Solar Panel Leasing vs. Buying: Which Option is Best for You?

With the increasing demand for renewable energy, solar power has become an attractive option for homeowners looking to reduce their energy costs and carbon footprints. However, deciding whether to lease or buy a solar panel system can be a confusing choice, especially given the upfront costs, long-term savings, and various incentives available.

Both options have their pros and cons, and the best choice for you depends on your financial situation, long-term goals, and how much you want to be involved in managing the system. In this blog post, we’ll explore the advantages and disadvantages of solar panel leasing and buying, helping you make an informed decision that suits your needs.

Solar Panel Leasing: What You Need to Know

When you lease a solar panel system, you’re essentially renting the equipment from a solar provider. This means you don’t own the system, but you still benefit from the power it generates. Most solar leasing agreements require little to no upfront costs, and you pay a fixed monthly fee or a set rate for the electricity generated by the system.

Pros of Solar Panel Leasing

No High Upfront Costs One of the biggest advantages of solar leasing is that you don’t have to worry about the hefty upfront cost of purchasing a solar panel system. The cost of buying a solar system can range from $10,000 to $25,000 or more, which can be a barrier for many homeowners. With leasing, the installation is typically free or involves minimal fees, making it a more affordable option.
Maintenance and Repairs Are Handled for You Solar panel leasing companies often include maintenance, repairs, and system monitoring in their agreements. This means that if your system breaks down or requires maintenance, the solar provider takes care of it at no additional cost. This peace of mind can be a huge benefit for homeowners who don’t want the hassle of dealing with system upkeep.
Lower Monthly Payments Leasing agreements typically involve lower monthly payments compared to purchasing a solar system. If you don’t have the financial means to buy a system upfront, leasing offers an alternative where you can still benefit from solar energy without a significant investment.
No Risk of Falling Solar Panel Prices Solar technology is constantly evolving, and the price of solar panels continues to drop. When you lease a system, you don’t bear the risk of future price fluctuations. In contrast, if you purchase a system, you’re locked into the price at the time of purchase, which could seem expensive if prices drop in the future.

Cons of Solar Panel Leasing

No Ownership The most significant downside of solar leasing is that you don’t own the system. Since the leasing company retains ownership of the panels, you miss out on incentives like tax credits and rebates. Homeowners who buy solar systems can claim the federal solar tax credit (which is 30% of the system cost) and other local incentives, which can significantly reduce the overall price.
Higher Long-Term Costs Although the monthly payments may be lower than a solar loan or upfront purchase, leasing can be more expensive in the long run. You may end up paying more over the life of the lease due to ongoing payments, and since you don’t own the system, you can’t benefit from the savings after the lease term ends.
Less Flexibility Leasing agreements typically have fixed terms (usually 20 years), and breaking the lease early can result in penalties or fees. Additionally, if you decide to move, you may have difficulty transferring the lease to the new homeowners, or they may not want to take over the payments. In contrast, if you own the system, you can sell the house with the panels, potentially increasing your home’s value.
Impact on Home Value Since you don’t own the system, solar leasing might not contribute to your home’s resale value as much as a system you purchase would. Many buyers are looking for solar panels when they purchase a home, but they typically prefer homes with fully owned systems rather than leased ones.

Solar Panel Buying: What You Need to Know

When you buy a solar panel system, you are making an investment in your home’s future. You can pay upfront, take out a loan, or finance the system through a payment plan. In return for this investment, you own the system and are responsible for its maintenance and repair (unless you opt for a separate service agreement).

Pros of Buying Solar Panels

Full Ownership and Control One of the biggest benefits of buying solar panels is that you own the system outright. This means you get to enjoy the full financial benefits of the system, including tax incentives, rebates, and increased home value. You also have complete control over the system’s maintenance and operation.
Significant Long-Term Savings While purchasing a solar system comes with a larger initial cost, it can save you significantly more over time compared to leasing. Once the system is paid off, your electricity costs could drop to near zero, as you will no longer have to pay the monthly leasing fee. Many homeowners who buy their solar systems see a return on investment within 7 to 10 years, after which they continue to save money for the life of the system (usually 25+ years).
Tax Incentives and Rebates Homeowners who purchase solar systems are eligible for the federal solar tax credit (currently 30% of the system’s cost), as well as potential state and local incentives. These savings can offset a significant portion of the cost of purchasing a system. With leasing, you lose out on these financial benefits since the leasing company claims the incentives.
Increased Home Value Solar panels can increase your home’s value. In fact, studies have shown that homes with solar panels tend to sell faster and at higher prices than those without. Because you own the system, the next homeowner will also benefit from the savings, making the system an attractive feature when selling your home.

Cons of Buying Solar Panels

High Upfront Cost The most significant drawback of purchasing solar panels is the high upfront cost. Depending on the size of the system and your location, this can range from $10,000 to $25,000 or more. For many homeowners, this can be a significant financial burden, even if financing options are available.
Maintenance and Repairs Unlike leasing, where the provider typically handles maintenance and repairs, homeowners who buy their solar panels are responsible for any maintenance or repairs that may arise. While solar panels are generally low-maintenance, things like inverter failure or damaged panels can occur, and these costs can add up over time.
Long Payback Period While buying a solar system can lead to long-term savings, it also involves a longer payback period. Depending on your electricity usage and the cost of your system, it could take 7 to 10 years or more to recoup the initial investment. This may not be ideal for homeowners who plan to move within a few years.
Financing Complications Financing options for purchasing a solar panel system can sometimes be complicated or difficult to secure. While there are solar loans available, they may come with interest rates that make the system more expensive over time. Additionally, homeowners must often provide proof of creditworthiness to qualify for financing.

Which Option Is Right for You?

The decision between leasing and buying solar panels ultimately depends on your financial situation, long-term goals, and how much control you want over your system. Here’s a quick guide to help you decide:

Choose Solar Leasing If:
- You have limited upfront capital.
- You prefer not to deal with maintenance or repair costs.
- You don’t plan on staying in your home for a long time.
- You want predictable, lower monthly payments without the commitment of ownership.
Choose Solar Buying If:
- You have the financial resources to make a significant upfront investment.
- You plan to stay in your home long-term and want to reap the full financial benefits.
- You want to take advantage of tax credits and rebates.
- You want to increase your home’s value and have full control over the system.

Conclusion

Both solar panel leasing and buying have their unique advantages and disadvantages. While leasing offers an affordable, low-risk option with no upfront costs, buying allows you to take full ownership, claim tax incentives, and enjoy long-term savings. Ultimately, the best option depends on your financial situation, how long you plan to stay in your home, and your comfort level with system maintenance.

Take the time to consider your personal circumstances, and speak with a solar provider or financial advisor to help you make the best decision. With the right choice, you can enjoy the environmental and financial benefits of solar energy for years to come.