How to pay for solar panels

Key takeaway

• Buying solar panels with cash is cheapest and provides the most flexibility compared to other options.

• Getting a loan to pay for solar is more expensive than paying cash, but it‘s still a better option than leasing or signing a purchase agreement.

• Government loans and assistance options may be available to help you pay for solar.

Want to make the move to solar energy but don’t know how you can pay for it? The good news is that you’ve got options.

In this article, we take a look at your options for covering the cost of solar panels and the advantages and disadvantages of each. We also cover which of those options is likely to be the best for you and highlight a few ways you might be able to get help paying for solar panels.

Best ways to pay for solar panels: Cash or loan

When choosing how to pay for your solar energy system, paying cash or securing financing usually gives you the best value and flexibility.

Paying cash means you own your solar panels outright, so you avoid interest charges and immediately start saving on electricity bills. You’ll also increase your home’s resale value because buyers are attracted to homes with fully owned solar systems. 

If you choose financing, you can spread out payments over time, which makes solar accessible without a large upfront cost. Financing options often come with low interest rates, and you’ll still benefit from the federal solar tax credit and other incentives like state rebates. Both cash and financing let you take full advantage of warranties and future energy savings, giving you a strong return on investment compared to leasing or power purchase agreements.

Solar panel payment and savings details

Here’s a more detailed look at different ways you can pay for panels and save on the cost (in some cases).

Why use cash to pay for solar panels

If you have the ability to pay for your solar equipment in full on your own, cash is your best possible option. There are several key reasons why we recommend doing so, including:

• Lower cost: Paying for solar in cash means you don’t have to pay interest on a loan or origination fees and other costs related to opening a loan.

• Immediate ownership: As soon as you buy your solar equipment in cash, it is yours to do with as you please. Whether that’s saving on your energy bills or adding value to a home you plan to sell soon, no other party can restrict you from how you use your panels.

• Shorter payback period: The lower cost of using cash to pay for solar means that your system will pay for itself more quickly than it would when financed. That means you’ll get access to true energy savings sooner.

Why financing solar panels also works

If you can’t pay cash for a solar energy system, your next best option is to find financing to purchase it. This comes with the additional cost of interest on your loan, but still allows you to own the equipment. That means they can add value to your home should you decide to sell.

These days, you’ve got more than a few options for solar panel financing, including:

• Banks and credit unions: You can get financing for your solar energy system from a traditional lender through personal loans, mortgage refinancing, or a home equity line of credit (HELOC).

• Mortgage lenders: Lenders who specialize in mortgages can help you finance a solar panel purchase through a cash-out refinance, where you take out a new mortgage on your home and withdraw some or all of the amount between what you owe and what you have in equity.

• Solar lenders: You can also find specialty solar energy lenders who offer loan products specifically for solar panel purchases.

• Contractor financing: Some solar energy contractors offer their own financing arrangements to help you pay for panels.

How solar leases work and what they cost

Leasing solar panels lets you add solar power to your home without buying the equipment, but it often costs more in the long run and locks you into a long-term contract.

Under a solar panel lease, a company will install solar equipment, and you pay a flat monthly fee to use it. Even though the equipment is installed on your home, it still belongs to the provider. Solar leasing agreements often come with terms up to 25 years, locking you into a contract for decades.

The cost of a solar panel lease typically ranges from $50 to $250 per month. However, most contracts allow the provider to raise monthly payments over the course of the agreement. Compared to financing solar equipment, leasing usually ends up costing much more over the life of the panels. At the end of the day, we don’t recommend solar leases.

Paying for solar panels with a power purchase agreement

A power purchase agreement lets you access solar energy for your home without having to buy or lease the equipment, allowing you to pay only for the electricity you use. Like a lease, these agreements often have very low or no upfront costs and you don’t own the equipment.

Unlike lease agreements, purchase agreements don’t usually have monthly fees. Instead, the provider charges you for the energy you use produced by the equipment on your home, similar to a traditional energy provider. You do get to use solar energy, but not in the same way you would through purchased or leased equipment.

Government loans for solar panels

You can find a variety of government-backed loan and assistance programs at the federal, state, and local levels to help make solar panels more affordable. 

At the federal level, programs such as the Rural Energy for America Program Renewable Energy Systems initiative through the USDA can help guarantee loans for homeowners in some areas. Other departments offer assistance for low-income homeowners who want to convert to solar energy. While it does not offer loan assistance itself, the U.S. Department of Energy (DOE) provides a list of government-backed loan and assistance programs on its website.

Many state and local governments also offer their own loan and assistance programs. Be sure to research the programs available to you in your state and city or county to see if you can get help paying for solar.

Using PACE financing to pay for solar panels

PACE financing offers an alternative method to help homeowners afford clean energy improvements like solar panels by reducing upfront costs.

With property assessed clean energy (PACE) financing, you can get specialized loans that cover some or all of the upfront expenses for installing solar energy systems on your home. Instead of traditional monthly payments, you’ll repay this loan through a higher property tax bill over a period that can range from five to 35 years, depending on the agreement. 

PACE loans come with unique terms, including placing a lien on your property, which means that federal mortgage agencies like Fannie Mae and Freddie Mac, as well as FHA-insured financing, won’t back mortgages on homes with existing PACE liens. This can affect your options if you plan to refinance or sell your home, so it’s smart to consider these factors before choosing PACE for your clean energy upgrades.

Joining community solar instead of paying for panels directly

You could lower your solar energy costs by joining a community solar co-op with your neighbors. If you're interested in saving on solar energy, community solar programs offer a way to share the investment with others in your neighborhood. In a community solar co-op, a group of households pools their money to purchase solar panels and related equipment for collective use. 

While you'll need to invest in a larger solar array and extra infrastructure to support multiple homes, the costs are divided among all participating members. This shared approach can make your individual expenses significantly lower compared to installing a private solar system at your own home. Community solar projects are growing in popularity across the United States, with support from local governments and utility companies aiming to expand access to renewable energy.

Bottom line on paying for solar panels

Paying cash for solar panels gives you the lowest lifetime cost and total ownership without restrictions. Financing your purchase is the next best choice since it still lets you own the system and save over time. Leasing or signing a power purchase agreement usually means you’ll pay more overall. If a predatory lease deal is the only option available, solar might not be the best idea.

Be sure to check for federal, state, and local solar incentives like net metering that could help cover your overall costs.

FAQ about paying for solar panels

Below are a few frequently asked questions about paying for solar panels:

How do people pay for solar panels?

There are several ways you can pay for solar panels, including cash, loans from banks or credit unions, leasing, or entering into a solar power purchase agreement. Each payment method affects ownership, monthly costs, and long-term savings.

What is the monthly payment for solar panels?

The monthly payment for solar panels depends on the total cost of the system and the payment model, among other variables. Loan payments for solar panels tend to range from $100 to $250 per month, while monthly payments for leased panels typically fall between $50 and $250 per month.

Is paying for solar worth it?

Paying for solar is usually worth it if you purchase your panels. Most solar energy systems pay for themselves in energy savings in around 10 years and continue to provide energy for another 15 to 20 years. However, the cost of leasing solar or entering a purchase agreement may not be worth it compared to staying on traditional grid-provided power.

Is solar panel available on installments?

You can finance solar panels with monthly payments, so you don’t have to pay the full price upfront. This lets you enjoy renewable energy while spreading out the cost over time through a solar loan.