Solar Financing Comparison Calculator
Compares the true monthly net cost of financing a solar installation with a loan versus the monthly savings it generates, helping you decide whether to pay cash, take a loan, or lease. Use it at the point-of-sale when evaluating installer quotes.
About this calculator
When financing solar with a loan, your monthly net cash flow is the loan payment minus your electricity savings. The standard amortising loan payment formula is: Payment = P × [r(1+r)ⁿ] / [(1+r)ⁿ − 1], where P is the loan principal (systemCost), r is the monthly interest rate (interestRate / 100 / 12), and n is the number of monthly payments (loanTerm × 12). Subtracting monthlySavings gives the net monthly out-of-pocket cost: Net Cost = Payment − monthlySavings. A negative result means the monthly savings exceed the loan payment — the system is cash-flow positive from day one. A positive result means you are paying more than you save each month, though long-term ownership and rising electricity rates may still favour the loan over time.
How to use
Suppose the system costs $18,000 after the federal tax credit, with a 7% annual interest rate, a 10-year loan term, and monthly electric savings of $130. Monthly rate r = 7 / 100 / 12 = 0.005833. n = 120 payments. Payment = 18,000 × [0.005833 × (1.005833)¹²⁰] / [(1.005833)¹²⁰ − 1] = 18,000 × [0.005833 × 2.009] / [2.009 − 1] ≈ 18,000 × 0.01172 / 1.009 ≈ $209.12/month. Net cost = $209.12 − $130 = $79.12/month out of pocket. After the loan is paid off, the $130 savings become pure gain.
Frequently asked questions
How does the federal solar tax credit affect solar loan financing calculations?
The 26–30% federal Investment Tax Credit (ITC) reduces your net system cost dollar-for-dollar against your federal income tax liability. Most solar loan calculators apply the credit by reducing the principal you borrow: for a $25,000 system with a 30% ITC, your effective loan principal drops to $17,500. This directly lowers your monthly payment and improves cash flow. Importantly, the ITC is a credit against taxes owed, not a refund — if your tax liability is smaller than the credit, you carry the remainder forward to future tax years.
When does a solar loan make more financial sense than a cash purchase?
A loan beats cash when the after-tax interest rate on the loan is lower than the return you could earn investing that cash elsewhere. If you can earn 8% annually in a diversified index fund and your solar loan charges 4–5% APR, borrowing preserves capital for higher-return uses. Additionally, if you lack the upfront cash, a loan still allows you to lock in electricity savings immediately and protect against future rate increases. Cash purchases minimise total lifetime cost and maximise ROI when the homeowner has no better use for the capital.
What is the difference between a solar loan and a solar lease for financing purposes?
With a solar loan you own the system outright after paying it off, capturing all electricity savings, tax credits, and any increase in home resale value. With a lease you pay a fixed monthly amount to use the installer's system — typically lower upfront with no tax credit benefit — but you never own the asset. Leases can complicate home sales because the buyer must assume the lease contract. Loans generally offer better long-term financial returns; leases suit homeowners who want zero-down simplicity and are not concerned with ownership or tax credits.