How Does Zero Down Solar Financing Work?

A few years ago, the cost of going solar was steep, unaffordable for most people. Currently, the price of solar is around $3 per watt. Technological growth and innovation are some of the contributing factors to this change. You can now install solar panels for your home without paying upfront fees through zero down financing. 

You may need to pay an upfront fee of about $15,000 to install an efficient solar energy system for your home. However, with zero down financing, you pay the solar energy system’s cost through a monthly payment plan. The interest is factored in this case. We will look at zero down financing solar in detail. Let’s get started.

What is Zero Down Solar Financing?

Zero down solar financing

What is Zero Down Financing?

It is also termed as zero down solar loan program. As a homeowner, the initial solar installation cost for you is $0. The model heavily borrows from the mortgage system. Though the idea of owning a reliable energy system at zero initial cost can be appealing, it is essential to ask a few questions. The most commonly asked questions include:

Can Zero Down Financing Save You Money?

Buying solar panels outright can save you more money than choosing this financing option. However, even with this model, you will significantly save money on your electricity bill. You may have to look at other factors such as your usage, electricity rates, and incentives to save you more money. That said, zero down solar financing will still save you money.

Should I Go for Zero Down Financing?

Ultimately, this is the most asked question when it comes to switching to solar energy. There are various components involved in this financing method, and we will discuss them later on. For homeowners who want to spread their payments over a long period, this is a good option.

Types of Solar Zero Down Financing

In a nutshell, a solar company will install the solar panels on your roof. What happens next depends on your financing option. 

Once you decide to use this method to finance your solar energy system, you need to choose the best option. There are several solar zero down financing options to enable you to own a solar energy system. Such include leases, power purchase agreements (PPA), and solar loans. These are some of the most common options, and we will look at them in-depth.

1. Power Purchase Agreements (PPAs)

They are also referred to as zero-down solar PPAs. They work the same way as leases. Here, after agreeing on a set price with your provider, you now access the solar energy system’s full benefits. The PPA provider retains the ownership of the energy system, where he receives all the financial incentives. Such provisions could include rebates, tax cuts, or other incentives.

When using the PPA method, you accept to buy the power your system generates at a set rate. Here, you do not pay a fixed monthly amount, as is the case in a lease. Under this program, you do not have an upfront debt to the PPA provider. Instead, you pay the electricity generated by your system at a specific rate. Generally, this price is approximately 20% or 30% lower than the electricity rates. However, depending on the agreement, the amount can increase after two or three years.

2. Solar Leases

Another way you can benefit from financing programs is through zero down solar leases. Under this option, you get into an agreement with a leasing company regarding the energy your system will generate. For this exchange, you pay a monthly fixed fee “rent” based on the estimated production.

In this program, the company from which lease owns and keeps the system maintained. Due to this, the company gets the rebates, tax breaks, and other government incentives you get for installing solar panels.

These solar leases require no initial cost. However, once the solar panels are installed and are operational, you start to make monthly payments. The ‘rent’ ranges between 10% and 30% lower than the total utility energy bills. In the contract, there may be a provision to increase the rate annually as utility rates increase.

3. Solar Loans

The other option for solar panel financing is a solar loan. Through this option, you get a loan and use it to purchase and install the solar panels. You then pay the loan monthly at interest. Under this solar zero down financing option, you get the solar energy system’s ownership, unlike leases and PPA agreements.

The best thing about this option is you benefit from all that tax breaks, rebates, and incentives. The amount paid monthly is dependent on the cost of installation, the interest rate, the type of loan you choose, and the loan term.

Solar loans will give you a higher net saving compared to other zero down financing options. You also start to save immediately on your energy bill after the system installation, and they are available on zero down option from most providers.

What Next?

Several zero down financing options for solar are readily available for you. However, the one that you choose should provide you with a return on investment. As you shop around, it is good to be aware of your options and compare them with others.

Solar is a long term investment. Whatever decision you make, you know you are choosing a product that you will use for the next 25 years. The ideal outcome is to save you as much money as possible over that period. With this in mind, you need to go through each fine print for all solar financing options available.

In the end, your goal should be to spend less money on solar installation than you would if you continued paying electricity bills throughout that time. Evaluate all estimates and graphs carefully before you sign any binding legal document. At Dynamic SLR, we help you to determine the financial implications and benefits of solar installation. You can get a free solar quote that estimates the cost of going solar for your home.