Solar System Purchase Options
Phoenix, Arizona Solar System Purchase Options: Loans, Leases, and Cash
Here are the financing options for purchasing a solar system in Phoenix, Arizona from Phoenix Solar Panel Systems.
Solar Loans
- Loans are the most popular option for purchasing a solar system in Phoenix, Arizona. When a customer chooses a loan, they will own the solar system on their roof.
- 90% of Phoenix Solar Panel System’s projects are solar loans.
- Those who purchase using a loan are eligible for Federal and State tax credits.
- Like a home mortgage, the title of the solar system will be put in the homeowner’s name when the solar system is installed, and the solar finance company will hold a security interest in the solar system until the loan is paid off.
- A security interest means that if the homeowner fails to make payments on the loan, the solar finance company reserves the right to repossess the solar system, much like a vehicle loan.
- Since COVID, interest rates have dropped tremendously across the board, and solar loans are no exception.
- Before COVID, interest rates for solar loans were 3.99% and above. Now solar loan interest rates are as low as 0.49%.
- Solar loans come in different length terms: 10-year, 15-year, 20-year, and 25-year. 20-year and 25-year loans are the most popular because they drop the monthly payment on the loan to the point where homeowners will pay less for electricity with solar than without solar. The money savings of solar is the main reason why homeowners choose to go solar in Phoenix, Arizona.
Primary and Most Often Used Solar Loan Companies
- There are several different finance companies that offer solar loans. Some of the primary solar loan companies are Dividend, SunRun, Sungage, Sunnova, LoanPal, Sunlight, and others.
- As of January 16, 2021, Phoenix Solar Panel Systems generally uses Sunnova as their finance partner because Sunnova offers the best warranties and guarantees out of all the solar finance companies.
- Each finance company has different loan products they offer with varying length terms and interest rates.
- An important thing to consider is whether the solar finance company covers the warranties and guarantees on the solar system themselves or they put that responsibility on the company installing your solar system. Historically, the solar finance companies are more stable and will stay in business longer than a solar installation and solar sales company. Therefore, Phoenix Solar Panel Systems prefers to use Sunnova as their financial provider because Sunnova holds the 25-year system warranty themselves. Sunnova is part of Bank of America, which customers can trust will be in business for the next 25 years.
- Currently, no other solar finance company besides Sunnova offers system warranties, roof warranties, repair promises, and production guarantees in their financial agreement, which makes Sunnova a superior product.
- Sunlight is a popular choice in the solar industry because they offer a 20-year 0.99% loan, however most Phoenix Solar Panel Systems customers choose to go with the Sunnova 25-year 1.99% loan because of the warranties and guarantees that Sunnova offers. A 25-year loan will also have lower payments per month, resulting in more savings per month, than a 20-year loan.
Credit Qualifications for Primary Solar Loans
- The credit qualifications for solar loans vary with each finance company. Each company will value different aspects of an applicant’s credit and financial history. Some companies like Dividend require that the homeowner(s) have a certain yearly income to qualify for a loan. Other companies like Sunnova base their decision almost entirely on credit score. Other companies look at the debt-to-income ratio closely and have a certain percentage requirement to qualify for a loan.
- People in the industry say that homeowners need around a 650-credit score and above to qualify for primary solar loans and leases.
- There are some exceptions to this rule, as LoanPal can approve applicants that have credit scores as low as 620.
Secondary Solar Loan Companies
- There are secondary loan companies that credit unions and banks that offer solar loans through solar installers and directly to consumers. Typically, these companies have lower credit and financial history requirements and higher interest rates than the primary solar loan companies mentioned above.
- Customers that want solar who do not qualify for a loan through the primary solar loan companies are encouraged to apply for solar loans through secondary companies such as: First Green Bank, AmeriFirst, Admirals Bank, Home Loan Investment Bank, LightStream, Provident Credit Union, Redwood Credit Union, Alternatives Federal Credit Union, First New Your Federal Credit Union, SF Fire Credit Union, and EECU banking.
- Customers can also consult with their local and personal banks to apply for loan for your solar system.
- The primary solar loans have fixed interest rates for the entire term of the loan. Secondary solar loans may have variable interest rates.
Solar Loan No-Interest Periods and Reamortizations
- Every primary solar loan starts with a no-interest period that lasts last 12 to 18 months which is followed by a one-time reamortization of the loan based upon the amount paid into the loan during the no-interest period. During the no-interest period, customers have a low monthly payment. The solar loan companies know the customer will be receiving a tax credit from the Federal Government which is a percentage of the total amount financed. If the customer puts 100% of the Federal tax credit back into the loan, the initial payment on the loan will stay the same for the remainder of the loan term. If the customer keeps the Federal tax credit in their pocket as does not apply it to the loan, the monthly loan payment will increase.
Leases
- Leases are the second most popular option for acquiring a solar system.
- Those who lease their solar system technically do not own the solar system on their roof and are not eligible for Federal and State tax credits.
- With a lease, the solar finance company takes the Federal and State tax credits and then passes these savings on to the homeowner, resulting in lower payments per month than a loan.
- Leases are typically recommended to customers that cannot take advantage of the Federal and State tax credits. This includes customers that are unemployed and/or retired and do not pay any taxes.
- Since the monthly payments on leases are typically lower than loans, a lease can be ideal for a customer that cannot leverage tax credits and is retired and on a fixed income.
- Customers that know they will not be in the home long also prefer leases because the savings they see while in the home will be greater than with a solar loan.
- Leases have more short-term savings while loans have more long-term savings. Typically, after the seven-year mark a loan will become less expensive than a lease per month. For the first seven years, leases are less expensive than loans per month.
- However, over the course of 25 years, which is the average term length of a solar lease, a lease will cost more than a solar loan of the same length.
Cash
- Cash is the third most popular option for going solar.
- If you look at the long-term cost of solar over 15 plus years, leases will be most expensive, followed by loans, and then cash. Conversely, the short-term cost of solar over 5 years is lowest with leases, then loans, then cash. In the long-term, cash will also provide the most of amount of savings on electricity costs.
- With a cash purchase, the homeowner will need to be in the home about 10 years to “break even”. What this means is that the amount the homeowner will pay over the next 10 years to the utility company if they don’t go solar will equal the amount of cash they must pay now to buy the solar system outright. After that 10-year period the savings begin.
- Therefore, we don’t recommend the cash purchase option to people that know they will be in their home less than 10 years.
- A homeowner will typically save between $50,000 to $200,000 or more over a 25-year period by choosing the cash solar purchase option. Thus, cash is the best option for those who know they will be in their house for a long time and have the cash to purchase the solar system.
- Once someone buys a solar system for cash in Phoenix, Arizona and has it installed, their total electricity costs will be little to nothing at all paid to the utility company every month, which is seen as a huge benefit by some.
If you have any questions about solar panel system purchase options, please feel free to call us at (602) 753-0560.
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