Unlock the Power of the Sun Without Breaking the Bank: Understanding Solar PPAs and Leases

by Dave Fleming

The sun is a powerful, clean energy source, and harnessing its power with solar panels is becoming increasingly popular. But navigating the world of solar financing can be tricky. At Zoomin Solar, we’re committed to making solar accessible and understandable for everyone. Today, we’re diving into two popular options: Solar Power Purchase Agreements (PPAs) and Solar Leases, and exploring why they might be a smarter choice than solar loans burdened with hidden dealer fees.

What are Solar PPAs and Leases?

Think of PPAs and leases as renting your solar energy instead of buying it. Here’s the difference:

• Solar Lease: You pay a fixed monthly amount to “rent” the solar panel system installed on your property. This payment is typically lower than your pre-solar electricity bill.
• Solar Power Purchase Agreement (PPA): You pay a set price per kilowatt-hour (kWh) of electricity generated by the solar system. Your monthly bill will vary depending on the system’s production, but the per-kWh rate is usually locked in, protecting you from rising energy costs.

With both PPAs and leases, a third-party company (often referred to as the “system owner”) owns and maintains the solar system. You simply enjoy the benefits of clean, affordable energy without the upfront cost of purchasing the panels.

The Hidden Trap of Solar Loans with Dealer Fees

While solar loans allow you to own your system, they often come with a hidden catch: dealer fees. These fees, which can add thousands of dollars to your loan, are essentially a markup charged by the solar installer for arranging the financing. They artificially inflate the loan principal, meaning you end up paying interest on a much larger sum than the actual cost of the solar system. This practice drives up the overall cost of going solar and can eat into your long-term savings.

15 Reasons Why a Solar PPA or Lease Can Be Better Than a Solar Loan:

Here at Zoomin Solar, we believe in transparent and affordable solar solutions. That’s why we’re highlighting the advantages of PPAs and leases:

While both PPAs (Power Purchase Agreements) and solar loans can help you go solar, PPAs offer some distinct advantages in certain situations. Here are 15 reasons why a PPA might be the better choice for you:

Financial Advantages:

1. Zero Upfront Costs: PPAs require little to no upfront investment, making solar accessible to those who can’t afford the initial purchase and installation costs.
2. Lower Monthly Payments: PPA payments are typically lower than loan payments, especially in the early years.
3. Predictable Energy Costs: PPAs often have a fixed or predictable price per kilowatt-hour (kWh) of electricity, protecting you from rising utility rates.
4. Potential for Immediate Savings: You might start saving money on your electricity bills from day one with a PPA, as the PPA rate is often lower than your current utility rate.
5. Does Not Effect Debt to Income Ratio: While a PPA may have a small credit check to get approved, the actual products do not go on your credit like a solar loan. Now homeowners with multiple homes can take advantage of solar on their rental properties as the tax credit is discounted from the equipment.

Operational and Maintenance Benefits:

6. Maintenance Included: The PPA provider is responsible for all maintenance and repairs of the solar system, saving you time and money.
7. Performance Monitoring: PPA providers typically monitor the system’s performance remotely, ensuring it operates efficiently.
8. System Upgrades: Some PPA providers may offer to upgrade your system with newer technology during the contract term.

Other Advantages:

9. Reduced Risk: With a PPA, you don’t own the system, so you’re not responsible for its performance or potential repairs.
10. Environmental Benefits: PPAs contribute to clean energy adoption and reduce your carbon footprint.
11. Increased Home Value: Even though you don’t own the system, a PPA can still increase your home’s value.
12. Flexibility: Some PPAs offer options to purchase the system at a later date or terminate the agreement early.
13. Shorter Commitment: PPA contract lengths can be shorter than some solar loan terms.
14. Ideal for Renters: PPAs can be a good option for renters who want to benefit from solar energy without making a long-term commitment.
15. Support from Experienced Providers: PPA providers have expertise in solar installation and maintenance, ensuring a smooth experience.

What are some issues with Solar Loans? The Dreaded Bankers Dealer Fee

• Dealer fees are often baked into the loan principal and interest rate: Solar loans frequently include a “dealer fee” that represents the cost of the solar installer’s partnership with the finance company. This fee can significantly inflate the total cost of the loan and is often not transparent to the borrower. The loan principal will be much larger due to the dealer fee which will also increase the total interest paid.
• Impact on interest rates: Because the dealer fee is factored into the loan, it artificially lowers the stated interest rate while increasing the total amount financed. This makes the loan appear more attractive than it is because the borrower is paying interest on the dealer fee over the life of the loan.
• Transparency issues: The way dealer fees are structured in solar loans can make it difficult for consumers to compare different financing options and understand the true cost of their solar system.

Zoomin Solar: Your Partner in Affordable Solar

At Zoomin Solar, we offer a variety of financing options to fit your needs, including Paying Cash Up Front, Solar Loans, but PPAs and leases provide a clear path to solar savings, without risking the equipment costs. We are against hidden dealer fees and believe in full transparency. Let us help you determine the best solution for your home and budget. Contact us today for a free consultation and discover how easy and affordable it is to go solar with Zoomin Solar!