As you go about your solar shopping, you’ll find yourself vetting the various finance solutions that can open the door to reliable, uninterrupted power in your home. Of all the funding avenues available, the two most common types that people struggle to choose between are the rent-to-own financial options or simply opting for a completely financed deal.  

If you’re wondering which of these two makes the most sense for your specific financial circumstances, then we can help you by exploring what is entailed with each, and importantly, what the differences are.  

This way, you can make an informed decision. 

What Is Solar Rent-To-Buy? 

The rent-to-own model simply entails paying an agreed amount to a solar company over a set period of time, essentially ‘renting’ your solar system until all payments have been made. Once you’ve completed your payments, the solar system is yours – but only from this point on.  

Before this, the system belongs to the solar company. 

What Is Solar Finance? 

Solar finance is, at its core, a loan from a financial institution which you can use to pay all the costs associated with buying the solar system you want for your home. 

South Africa now boasts a number of financial institutions offering dedicated solar financing options. For the most part, these loans are made available through the major banks, including Discovery Bank who offers flexible funding options, Absa with customisable finance plans, FNB’s dedicated finance for energy solutions, Solar Energy Finance by Nedbank, and Standard Bank’s offering through a dedicated subsidiary, LookSee. 

What’s The Difference? 

The difference between a solar rent-to-own system and financing a solar system is simple.  

With the solar rent-to-own model you are leasing the system until the end of the lease period, whereas if you go with solar finance, you own the system outright. This is the main difference, and quite a significant one at that. 

However, there are other key differences that you need to be aware of. 

Starting with the fact that with the solar finance route, you typically undergo a stricter application process. Different banks have different qualifying criteria, including but not limited to your credit score. Once approved, your finance agreement typically comes with a moderate contract period of around six years and a competitive interest rate of 13-18% that is usually fixed.  

Importantly, the money is yours to pay for the solar system of your choosing, and your only obligation, generally speaking, is to keep up with your payments. And because you’re the owner, you could benefit from tax or other incentives, including selling your excess power back to the grid. 

On the other hand, the rent-to-buy approach includes a less rigorous application process. It also usually includes much higher interest rates (22% and up) and a lease period of between five to 10 years, which means that you could be paying this off for quite some time.  

Finally, your lease agreement includes specific terms and conditions that you need to adhere to. For instance, there may also be buy-out clauses and separation clauses. Let’s not forget that until the final payment is made, the system belongs to the solar company. So, if you move before you’ve paid the system off and can’t take it with you for whatever reason, the company can take the system back – leaving you with nothing to show for the money that you’ve spent. It also means that you won’t benefit from tax or other incentives, because it’s only if you own the system outright that you can benefit from tax incentives or recover excess solar production and sell it back to the grid for cash. 

Feeling informed? 

We trust that this information will prove useful as you explore the right solar financing solution for your budget and needs.  

Don’t forget that AA Inform is home to a variety of tools that can help you on your journey. For instance, you can use our Free Credit Report to get a comprehensive credit report with your score so that you can stay informed and empowered with insights into your financial health – and make better decisions so that solar is an affordable solution for your home.  

We trust that this information will help you make an informed decision.