When comparing interest rates on solar loans to the monthly payments for solar leases, it’s essential to consider both the financial structure and the benefits of each option.
Solar Loans
- Interest Rates: Solar loan interest rates typically range from 3.99% to 16.99% APR, with some offers as low as 6.25% APR from providers like Star One Credit Union.
- Monthly Payments: These vary based on the loan amount, interest rate, and repayment term. For example, a $30,000 loan at 6.25% APR over 15 years might have a monthly payment of approximately $257.23.
- Benefits: Solar loans allow homeowners to own the solar system, which can increase property value and qualify for federal and state tax credits.
Solar Leases
- Monthly Payments: Lease payments are often structured to be slightly less than the customer’s current electricity bill. They are typically fixed for a set term (usually 20 years) and can vary based on the energy produced by the solar system.
- Benefits: Solar leases do not require an upfront payment, but the solar provider retains ownership of the system and benefits from tax credits. Leases can complicate home sales and may have cancellation fees.
- Comparison: Lease payments can be lower than loan payments in the short term since they are based on energy production rather than the full system cost. However, the total cost over the lease term might be higher because the homeowner does not benefit from ownership, tax credits, or increased property value.
In summary, interest rates on solar loans are generally competitive and offer benefits of ownership and tax credits. Monthly payments for solar leases might be lower initially but lack the long-term financial benefits of owning the solar system.
Key Points for Comparison
| Feature | Solar Loans | Solar Leases |
|---|---|---|
| Ownership | Homeowner owns the solar system | Solar provider retains ownership |
| Upfront Cost | May require down payment or financing | Typically no upfront cost |
| Interest Rates | Varying APRs, e.g., 6.25% to 16.99% | N/A (lease payments based on energy production) |
| Monthly Payments | Based on loan terms and interest rate | Generally lower than loan payments, fixed for term |
| Tax Credits | Homeowner qualifies for federal and state tax credits | Solar provider benefits from tax credits |
| Property Value | Can increase property value | No increase in property value |
| Long-term Benefits | Energy savings and eventual free energy | Energy savings only during lease term |
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-do-interest-rates-on-solar-loans-typically-compare-to-the-monthly-payments-for-solar-leases/
