Purchasing solar panels isn’t a cheap investment, and you must find a way to afford your system at the start. You can always pay the full cost yourself, but there are also financial providers who can lend you the money. Some solar installers have plans that allow you to install solar panels with no upfront cost.
It’s better to purchase solar panels if you can afford to pay the money upfront. You enjoy the benefits right away and your savings won’t go towards any repayment plan. It also benefits your home value if you decide to sell at some point. For those who want solar immediately and are confident in their ability to make payments, financing solar panels is a better investment option.
Why should you buy solar panels upfront?
Paying for solar panels upfront can be a big expense, with a 10 kW system costing around $10-13k. If you can purchase the solar panels immediately, you won’t need to worry about falling behind on interest payments and can own your system. Your energy savings also start when the system starts working, since you won’t have to worry about energy providers increasing your costs anymore.
Your solar panel system’s payback period will also be shorter since it isn’t impacted by interest payments. You get the full benefit of feed-in tariffs, solar incentives, and other cost reductions as none of it goes towards repayments.
Since you own the system after paying for it in full, it also improves the value of your home immediately. If you plan on selling your home at some point, it’s helpful to factor in the system towards the final sale price.
Why would you finance solar panels?
If you want to get solar panels for your house right now, financing is the better option. The upfront cost might be larger than you anticipated but you think it’s a good time to switch to solar power. You might also feel that the current rebates, small-scale technology certificates (STCs), and other financial incentives will reduce in value. Electricity prices are rising and you want to get off the grid quickly to avoid paying too much.
You might be able to afford an upfront purchase, but feel that you want to use that money for expanding the system. There might be also be an expense in the future that you are anticipating and don’t want to spend money now. Financing solar panels also makes sense in those cases, as you know you will be able to make the repayments.
There are a variety of financing options for solar panels, and it’s important to do your research. Look at the interest rates and the requirements to ensure that you are getting something you can properly repay.
What are your options for financing solar panels?
There are six options for financing solar panels in Australia, which are:
- Green loans
- Interest free solar loans
- Personal loans
- Adding solar to your existing mortgage
- Solar leasing
- Solar power purchase agreements
Green loans are loans designed for renewable energy purchases such as installing solar panels and batteries. Some financial institutions such as ANZ and Commonwealth Bank offer them, and they usually have lower interest rates and fees than other solutions.
Interest free solar loans are often provided by solar providers themselves, such as Go Sunny’s ANYTIME Solar plan. There won’t be any interest rate changes or fees to worry about, and you repay a flat amount every month.
Personal loans are another choice if you can’t get green loans or interest free solar loans. These loans are pre-approved and it’s easier to get them approved than a green loan. They can often be cheaper than green loans if you pay off the loan faster than expected.
Adding solar to your existing mortgage is a good way to consolidate the debt and you start owning the solar system from the start. While it will be dependent on current rates, it is more convenient than dealing with multiple financial providers.
Solar leasing installs the solar system on your property with no upfront cost. As you don’t fully own the system until it is fully paid off, maintenance and repairs won’t be your responsibility until it is. The monthly payments are also low and it gives you the benefits of solar immediately.
Solar power purchase agreements allow the provider to set up solar on your property and you pay a fee for the energy you receive. The fees you pay are usually less than what you would pay if you bought that energy from the grid.
Always go through your options and do your due diligence to see which option is right for you. Some of these options have strict eligibility requirements and they aren’t right for everyone. Consider your finances and how long you will be at your current home before making a decision.
What would a comparison between financing options look like?
To go through this example, assume you have purchased a 10 kW solar power system and require $10,000 AUD to complete the installation. The $10,000 will be the principal amount you must pay back, while the interest will depend on the options you choose. Commonwealth Bank will be the default provider, and all prices are in AUD. Green loans, personal loans, and adding solar to your mortgage are covered here.
The provider you ultimately choose and the option you pick should be done after careful research, and this is purely informational.
Green Loan
For green loans, Commonwealth Bank offers theirs at 1.99% p.a. over 10 years, and you can pay that loan off earlier. There are no establishment or monthly service fees to pay. Your total loan repayment would be $11,037 with $1,037 charged as interest. You would be paying $92 per month for 10 years, assuming you are not planning on paying it off earlier.
Personal Loan
Commonwealth Bank’s personal loan options are a Fixed Rate Loan, Variable Rate Loan, and a Secured Personal Loan. The loan term will be the maximum of 7 years. Since purchasing solar panels would be considered a green purchase, the information used is as follows:
- For a Fixed Rate Loan, your total loan repayments would be $13,314 with $3,314 charged as interest. Monthly repayments would be $159 per month.
- For a Variable Rate Loan, your total loan repayments would be $13,314 with $3,314 charged as interest. Monthly repayments would be $159 per month. Extra repayments won’t have a fee for this loan, which is useful for those looking to pay off sooner. A Variable Rate Loan might look better but it is subject to interest rate rises. While you benefit if interest rates go down, you end up paying more if interest rates go up.
- For a Secured Personal Loan, your total loan repayments would be $12,907 with $2,907 charged as interest. Monthly repayments would be $154 per month.
Adding solar to your existing mortgage
Commonwealth Bank has the Green Home Offer, which offers a discount on your Standard Variable Rate home loan. The new rate will be 5.49% p.a. instead of the current Standard Variable Rate of 5.79% p.a. assuming that your loan-to-value (LVR) ratio is 80% or below.
You can split the loan if you are interested in making repayments separately. Assuming you would pay back the loan over 10 years at the 5.49% rate, your loan repayments would be $13,018 with $3,018 in interest. You would be paying $109 per month.
What about interest free solar loans or solar leasing?
Every provider of interest free solar loans, solar leasing, and solar power purchasing agreements will have their own terms, repayment periods, and/or interest rates. As these will be different depending on who you talk to, you should shop around and get quotes from these providers to get an exact number.
For example, GoSunny’s ANYTIME Solar plan has no upfront installation cost and repayment terms dependent on your property. There are no lock-in or exit fees, nor are there any interest payments since it is an interest free solar loan. The exact repayment amount will depend on your property, whether solar is currently installed, and your average electricity bill.
What if you want to make improvements to your system in the future?
If you want to expand your solar power system and aren’t able to purchase up front, you can look at green loans and personal loans. These loans cover system expansions as well, factoring in additional batteries, inverters, and solar panels. They also cover other systems like solar hot water systems and EV charging stations.
Qualifying for these loans and paying them off or demonstrating your repayment ability will allow you to finance your system expansion. As long as you can repay the loan, there won’t be a limit on the expansion you want to finance. This will require proper discussions with solar installers and the financial provider before you go ahead with any plans.
Conclusion
If you can afford it, it’s almost always better to buy your solar panels outright and enjoy the savings immediately. For those who require the money for other uses or can’t afford it, you have a variety of financing options available to you.
Shop around with your financial providers and see what options they provide. Everyone will have different interest rates and options that you must consider before taking out a loan. For interest free solar loans, solar leasing, and solar power purchase agreements, you must talk with the provider to get a proper quote.
Each of these finance options will help you get your solar system running, some without any upfront cost. Make sure you are aware of the repayment terms and additional fees that may be present. If you are curious about an interest free solar loan, contact GoSunny and we can walk through the options that are perfect for your needs.
