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Solar Financing: How To Pay For Solar Panels
- David Kranker
- Jan 13
- 10 min read
Solar panels are designed to reduce your electricity bill by producing power on site. According to EnergySage, the average U.S. homeowner saves about $57,000 over 25 years by going solar. Depending on electricity costs in your area, you could save between $37,000 and $148,000 over the same period by installing a solar energy system.
That said, they can be a substantial investment, with a typical home system costing between $15,000 and $25,000 before incentives. That price point stops many homeowners from moving forward with their plans to go solar, even when monthly electric bills already exceed $150.
Solar financing solves that problem by letting you pay for your system over time. In this guide, we’ll review the options available to homeowners across Maryland, Pennsylvania, and Delaware, as well as tax credits and state incentives that can lower the purchase price.
What You Need to Know About the Cost of Solar Panels
The price of a solar panel system reflects equipment, labor, permits, and site conditions. As we stated at the beginning, most residential systems in the U.S. fall between $15,000 and $25,000 before incentives, with system size as the primary cost driver. Roof type, electrical upgrades, and local permitting rules also affect the final number.
Here’s a general overview of the factors that impact cost:
Solar Panels: Panels account for roughly 25 to 30 percent of the total system price. Higher-efficiency panels cost more but produce more electricity in the same roof space, which can reduce the number of panels required.
Inverters and Electrical Equipment: Inverters and related electrical components represent about 10 to 15 percent of system cost. These parts convert solar power into usable household electricity and connect the system to the main service panel.
Mounting Hardware and Wiring: Racking, wiring, and conduit make up close to 10 percent of the total price. Roof-mounted systems require hardware rated for wind and snow loads based on local building codes.
Installation Labor and Permits: Labor and permitting combined typically account for 20 to 30 percent of the total cost. Installation crews spend one to three days completing mechanical and electrical work, while permit fees and inspections vary by city and utility provider.
System Size And Energy Use: A 5-kilowatt system may cost around $15,000 before incentives, while a 10-kilowatt system can exceed $25,000. Homes with higher annual electricity use require larger systems to offset utility bills.
Roof Type and Condition: Asphalt shingle roofs cost less to work on than metal, tile, or slate. Older roofs may need reinforcement or replacement before installation, adding thousands of dollars outside the solar contract.
Upfront price doesn’t reflect long-term cost. A $20,000 system that replaces a $180 monthly electric bill pays for itself in roughly nine years before incentives. After that point, the system produces electricity without fuel costs for the remainder of its service life, which commonly exceeds 25 years. This long operating period is why financing choices have a direct impact on total cost.
Paying Cash for Solar Panels
When you pay cash, it means you’re purchasing your solar energy system outright, with no financing involved. You own the equipment from day one and avoid interest charges entirely. This option involves the highest upfront payment but results in the lowest total system cost over its operating life. Here’s why:
Upfront Payment Structure: Cash purchases require full payment before or at installation. For a $20,000 system, the entire amount is paid at once, with no monthly obligation after the system is turned on.
Immediate System Ownership: The homeowner owns the panels, inverters, and all related equipment. Ownership allows full control over the system and removes any third-party claims on the property.
Access to Tax Credits and Incentives: Cash buyers qualify for the federal solar tax credit, which currently equals 30 percent of the system cost. On a $20,000 system, that credit reduces federal tax liability by $6,000. State rebates and performance incentives also apply.
Lowest Lifetime Cost: Without interest payments, the total cost equals the contract price minus incentives. Over a 25-year system life, this option produces the highest net savings compared to loans, leases, or power purchase agreements.
No Monthly Payment After Installation: Once the system is operational, you only pay remaining utility charges, such as grid connection fees. Electricity produced by the system replaces power that would otherwise be purchased from the utility.
Capital Tradeoff: Paying cash ties up funds that could be used for other expenses or investments. This tradeoff is extremely helpful for homeowners who rely on savings for emergencies or near-term expenses.
Cash purchases work best for homeowners who have sufficient savings and want the lowest total cost and fastest payback. This option removes any hassle associated with interest payments, lender requirements, and payment schedules. For households that prefer to keep cash available, financing provides another path to ownership, which is covered in the next section on solar loans.
Solar Loans: Owning Solar With Monthly Payments
Solar loans let homeowners spread the cost of a system over time with monthly payments. With this arrangement, the homeowner owns the system and still claims the federal solar tax credit. Loan interest adds to the total cost, but monthly payments are typically lower than the cash price.
