By Dan Simms
Updated Oct 20, 2022
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Solar panels are expensive, and not many people can afford to purchase a rooftop solar system outright in cash. Many homeowners look for solar loans to help them pay off their solar panel purchase over time, while others choose to lease panels from a solar company, relinquishing ownership in exchange for less responsibility — and fewer savings. If you’re not sure which option is right for your home, this is the article for you.
Below, we’ll cover the main differences between leasing and buying solar panels, focusing on overall cost differences and lifetime savings potential.
Here’s a quick look at the main similarities and differences between leasing and buying solar panels.
|Homeowner owns the panels||Solar leasing company owns the panels|
|High upfront costs||No/little money required upfront|
|Access to tax credits||Ineligible for tax credits|
|Access to net metering programs||Ineligible for net metering programs|
|Higher lifetime savings||Lower lifetime savings|
|Lower monthly energy bills||Lower monthly energy bills|
|Homeowner is responsible for maintenance||Maintenance is handled by the leasing company|
Leasing solar panels is a way to invest in solar power without having to lay out a large sum of money upfront. It makes rooftop solar power more accessible to people on tight budgets at the expense of long-term savings.
When you lease solar panels, you don’t own them, so the energy they produce doesn’t belong to you. That means you can’t take advantage of solar incentives or net metering programs, and you won’t enjoy increased home value since the solar panels aren’t technically part of your home.
Buying solar panels requires more initial capital but rewards you with greater savings over the course of your solar system’s life. People who purchase their solar panels — either outright in case or via a loan — can offset the high upfront cost by taking advantage of local and federal solar tax credits.
Additionally, buying and installing solar panels increases the value of your home, making it possible to recoup most of your investment should you decide to sell your home down the road. Solar panels also make your home more attractive to potential buyers, which makes it easier to sell your home in a competitive market. New owners get to enjoy the lowered electricity costs of a home with solar panels without the hassle of buying and installing them, making homes with rooftop solar especially attractive to first-time home buyers.
The following table summarizes the cost differences between buying and leasing solar panels.
|Significant upfront costs||Few or no upfront costs|
|Drastically reduced electric bills||Moderately reduced electric bills|
|Monthly loan payments eventually stop when you pay the system off||Monthly lease payments continue for the entire lease term|
|Higher cumulative savings||Lower cumulative savings|
The average monthly solar lease payment is between $50 and $250, according to Forbes. Assuming an average monthly fee of $150 and a 25-year lease, you’ll wind up paying approximately $45,000, far more than you’d pay if you purchased your panels, even accounting for interest on a solar loan.
Solar leases also don’t cost the same from month to month, making it more difficult to keep the rest of your finances in order. Many solar leases also have price escalators, which are planned increases in your monthly payments over the lifetime of the lease. Additionally, your monthly electric bill savings disappear if you don’t re-up your lease when the term ends, indirectly increasing the costs of leasing.
Buying solar panels is cheaper in the long run even though it costs more initially. If you can afford to pay for your panels in full, you’ll get the full benefit of lowered utility bills immediately and save the most money over the 20- to 30-year lifespan of your solar system.
Even if you have to take out a solar loan, buying panels is still the better prospect. Unlike solar lease payments, loan payments are the same every month and won’t increase with time. These days, most solar companies have flexible solar financing options with reasonable interest rates, making it easy to find a plan that works for you.
Even though buying solar panels is the better option, both leasing and buying have their pros and cons.
The primary benefit to leasing solar panels is that it reduces the initial cash outlay, making it possible for more people to invest in renewable energy for their home. Unfortunately, the tradeoff is fewer cumulative savings and limited access to solar tax credits and rebate programs.
Another hidden downside to leasing solar panels is that many solar leases last for 20 to 25 years, giving you few options to back out if you change your mind. It can be difficult or impossible to end a lease early without incurring massive penalties — sometimes on the order of $10,000 or more.
Buying solar panels is the best way for most homeowners to invest in a residential solar panel installation. It gives you control over your system, saves you more money overall, and lets you take advantage of the federal tax credit and any state incentive programs offered in your jurisdiction. Solar loans also usually only take 5 to 15 years to pay off, and the payments stay the same for the entire duration of the loan.
