How to pay for solar: upfront financing versus rent-to-own
In this new blog post on solar energy solutions, we explore the pros and cons of the various finance options available to consumers.
You've decided to get a solar energy system for your business or your home. You know all the solar lingo , you're an expert on inverters of all shapes and sizes and you've chosen the right solar solution for you.
Your next step? Deciding how to pay for it!
Upfront financing or rent-to-own? Pros and cons
You can pay for your solar system in three main ways:
- Buy it upfront - either in cash or through available financing options
- Rent to own - rent your solar for a number of years until you own it
- Solar as a service - enter into an evergreen rental contract with the option to break the contract with penalties
Let's take a deeper look at the benefits and limitations of each payment option:
Buying
Pros
- You have more flexibility when it comes to choosing equipment from pre-curated kits to customised solutions based on your needs.
- You own the solar equipment, which means it adds value to your home.
- You can expand your system whenever you want.
- You have a wide range of financing options available, including home loans or personal loans.
- You get a from SARS on solar installations (25% on the cost of solar panels for rooftop installations up to R15,000).
- You pay less over the long term and start seeing a return on investment right away.
- There are no lengthy contracts to review and no hidden terms and conditions.
Cons
- A vast range of suppliers means you need to find the right provider.
- You must do research and understand the technical aspects.
- You must insure your system against damage and theft.
- It's a large upfront cost if you don't use financing.
- You're responsible for maintaining the system, for example cleaning the panels and replacing the battery.
- A good support and maintenance package is important to make sure you aren't left without support if something goes wrong.
Rent-to-own
Pros
- It's limited to pre-selected kits, so you don't need a lot of technical know-how.
- The rental company is responsible for maintaining the system.
- The once-off installation cost is lower when you're renting than when you're buying in cash.
- You have a wide range of financing options available, including home loans or personal loans.
- So, you have more cash flow in the short term.
Cons
- Solar as a service is limited to partner suppliers and installers - you don't have much choice..
- It limits your ability to expand your system later.
- You only own the system at the end of the contract.
- But you're still responsible for insuring it.
- It's not easy to buy out once you're locked into a contract.
- It might be cheaper every month - but you pay more in the long term as monthly costs increase.
- You don't get a tax rebate from SARS.
- If you cancel the service, you pay the removal costs.
Solar as a Service
There is an additional financing option gaining popularity in South Africa, and that is Solar as a Service (SaaS).
SaaS is a financing option that allows you to rent solar panels and equipment instead of buying them outright. This can be a good option for people who do not have the upfront capital to purchase solar panels, or who want to avoid the hassle of owning and maintaining a solar system.
With SaaS, you will typically pay a monthly fee for the use of the solar panels. This fee will cover the cost of installation, monitoring, and maintenance. You will not own the solar panels or equipment, but you will be able to enjoy the benefits of solar energy, such as lower electricity bills and a cleaner environment. However, after the contracted period, all the equipment will have to be uninstalled or you will have to renew your contract.
Conclusion
With more flexibility and choice on equipment and financing, it makes better financial sense to buy a solar solution upfront than to rent it in the long term . Read our next blog post for more options on how to finance your energy solutions.
Take charge of your future. Now.
With Discovery Bank Energy Solutions in partnership with Rubicon, you can power your house the smart way. You get:
- A simple calculator to work out your energy needs
- Expert energy advisers to give you technical support every step of the way
- Plus, competitive financing options to help make your solar dreams a reality.
The Future of Banking. Now.
This article is meant only as information and should not be taken as financial advice. For tailored advice, please contact your financial adviser.