Why $0 down is the most expensive way to power a home
By Deep Patel, Founder and CEO of Gigawatt Inc. | The residential solar market is shifting. For years, the industry leaned heavily on the 30% federal tax credit and unsecured “zero-down” loans. That model is breaking down. With interest rates staying high and the 25D tax credit ended, the solar industry is scrambling to find its next pitch. Many are turning to third-party ownership (TPO), such as leases or power purchase agreements (PPAs). However, these financing options have serious drawbacks as they trade short-term simplicity for long-term cost. There’s a better path: true ownership through smart financing and better project management.
The real cost of the unsecured loan
For the last decade, most solar companies sold systems using unsecured loans with 20- to 25-year terms. The pitch was simple: “Renting power from the utility is a waste. Own your system instead.”
That sales pitch worked. Loans gave control and the option to pay off early, unlike leases which have a five-year lockout or high buyout costs.
But these loans were never cheap. To make the monthly payment seem affordable, companies stretched loan terms and added hidden dealer fees. Lenders routinely added a predatory 25% to 40% dealer fee to the system cost, buried in the principal. The homeowner never had transparency into these added costs. On a $30,000 system, this could mean an extra $10,000 to $12,000 in markups before a single panel was installed, which is essentially equivalent to the value of the tax credit.
These inflated costs helped lenders justify the risk of issuing unsecured debt. The result was a product that looked attractive on paper but cost far more than paying in cash.
The bigger problem came with the tax credit. Sales reps often referred to it as a “rebate,” implying the government would mail you a check for 30% of the system cost. This misunderstanding led to system owners disappointed and confused at tax time, and upset that their system did not provide the full benefit they expected.
This created what lenders called the 18-month “cliff.” If the homeowner didn’t apply the full credit to the principal within that window, the loan re-amortized. Payments jumped, often dramatically. Retirees and low-income families were hit especially hard. They signed up for one payment, and 18 months later they were stuck with something much higher, all because of a misunderstanding of how tax liability works.
The lease trap: Rent vs. rent
Now that unsecured loans are harder to sell without the full benefit of the 25D tax credit, solar companies are leaning back into leases. The new pitch is that the solar or financing companies “capture the tax credit,” but pass through the savings by lowering the homeowner’s monthly payment.
But all that does is swap one bill for another. Homeowners end up trading their utility bill for a finance company bill — they still don’t own anything.
Additionally, most leases include aggressive annual price escalators of 3% or higher, which increase the payments every year, often faster than utility inflation. While the first payment year would be relatively attractive with immediate savings, within two to three years, the solar payment outpaces utility rates, creating a net loss for the homeowner. Leases are also a problem when it comes time to sell the home. The buyer has to assume the lease or the seller has to buy it out. Neither option is attractive. On top of that, the system doesn’t increase the home value because the homeowner doesn’t actually own the solar energy system.
For homeowners who just want a lower monthly bill for a few years and don’t care about long-term equity or asset control, a lease might make sense. But for most people, that’s a last resort.
The HELOC advantage
Because of the drawbacks of the above financing solutions, a Home Equity Line of Credit (HELOC), which is a secured loan tied to the home, offers one of the best ways to finance solar, along with cash or a local credit union loan. Because a HELOC loan is backed by collateral, the risk to the lender is much lower. As a result, HELOC fees typically range from 1% to 2%, compared to the 25% to 40% markups baked into unsecured loans or leases.
An additional benefit of a HELOC is that it gives the homeowner true ownership. A homeowner can pay it off early, avoid penalties, and the system adds home value. According to national appraisers, a solar system adds about 4% to home value, but only if the homeowner owns it. Leased systems don’t count.
When picking the right HELOC program, payments often come in lower than a standard utility bill, and it allows homeowners to keep control over their financing terms. There are no lockout periods. No inflated dealer fees. Just real equity and long-term savings.
The $3.00 difference
Leased systems today typically cost between $4.50 and $6.00 per watt. That pricing includes layers of markup to support sales commissions, dealer fees, and third-party overhead.
But if a homeowner takes a project management approach, designing the system, securing HELOC financing, and coordinating installation, the total cost can drop to under $3.00 per watt. That’s a 40% difference.
It requires more effort. It’s not as easy as signing a lease and forgetting about it. But for homeowners who are willing to be involved, the savings are massive and the control is theirs.
Why sales teams avoid HELOCs
If a HELOC is the best way to finance solar, why don’t more companies recommend it?
Because it slows down the sale.
Turnkey solar companies rely on speed. Their sales reps are trained to close deals on the first or second visit. They want the homeowner to sign the agreement, run credit, and lock the deal right away.
A HELOC takes longer. It requires the homeowner to talk to their bank, submit documents, and wait. That delay kills momentum, and for high-pressure sales organizations, that’s a deal-breaker.
So instead of helping homeowners get a lower interest rate, they push people into a lease or an inflated loan in order to hit their monthly quotas. It’s not about what’s best for the homeowner. It’s about what closes fastest.
The bottom line is that when the different financing options are compared, while the $0-down turnkey model might look better at first glance because it still includes a 30% tax credit, the HELOC loan still provides homeowners with more savings, better control, and better long-term value even without the ITC. This becomes an even more important equation when taking into account the stability of third-party owners that may end up disappearing or filing for bankruptcy, leaving stranded assets.
As the industry shifts under new federal policy, we have a chance to do better for our residential customers. Ownership, backed by smart financing and better education, gives homeowners true energy independence, real equity, and long-term savings.
Deep Patel is the founder and CEO of Gigawatt Inc., the parent company of Unbound Solar and Real Goods. Unbound Solar has provided DIY solar kits and expert support for over 19 years, serving homeowners, contractors, and professionals. Real Goods, established in 1978, is a legacy brand in the solar industry known for reliable solar and energy storage products. Through these brands, Deep is focused on expanding access to clean energy by combining education, high-quality components, and a customer-first approach.
