May 2, 2017 | By RGR Marketing Blog

Helping to Choose the Best Fit for Each Solar Customer

Despite the years that both solar leases and solar loans (not to mention power purchasing agreements or PPAs) have been available and popular, many consumers (and even some in the solar industry) have a difficult time explaining the key differences. This is unfortunate for a variety of reasons that can impact an installer’s ability to maximize the potential of their business over the long term.

Depending on the customer, their financial status, and where they are in life in relation to the ownership of their home, either financial approach to solar could make for the best fit. While these financing approaches have much in common, their differences are only ignored at the peril of the customer. And rare indeed is the situation in which the difference is either totally irrelevant or negligible to the solar customer.

The Terms of the Solar Loan

Simply put, a solar loan is just a loan that allows the consumer to finance the purchase and installation of a solar power generating system. They can require a down payment, but sometimes do not. They have variable terms and interest rates that are mostly dependent upon the customer’s credit rating.

Solar loans generally are not transferrable, requiring that if the home is sold, the cost of paying off the loan is recovered as part of the asking price for the home—much like the financing a homeowner might secure to pay for a new roof, hot water heater, or an in-ground pool.

Understanding the Solar Lease

The solar lease, on the other hand, is an agreement entered into between the homeowner and a solar power leasing company. Under a solar lease, the solar power company installs the system for no money down in exchange for a monthly payment from the homeowner that should not exceed the savings on their power bill from having the system installed.

The homeowner does not own the equipment, but may, in many cases, be on the hook for system maintenance and repair.

A Word About PPAs for Solar Power Systems

Another approach to financing a solar power system is the power purchasing agreement. These solar PPAs often get conflated with solar power lease arrangements, as the two have many similarities.

With PPAs though, the installer places the equipment on the homeowner or business owner’s property in exchange for an agreement from the homeowner of business to purchase their power from the installer at a fixed rate over the term of the agreement.

As with a solar lease, the home or business owner does not own the equipment, but unlike many solar lease arrangements, with a PPA, they typically aren’t on the hook for maintenance and repairs to the system.

The Final Analysis on Solar Financing Options

Determining which arrangement is best for any one home or business is challenging and depends on many variables. For some, borrowing the money via a solar loan to purchase the system makes the most sense. For others, leasing the equipment or entering into a power purchasing agreement is a smarter move. But, understanding the major differences between the two solar financing options is key to your customers making an informed decision.

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