership**: Determine whether the solar panel system is owned outright or leased. If it's leased, consider whether you want to take over the lease payments or if you'd prefer the current owner to resolve the lease before purchase.
- **Roof Condition**: Assess the condition of the roof. If the roof requires maintenance or replacement, removing and reinstalling the solar panels may be necessary, adding to the cost.
- **Energy Needs**: Evaluate whether the existing solar system will meet your electricity demands. If you anticipate higher consumption, such as from an electric vehicle, you may need to supplement your energy needs.
- **Warranties**: Confirm if the warranties for the solar panels transfer with the sale. Typically, both performance and product warranties should carry over to the new owner, but verify this during the transaction.

Overall, purchasing a home with solar panels can provide a convenient pathway to benefiting from solar energy and the long-term financial and environmental perks it offers.

Top Solar Panels for Your Home

When choosing residential solar panels, homeowners are often faced with a wide array of options in terms of size, efficiency, power output, cost, and warranty coverage. The right choice depends on individual budget constraints, personal priorities, and specific energy objectives. A balance between efficiency, cost-effectiveness, and solid warranty coverage is generally sought after. Over a 12-month sales period, REC emerged as the top-selling solar panel brand, followed by other popular options such as Q Cells, Panasonic, SEG Solar, Canadian Solar, and Solaria.

When choosing a solar panel model, there are several key factors to consider:

1. **Roof Size**: Assess the available space on your roof, as this will impact the type and number of panels you can install. If space is limited, prioritize high-efficiency panels for optimal power output.

2. **Warranty and Longevity**: Look for panels that come with a long-term warranty, typically 25 to 30 years, ensuring a certain level of performance over time and protecting your investment.

3. **Panel Color and Material**: The color of solar panels can vary depending on the type. Monocrystalline panels are often black and offer higher efficiency, while polycrystalline panels are blue and slightly less efficient but generally more affordable.

4. **Manufacturing Location**: With the support of incentives from the Inflation Reduction Act, more solar panels are being produced in the United States, which can be an advantage for those who prioritize domestic production.

5. **Top Performers**: Research the leading solar panel models based on performance, efficiency, and durability. Some top-performing brands may offer panels that excel in specific characteristics, such as output or longevity.

When making your decision, compare these aspects and consider your unique needs and budget.

Key Insights

With various incentives, zero-down financing, and falling prices, the financial barrier to adopting solar energy has significantly decreased. Often, the challenge is not the purchase of solar panels but rather understanding how to navigate the buying process.

Solar.com streamlines the solar panel purchasing experience by connecting you with an expert Energy Advisor who provides personalized guidance throughout the entire process. Additionally, research from the US Department of Energy indicates that homeowners can achieve cost savings by using solar.com to compare shopping options.