i am your guide to solar finance

Credit card

Using the credit card option you buy the solar system and pay it off as a part of your credit card repayments. Credit card interest rates and interest-free periods can vary. Credit cards can also be used for any other purchases and interest is charged on the total amount outstanding

Some solar retailers partner with banks or credit unions to offer a new credit card with longer initial interest free periods. Once interest- free periods are over, the cost of finance is very high.

Can be marketed as interest free

Finance details

Period Interest rate Early repayment possible
N/A 14 - 20% Yes

Ownership of the solar system

  • You own the solar system.
  • For an investment property you may be able to claim tax deductions for interest charges, maintenance costs and depreciation of the asset. 

Financing costs, fees and charges

  • Variable rate of interest on the monthly outstanding balance.
  • Potential establishment and administration fees.
  • Potential early repayment charges and/or exit fees.

Performance and maintenance costs

You are responsible for monitoring system performance and the costs of any out-of-warranty maintenance required, including inverter replacement. 

Advantages

  • It is convenient with flexibile repayment amounts and periods.
  • An interest-free period may be attractive if you can pay off the system within that timeframe.

Disadvantages

  • It is one of the more expensive forms of consumer credit.
  • There could be a very long repayment times if you only repay the monthly minimum monthly. (10 years or more)
  • The longer you take to repay, the more expensive it is.
  • It requires disciplined budgeting to avoid high costs.

Managing risks

  • You are responsible for making sure the system produces as much energy as you expect and that you use it.
  • The repayment schedule is up to you. Make sure you understand how much and how often you need to repay to keep the finance costs lower than your energy bill savings.
  • Interest free financing through new credit cards usually have very high interest rates after the interest free period is up.

Example

Below is an illustration of how the costs and bill savings could work with a credit card.

In practice these costs and bill savings will vary depending on what you pay for the system, how much energy it produces, how much you use and the period and costs of any payment plans of financing. 


Solar project

Solar system size (kW)

3kW

Upfront system cost ($ net STC subsidy)

$5,200

Proportion of power used (%)

67%

Life of system

25 years

Maintenance costs

(Assume a new inverter is required every 10 years)

$4,300

 

Cost of daytime grid electricity

$0.20 to $0.51 / kWh

Payment conditions

Deposit/initial payment

$0

Term of finance

Repaid in 2 years at 19.74% interest. $0 establishment cost, and $30 annual fees

Comparison interest rate

20%

Costs and bill savings

Total payments

$11,200

Total bill savings

$20,600

Net savings

$9,400

 

Effective interest rate

20%

Lifetime unit cost of energy

0.17 $/kWh

The chart below illustrates the annual cash flow of energy bill savings and the costs of the solar PV system and finance based on this scenario.

Credit card purchase of 3kWh system for household at home during work days

The chart shows that the upfront costs are spread over the first two years. The system delivers net savings of nearly $1000 per year for the remaining 23 years, apart from years 10 and 20, when the scenario assumes that the inverter needs replacing.

Note that if the repayment period was longer, the net bill savings would be much lower.

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Page last updated: 18 December 2015