Why you shouldn’t let today’s interest rates stop you from going solar

As consumers and homeowners alike, we’ve all become accustomed to low interest rates over the past few decades – especially since the pandemic. But interest rates have skyrocketed to two-decade highs since the beginning of 2022, and those higher rates change the way people spend their money, and think about spending their money. 

Investing in a solar panel system is one of the most reliable ways you can spend your funds in a high interest rate environment. A moment like this is a great time to explain why going solar makes sense no matter where interest rates are: a solar energy system is an investment rather than a sunk cost because it’s a resource that pays for itself in just a few years. 

While it may not be a bad idea to hold off on buying a new car, for example, the math isn’t the same for going solar. A car is a depreciating asset – it loses value over time, and eventually you have to replace it with a new one, spending tens of thousands of dollars all over again. But a solar energy system is a resource that doesn’t depreciate over the years. It eliminates your electric bill right away, which means immediate monthly savings – compared to a car loan that’s a new additional monthly expense  – and you typically won’t have to replace it for at least three decades, either.

The average monthly payment for a new car is $770, according to NerdWallet. If you buy solar panels outright instead of a car, you’ll save up to $250 a month by eradicating your electric bill instead. That’s a difference of almost $1,000 in available monthly household funds. Taking out a solar loan instead of paying for your system in cash will still provide a financial benefit because the average solar loan payment is $160, according to EnergySage Marketplace data, which is lower than the average electric bill for EnergySage customers. 

Even if you’re paying a slightly higher interest rate for a solar loan than you would have last year (if you can’t afford to pay upfront in cash), you’re still gaining valuable savings that don’t come with other big ticket expenditures you might be considering.

Although the Federal Reserve lowered the federal funds rates by 50 basis points to 4.75 - 5.25% at its September meeting, no one can predict what the Fed will do in the future. Just as trying to time the stock market isn’t a good idea, trying to time interest rates cuts isn’t a smart strategy either. Although the Fed gives the market indicators of what it’s likely to do over the course of the year, whether it will ultimately raise or cut rates again is never set in stone. Many economic factors, including inflation and the strength of the job market, influence how the Fed behaves when it comes to changing the federal funds rate. That’s why it doesn’t make sense to hold off on investing in solar in the hopes that rates might go down. 

“You're losing every dollar that you pay for your electricity right now, so I encourage people not to wait to go solar,” said David Bridge, president of Great Sky Solar, based in Arlington, Mass. “We're conditioned to wait for rates to drop, but this way you’re recouping your investment. When rates come down, you can still count on the fact that electricity rates are always going to go up.” 

That’s why if you have liquid capital right now, spending it on a resource that will earn you immediate savings like a solar energy system can be a smarter money move than other pricey purchases. Cutting out a monthly bill in a high-interest rate environment ultimately saves you more money because you can use those additional funds to combat the higher costs of other bills you can’t eliminate. Most Americans felt the pinch from inflation after it hit a 40-year high last year, with Bloomberg estimating that the average U.S. household had to spend more than $5,200 in 2022 for the exact same expenses as the year before.

So where can you find extra money every month? By going solar and eliminating your monthly electric bill. Depending on where you live, you can save yourself anywhere from $100 to $250 per month on average. Even if you need to take out a solar loan, your monthly loan payment will typically be lower than what your electric bill was. Plus, the average EnergySage customer pays off their solar loan in less than 10 years, so you’re not stuck paying interest on a loan for two decades.

There are plenty of ways that the extra money in your pocket from going solar can improve your financial life. The average U.S. household is carrying more than $6,000 in credit card debt. The interest rate on that credit card debt has gone up since the pandemic, so you’re paying more money in interest every month than you were previously. You can use your solar savings to counter those higher credit card rates and pay down your debt faster, saving yourself on that additional interest.

Another way to hedge against interest rate changes is taking out a re-amortizing solar loan. With a re-amortizing loan, you can receive new, more favorable loan terms from your lender based on your lower principal balance as you pay off the loan. That means if interest rates drop, you may benefit from potential rate cuts thanks to your re-amortization option. Not all lenders offer re-amortizing loans (or refinancing options for standard loans), so it’s important to read the fine print and understand the terms and conditions of your specific solar loan.

You can compare different types of solar loans and financing options on the EnergySage Marketplace to figure out what kind of loan makes the most sense for your personal financial situation. Our online Marketplace allows you to compare multiple quotes from different installers side-by-side so you can see which companies are offering you the best prices without having to do all of the research by yourself. Our Energy Advisors are also available to speak with you at no cost and answer any questions you have about going solar.