The only negative to buying solar panels — besides the large initial investment — is that you’re responsible for maintaining your own system. However, many solar installers have excellent warranties that cover most problems you’ll encounter, and it’s becoming common for solar providers to perform panel maintenance, making it easy to get service if you do end up needing it.
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If you own your own home and are financially stable, owning solar panels is probably the right option for you. Leasing panels seems like an attractive option because it greatly reduces the amount of money you need upfront, but it deprives you of long-term savings because you never own your solar system. When the lease ends, you’re left with nothing, and you never get the chance to pay the system off and enjoy your reduced or non-existent electric bill without a monthly payment to think about.
The only people who should consider leasing solar panels are those who cannot afford to purchase solar panels outright and are ineligible for a solar loan due to a poor credit score. Leasing solar panels drastically reduces the lifetime savings you’ll enjoy compared to buying them, making it less worth it in the long run, even though it reduces the upfront cost. Leased solar panels also don’t add value to your home the way purchased panels do, further reducing their long-term value.
If you don’t mind not owning your panels and are aware of the limited savings opportunity that comes with leasing solar panels, it is a viable way to reduce your carbon footprint and have a positive impact on the environment.
Purchasing solar panels is always the right call when it won’t put you under undue financial stress. Buying panels instead of leasing them leads to much larger monthly savings compared to leasing. If you can afford to make a sizable down payment, it might not take that long to pay off your solar loan, and you’ll be able to take full advantage of your utility bill savings.
When you buy solar panels instead of leasing them, you have access to net metering — assuming your utility company offers it as an option. Since you don’t own the energy your panels produce when you lease them, you’re not able to take advantage of any excess energy your system produces.
Many solar companies offer competitive financing options for qualified customers, so most homeowners with good credit can find a solar provider that offers financing that fits their budget. Don’t forget that purchasing panels also lets you take advantage of the federal tax credit — sometimes called the solar investment tax credit (ITC) — and any state-level solar incentives or tax rebates your local government offers.
The bottom line is that buying solar panels leads to more financial benefits than leasing them, despite the higher upfront costs that come with purchasing. If you can afford to make monthly lease payments, you can most likely afford to make a monthly loan payment instead. The benefits are greater lifetime savings, complete control of your solar system, and an increased home value.
There are plenty of affordable solar panels available for people who can’t afford a premium solar system but still want to reap the benefits of a home solar system, so leases are almost never the only option.
Buying a solar energy system is a much better option than leasing solar panels. Purchasing solar panels will save you more money in the long run despite higher upfront costs. When your lease agreement is up, you’re left with nothing, whereas you’ll own your solar system once you finish paying off your loan.
Probably not. Leasing a solar power system burdens you with monthly payments that are only slightly lower than solar loan payments would be, with the considerable disadvantage of continuing for 20 to 25 years. Solar leases also typically have planned rate increases that make your monthly payments increase with time, and leasing panels doesn’t reduce your electric bill as much as owning them.
There are many downsides to leasing solar panels, but the biggest one is reduced electricity savings in the long run. When your lease is up, your electric bill returns to normal, but when you finish paying off a solar loan, your electricity remains free.
Leasing solar panels also prevents you from participating in any net metering programs your local electric company offers and doesn’t allow you to take advantage of solar tax credits or sales tax exemptions.
A solar lease is a deal with a solar company to pay a monthly rate for access to solar panels that the company installs on your roof. You can think of it the same way you think of renting a car. You get to use the solar panels you’re leasing and take advantage of the solar energy they produce, but you don’t own the solar panel system.
A power purchase agreement, or solar PPA, is an agreement to purchase the electricity the panels generate, so your monthly payment depends on how much energy you use. PPAs are similar to paying the electric company for the energy you use each month per kilowatt-hour, only you pay the solar panel provider instead.
At House Method, transparency and trust are our most important values for the reader. That’s why we took the time to create an objective rating system and score each solar energy company/service according to our methodology.
Our research team dug deep into the fine print of contracts, combed through more than one hundred customer reviews, and thoroughly investigated all of each solar energy company’s services, costs, and products. We’ve done the homework for you by researching nearly all of the solar energy companies on the market so you can have the information you need to make the best choice for your home.
We developed a formula to objectively determine the best solar energy companies and give each a score out of 100 based on the following criteria:
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