Installing solar panels for your home is good for the environment, reducing your carbon footprint by as much as 95%. If that isn’t enough to convince you to install some on your roof, know that solar panels can also save you money on energy costs over the long run.
Despite the benefits, many people shy away from solar panels because of the cost. This guide explains how much it costs to install solar panels and how to finance them.
How much do solar panels cost?
Solar companies use panels powered by photovoltaic systems to convert solar power into usable energy. The cost of your solar panels will largely depend on how much energy you use and where you live.
“Simply calculate how many kilowatt hours of power you will need and find the correct system size and number of panels to power your house,” says Vikram Aggarwal, CEO and founder of EnergySage, a company that connects homeowners with solar installers.
The easiest way to find out how many panels you need is to use an online calculator.
The good news is that, as solar panels become more popular and demand increases, they’ve become cheaper to install. Solar Action Alliance estimates the average cost to install solar panels to be between $11,410 and $35,280, depending on the size of the solar system.
Here’s how that breaks down for a 5-kilowatt (5kW) system, the average installation for a home in the U.S.:
If you opt for a larger system size, say 10kW or 15kW, the overall cost of installing your solar panels and system can double or triple.
Regardless of which system size you choose, the federal government helps with the cost by offering a tax credit of 30% of the installation costs on your federal taxes.
Are solar panels worth it?
Even with the cost of the solar panels, you could save you tens of thousands of dollars over a 20-year period, according to EnergySage. Not everyone plans to stay in one house for that long, though. In fact, a report by the National Association of Realtors pegs the average family lives in a home for 10 years before selling it.
If you don’t plan to live in your house long term, you can still get a return on your investment.
The Lawrence Berkeley National Laboratory estimates that home buyers are willing to pay a $15,000 premium for homes with photovoltaic systems, on average.
In the end, it’s up to you to decide whether solar panels are worth it. But regardless of how long you plan to stay in the house, there’s an argument that you’ll get most, if not all or more, of your money back.
How to save on your home solar project
Compare solar companies
“Homeowners interested in rooftop solar should receive and compare three to five quotes from vetted installation pros before making a decision,” says Aggarwal.
On top of offering lower costs, some solar companies even offer promotions, such as paying your monthly financing payment for a set amount of time.
In addition to comparing quotes, ask about product guarantees and what kind of long-term support the installer offers. The last thing you want is to end up not getting as much electricity from your solar panels as promised.
Take advantage of the tax credit
After the installation is complete, make sure you claim your tax credit. And if you wait too long to install, that credit value will go down. The 30% credit is available through the end of 2019, after which it goes down to 26% in 2020, and 22% in 2021.
After that, it expires, and you won’t get any tax credit at all. Some states offer state tax credits or deductions for installing photovoltaic systems.
Check your state’s tax commission to see what options you have.
Research financing options
Not only is it important to compare solar companies, but it’s also essential to consider the different ways you can finance your solar project.
Popular options include solar loans (personal loans specifically designed for solar systems), a home equity loan or home equity line of credit, and the FHA PowerSaver Loan Program. Additionally, some solar installers offer their own financing.
If you choose to finance your solar panels with a personal loan, be sure to compare the top lenders to get the best rates.
You can even get pre-qualified with some lenders using SuperMoney’s loan offer engine without a hard inquiry on your credit report. This can help you decide whether you’d get a better rate with a personal loan or with one of the other options.
Ben Luthi is a personal finance writer and a credit cards expert who loves helping consumers and business owners make better financial decisions. His work has been featured in Time, MarketWatch, Yahoo! Finance, U.S. News & World Report, CNBC, Success Magazine, USA Today, The Huffington Post and many more.