Solar Leasing Explained

Even though interest rates are rising, people continue to turn away from solar leases and third-party-owned solar systems in favor of home loans to pay for their residential solar systems in 2018.

According to GTM Research and their current report that solar lending will become the No. 1 consumer finance solution for residential solar systems in 2018. The growing trend of solar loans, which includes personal and home equity lending, took a big bite out of TPO systems.

TPO Market

The TPO market hit its peak in 2016 as companies like SolarCity and Vivint Solar spent tens of millions of dollars get customers through bought leads, door-to-door sales, and selling via big-box retailers.

The drop in SolarCity’s TPO business in particular contributed to the 15 percent market drop of the residential solar industry in 2017 over 2016 (and a 36 percent decline for the national TPO market). Even the cash market fell 30 percent in 2017 as struggles with customer acquisition plagued both national installers and the long tail.

Breakthrough Year

Meanwhile, the loan market had a breakthrough year in 2017. The rise of solar lending companies such as Mosaic and Sunlight Financial contributed to 81 percent annual growth in the loan market. Much of this growth can be contributed to SolarCity's and Vivint Solar’s use of these solar lending companies, though other lenders like Dividend Finance achieved explosive growth through partnerships with the long tail of installers.

Many of today’s solar loan products combine the benefits of leasing with system ownership. Like the leasing products, many solar loans require no money down and allow for annual savings on a customer’s electric bill, especially with longer-term loans. And like a cash sale, loans allow homeowners to own the system and take advantage of the 30 percent federal Investment Tax Credit, while also allowing them to enjoy the benefits of the power produced by the system after the loan is paid off.

The solar loan market is anticipated to grow through 2023, though at a decreased pace as solar lenders must grapple with the same sorts of challenges faced by the major TPO providers. While many challenges lie ahead for solar lenders, 2018 is gearing up to be another year of impressive loan market growth.

Like the few remaining TPO players, solar lending companies must compete to offer customer savings while maintaining sufficient margins to appease investors. If you want to move into the future and join the solar revolution, or if you want to find out what solar panels are right for you, go to HahaSmart.com and try our price checker tool.

You can see how much a system will cost, and how much you can save over the next 20 years. For more information relating to going solar, don't forget to visit our solar blog section for more handy guides and articles.

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