Loan Basics: A solar loan covers the full system cost from an installer. In Delaware, Maryland, New Jersey, and Pennsylvania, a typical 7-kilowatt system costs around $20,000 to $25,000 before incentives. With a 10-year loan at 6.5 percent interest, monthly payments might be about $230 to $290.
Ownership and Incentives: Loan borrowers own the system from day one. You reduce your federal tax liability by 30 percent of the total installed cost. For example, a $24,000 system yields a $7,200 federal tax credit that you claim on your tax return.
So what does this look like in the states that Solair services?
In Delaware, the average system cost before incentives is about $24,065. Some local utilities offer direct rebates, such as $500 per kilowatt up to $3,000, which lowers net cost further. Homeowners with an 8-year loan paying $250 per month retire the loan in year 8 and keep electricity savings after that.
Maryland’s average system price is about $25,372 before incentives. Some county programs offer grants or rebates; these vary and must be confirmed with local utility providers.
In New Jersey, a typical system costs about $24,857 before incentives. New Jersey has a sales tax exemption for solar equipment, which removes roughly 6.625 percent of sales tax on the system price.
Pennsylvania’s average system cost before incentives is roughly $25,633. In Pennsylvania, homeowners can sell Solar Renewable Energy Credits (SRECs) and use net metering to offset utility bills with excess solar production.
Monthly payments include principal and interest. A 12-year loan at 6 percent interest on a $24,000 net cost results in a total repayment of about $34,835. This means loan interest adds about $9,835 over the life of the loan.
Solar loans let you avoid a large upfront payment and still own the system and claim incentives. Loan terms affect monthly payments and total interest paid. In states where Solair operates, state rebates or tax exemptions reduce net cost and improve long-term savings. Loan ownership ends once the final payment is made, and electricity produced after that point cuts utility bills directly.
Solar Leases And Power Purchase Agreements
Solar leases and power purchase agreements place system ownership with a third party. The homeowner pays a monthly fee or a per-kilowatt-hour rate for the electricity produced. These options remove the upfront purchase price but change how incentives, long-term cost, and home resale work.
Here’s what you need to know:
Third-Party Ownership Structure: Under a lease or PPA, a solar company owns the panels, inverters, and related equipment. The homeowner agrees to a contract that typically lasts 20 to 25 years. The contract sets either a fixed monthly payment or a fixed price per kilowatt-hour produced by the system.
State Incentives: The system owner claims the installation state rebates, SRECs, and other performance incentives. This shifts incentive value away from the homeowner and into the contract pricing.
Here’s what this arrangement would look like in practice:
In Delaware, a homeowner with a lease might pay $120 per month for a system that produces most of their annual electricity. Utility rebates reduce the installer’s costs, not the homeowner’s. The homeowner’s savings depend on the difference between the lease payment and the avoided utility bill.
Maryland homeowners may see lease or PPA offers tied to local utility pricing. A PPA priced at $0.13 per kilowatt-hour replaces grid power that may cost $0.15 or more per kilowatt-hour, creating immediate monthly savings without system ownership.
New Jersey’s sales tax exemption lowers equipment cost for system owners, which affects contract pricing. Even with that benefit, homeowners do not receive tax credits directly and remain bound to long-term contracts.
In Pennsylvania, SRECs generated by leased systems belong to the system owner. Homeowners receive bill credits through net metering but do not earn revenue from SREC sales.
Pro Tip: Lease and PPA contracts must transfer to the buyer or be bought out during a home sale. Some buyers refuse long-term solar contracts, which can delay or complicate transactions.
Leases and PPAs reduce upfront cost but limit long-term savings because incentives and system value belong to a third party. Monthly payments continue for the full contract term, and homeowners never gain ownership. These options work best for homeowners who want predictable energy payments without purchasing equipment. However, we always recommend owning your system when you’re able to.
Solar Incentives, Tax Credits, And Rebates
Solar incentives reduce the price homeowners pay for solar panels through tax credits, rebates, and ongoing production credits. These programs change the net cost of a system but apply differently based on ownership, location, and timing. Homeowners who buy their system with cash or a loan receive the full benefit: lease and PPA customers do not.
Delaware Incentives: Delaware offers utility-based rebates through programs such as the Delaware Green Energy Program. Some utilities pay around $500 per kilowatt installed, with caps that commonly reach $3,000. Delaware also allows net metering, which credits excess solar production at the retail electricity rate.
