SolarCity MyPower Loan: Interest rate explained and other takeaways

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SolarCity MyPower loan reviews and explanation graphic

In the past, solar was out of reach for most homeowners. Loans were difficult to access, and upfront equipment and installation costs were too high for most people to pay in cash. By bringing the third-party lease to the solar market, SolarCity made solar accessible to the masses and enabled homeowners to go solar with no money down. In October 2014, SolarCity launched its first solar loan option: the MyPower loan product.

At EnergySage, we’ve noticed that more of our customers are interested in buying their solar energy systems outright, rather than leasing them. We attribute this trend to falling equipment prices and the rise of the $0-down solar loan. 90 percent of shoppers who compare their financing options on the EnergySage Solar Marketplace choose to buy their systems, rather than lease them.

When you consider the finances of each option, the trend towards ownership makes sense. If you lease your system from a third-party owner, you are splitting the financial benefits with them, which means that you receive about 20 to 30 percent of the system’s financial benefits over the lifetime of the agreement. The bulk of the benefits go to the third-party owner. By contrast, if you own your system outright, you don’t have to split the benefits with a third party owner. This means that you keep 40 to 70 percent of the savings when you buy with a solar loan, depending on the interest rate of your loan.

It’s no wonder that SolarCity is interested in providing a loan product to homeowners. In fact, other solar companies are following SolarCity’s lead: Vivint Solar recently announced that they are partnering with solar financing company Mosaic to offer loan products to their customers.

At EnergySage, our solar shoppers have been asking us to help them compare the SolarCity MyPower loan to other financing options available in the EnergySage Solar Marketplace. We took a look at the fine print, and have three takeaways you should remember about the SolarCity MyPower loan.

1. The SolarCity MyPower loan looks a lot like a solar PPA in disguise

The vast majority of solar loans look like traditional loans: you take out a loan for the amount that you need and pay it back, plus interest, in fixed monthly increments over a fixed amount of time. So, if you take out a $0-down solar loan, you know exactly what you owe each month and how long you will be paying the loan off. At the end of your loan term, your panels will continue to generate free solar electricity for 20+ years.

In comparison, the SolarCity MyPower loan looks a lot like a power purchase agreement (PPA) in disguise. Homeowners pay back the loan at a variable rate based on how much electricity their solar panels generate every month – the same way that they would pay for a third-party PPA. And just like a lease or PPA, the per-kilowatt-hour rate increases each year, supposedly to keep up with rising electricity costs. We haven’t seen any other loan that looks like that in the market.

2. SolarCity’s interest rates can be difficult to understand

With almost all solar loans, you can calculate exactly how much you will pay for your system over the term of the loan. All you have to do is calculate how much interest you will pay over the term of the loan and combine that value with the loan amount.

With the SolarCity MyPower loan, most homeowners will find it very difficult to calculate exactly much they would end up paying out of pocket. Since you pay the loan based on how much electricity your panels produce, the term of your loan isn’t fixed – it’s reliant on how well your solar panels work.

Since your per kilowatt-hour repayment rate goes up annually, you’ll pay a little more in interest every year until your panels generate enough to pay the loan off. If you were committing to a major purchase like solar, wouldn’t you want to know exactly how much you’re agreeing to pay to before you sign on the dotted line?

3. With the SolarCity MyPower loan, homeowners still don’t know what equipment they’re buying

SolarCity and other national solar leasing companies don’t always tell you who actually manufactures the equipment they’ll install on your property. If you lease the equipment, that matters less – you don’t own the system, and the third-party owner is on the hook for maintenance and provides you with performance guarantees. However, with the SolarCity MyPower loan, even though you’re buying the system, you aren’t given information about the equipment used in the installation.

Knowing the specifications of your solar energy equipment is necessary to understanding and predicting . When you agree to repay a loan based on how much electricity your panels will generate, having knowledge about the equipment itself is the only way to make an informed decision.

As always, at EnergySage, we recommend that you compare all of your options in one easy-to-understand format. By registering on our Solar Marketplace, you can receive competitive offers from multiple pre-screened installers to find the best equipment and financing products for your needs, and make a better informed decision as a result.

Up next: Breaking down the specifics of SolarCity’s MyPower loan

Transparency is key to finding the right solar option for your property, and SolarCity’s MyPower loan doesn’t offer it. In short, with the SolarCity MyPower loan, many of the benefits of owning your solar energy system are reduced or eliminated when compared with other solar loan products.

Next, EnergySage will take a deep dive into a SolarCity MyPower loan proposal to highlight the key issues to look out for if you’re considering buying your solar energy system through SolarCity.

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