SolarCity Corp (NASDAQ:SCTY) on Tuesday unveiled a brand new financing option that will allow the customers to claim a federal tax credit for solar power. The company’s new proposal of a solar loan is believed to be more affordable in most of the cases compared to the company’s panel leasing program, Chief Executive Lyndon Rive said.
Smart move from SolarCity
After the new scheme, homeowners will be able to own the solar systems through San Mateo, California-based SolarCity and claim the tax credit while still paying a monthly fee. After the tax credit, the loan called as “MyPower” becomes more affordable compared to the other financing options like lease. Also, the new financing option will help the solar company to expand in the markets dominated by grid.
The offering will be directly served through a subsidiary, SolarCity Financing Company. The solar firm is believed to have partnered with an undisclosed financial institution, and is expected to partly finance the program through security offerings, in the long-term.
“My forecast is I think this can be half our residential business come the end of next year,” Rive said in an interview to Reuters.
Prior to this proposal, the company’s business used to raise funds from external investors, including Google Inc and U.S. Bancorp, who own its residential systems and are then able to claim a tax credit worth 30% of the value. Systems are then leased to consumers. Such a model has made rooftop system, which requires tens of thousands of dollars to buy, more affordable.
Rising popularity of financing options
The company’s officials claimed that the offering is lucrative than others because it is a one stop shop for sales, installation and service for the duration of the 30-year loan. Also, the interest rate on the loan is very low at 4.5%.
SolarCity is not the only company to sell its product to homeowners by offering loans. Other companies such as Admirals Banks, also, offer similar loan through installers around the country. Separately, another solar company called Sunpower, also, offers a loan product to its customers.
These loans have gained popularity owing to a drop in the prices of solar panels by around 80% since 2008.Presently, a typical system costs $20,000 to $30,000 compared to $50,000 to $60,000 a few years back.
The solar company is founded by Rive and his brother, Peter and is supported by their cousin, who is none other than Tesla Motors Inc (NASDAQ:TSLA) and PayPal entrepreneur Elon Musk.