Maryland Incentives: Maryland homeowners qualify for net metering and can earn Solar Renewable Energy Credits. One SREC represents 1,000 kilowatt-hours of solar production. SREC prices change based on market supply and demand, but provide an additional revenue stream beyond bill reduction.
New Jersey Incentives: New Jersey exempts solar equipment from state sales tax, which removes 6.625 percent from the system price. The state also exempts solar systems from property tax assessments, so installing solar does not raise a homeowner’s taxable property value. Net metering credits excess generation at the retail rate.
Pennsylvania Incentives: Pennsylvania homeowners earn SRECs for solar production and can sell them on the open market. A system that produces 8,000 kilowatt-hours per year generates eight SRECs annually. Net metering credits the excess power sent to the grid at the full retail electricity rate.
Pro Tip: Incentives apply only to systems placed into service while programs are active. State incentives apply to system owners only. Homeowners using leases or PPAs do not claim these benefits directly.
Incentives reduce solar energy system cost by thousands of dollars when claimed by the system owner. Federal credits apply nationwide, while state programs change by location and year. Because these incentives depend on ownership, homeowners who purchase their system with cash or a loan receive the full financial benefit. This makes the financing choice a deciding factor in total system cost.
Solar Energy System Financing Options Comparison
Financing Option | Who Owns The System | Upfront Cost | Monthly Payment | Access To Tax Credits & Incentives | Total Cost Over Time | Home Sale Impact |
Cash Purchase | Homeowner | High. Full system price paid upfront, typically $15,000–$25,000 before incentives | $0 after installation | Homeowner claims all state incentives | Lowest total cost. No interest payments | No contract attached to the home |
Solar Loan | Homeowner | Low to moderate. Down payment may be $0–$5,000, depending on the lender | Fixed monthly payment, often $180–$300, depending on term and rate | Homeowner claims all state incentives | Higher than cash due to interest | The loan must be paid off or transferred |
Solar Lease | Third-party company | Usually $0 upfront | Fixed monthly lease payment, often $90–$160 | Third party claims all incentives | Higher than ownership options over 20–25 years | Lease must transfer or be bought out |
Power Purchase Agreement (PPA) | Third-party company | Usually $0 upfront | Per-kWh payment, often $0.11–$0.15/kWh | Third party claims all incentives | Higher than ownership options over the contract term | PPA must transfer or be bought out |
Choosing The Right Solar Financing Option
The best way to pay for your solar panels depends on how much cash you have available, your tax liability, and how long you intend to live in the house. The financing option you choose changes who owns the system, who claims incentives, and how much the system costs over time.
Cash Availability: Homeowners with sufficient savings can eliminate interest by paying upfront. For example, paying $20,000 in cash avoids $5,000 to $7,000 in loan interest over a 10 to 15-year term.
Length of Homeownership: A homeowner planning to stay in the home beyond 10 years benefits most from ownership. Systems typically reach payback in 7 to 10 years in Solair’s service area. After payback, the electricity produced reduces utility bills directly.
Monthly Cash Flow: Loan payments replace part or all of the electric bill. For example, a $240 solar loan payment that replaces a $220 utility bill increases the monthly out-of-pocket cost by $20 during the loan term but drops to near zero once the loan ends.
Home Sale Plans: Owned systems transfer with the home without contracts. Loans may need to be paid off at closing or transferred to the buyer. Leases and PPAs require buyer approval or contract buyouts, which can delay sales.
Risk Tolerance: Cash buyers avoid interest rate risk. Loan customers lock in fixed payments that protect against rising utility rates. Lease and PPA customers remain tied to contract escalation clauses that raise payments annually.
Solar Can Be More Affordable Than You Think!
Solar panels replace utility power with on-site generation that has no fuel cost. The main barrier for most homeowners is how to pay for the system, not whether the system will work for them. Cash purchases, loans, leases, and power purchase agreements all reduce electric bills, but they produce very different long-term results.
At Solair Clean Energy Advisors, we can review your electric usage, roof conditions, and local incentive rules before recommending a payment option. This includes showing side-by-side comparisons of cash purchases, loan terms, and third-party options. Comparing total dollars paid over the life of the system shows which option produces the lowest cost, not the smallest monthly payment. For more information or to schedule a no-obligation estimate, call 302-841-1108 or fill out our simple contact form.
