SolarCity Loan Review: Small Step in the Right Direction

For the past two months, SolarCity news coverage has focused on Tesla’s acquisition bid, drawing attention away from SolarCity’s reintroduction of a loan financing offer for residential solar customers. One in five SolarCity customers are now choosing the loan over the lease. That’s a relatively small number considering the obvious financial benefit that customers get with the loan that doesn’t come with the lease: an installation tax credit worth 30 cents on the dollar.

In fact, the share of SolarCity customers now opting for the new loan (20 percent) is not much higher than portion that selected SolarCity’s MyPower loan product last year (13 percent) before MyPower was phased out.

Analysts expect that loans will surpass leases and other third-party financing vehicles next year. So why haven’t more SolarCity customers gone with the new loan so far? Though it has more financial benefits than the lease and the discontinued MyPower offering, the underlying value of the loan doesn’t stand out among the most competitive bids in residential solar.

Better than a solar lease

Two things jump out about the loan offering as described in a June 2 SolarCity press release, one of the few publicly available documents that describe the available financing terms: (1) most customers will have much higher monthly payments than the amount reported by SolarCity, and (2) customers can find similar interest rates elsewhere.

The announcement says fixed payment options can be as low as $50 a month. This is based on the assumption that the loan amount is $7,680 – a figure that’s about $10,000 less than the price of an average-sized solar installation in the US at this time. If you’re buying an average-sized solar installation, the lowest monthly payment you can get from a SolarCity loan is $115. And the monthly payment will be considerably higher if you want the lowest possible interest rate.

SolarCity advertises a 2.99% interest rate for 10-year loans and a 4.99% interest rate for 20-year loans. First off, if you don’t have an excellent credit score, expect to be quoted a higher interest rate. But even if you qualify for SolarCity’s best rate, be advised that you can shop around for a comparable loan on a lower-priced solar energy system. NC State University’s DSIRE database shows 45 residential solar loan programs at the state and local level, and there are many more private offerings that are not subsidized by government incentives.

Price premium drives down value

If a homeowner overpays for a solar installation, there’s little consolation in finding the most competitive loan on the market. You’re still paying more than you have to for electricity, which is a still commodity, no matter how strongly you feel about one company brand or another.

Solar.com has reviewed multiple SolarCity quotes since the start of 2016. In each contract offer, whether the system size is 2 kilowatts (kW) or 12 kW, the price pencils out to a steady $4.22 per watt. That’s an improvement on the SolarCity pricing we wrote about one year ago, but it’s still significantly higher than the going rate of $3.50 that other installers charge on profitable projects. (See comment from Barry Cinnamon in the linked article on installation prices.) On an average-sized system, the difference amounts to $3,600. Add in financing costs, and the difference can be $5,700 or more.

Compare and save

Homeowners who use the Solar.com marketplace to save on the price of installation are finding a large and growing network of installers offering low-interest loans. This makes it possible to go solar with no money down, get immediate savings off the monthly electric bill, and claim the 30 percent federal tax credit for solar energy systems.

It would take hours to contact a dozen solar installers yourself and compare all of their proposals. Getting a side-by-side comparison of all the solar loans that are now available would take even more time. At Solar.com, installers compete for your business and we provide independent analysis to help guide you toward the bid that’s right for you.

It’s easy. Start now to discover the best value on rooftop solar with Solar.com.