Though solar panel prices dropped significantly, ownership may still feel like a faraway dream. But an outright solar system purchase isn’t your only option. Leasing a solar system may help you benefit from solar energy without the high upfront costs.
When it comes to leasing vs. buying solar panels, understanding the differences could make a big difference in how much you spend and whether going solar is worth it for you. Read more to help you weigh the decision of buying or leasing solar panels.
Key takeaways:
When you buy solar panels, you own them outright; if you lease solar panels, you pay a fixed monthly fee to a third-party company.
You will not qualify for the federal solar tax credit if you lease solar panels.
Buying solar panels is the best option for long-term savings, a higher home value and a cleaner energy footprint.
If you’re on a tight budget and plan to live in your home for years to come, a lease may be worth it for you.
The difference between leasing and buying solar panels?
Before deciding whether to buy or lease solar panels, learn the ramifications of each decision.
Buying solar panels
Owning solar panels has never been more affordable, thanks to the federal solar investment tax credit (ITC), which allows homeowners buying solar panel systems to receive a 30% tax credit through 2032. The credit is scheduled to decrease to 26% in 2033 and 22% in 2034 and expire in 2035.
The ITC is the best incentive for homeowners nationwide who want to invest in renewable home energy. However, you must own your system to use the tax credit.
Buying a solar panel system gives you instant ownership of your solar panels. You can buy your solar panels in full or take out a loan and pay monthly to your solar lender. Some solar companies let you finance with $0 down for the first one to two years to make going solar more affordable for homeowners.
Leasing solar panels
Solar leases used to be the go-to method for people who wanted solar panels. “[Solar leasing] was one of the things that really helped give a boost to the residential solar market as things were just getting going because it allowed more homeowners to go solar that didn’t have the cash saved up,” said Joe Ordia of Solar Surge.
With solar leasing, you don’t own your solar panel system. Instead, you pay a fixed monthly fee for a third-party company to install and maintain the solar panels on your home. You can often buy the panels at a discounted rate at the end of your lease term.
However, you aren’t eligible for the 30% federal tax credit because you don’t own the solar panels when you lease. You also miss out on net-metering programs, which let the solar system owner collect financial credits for the excess electricity your solar panel system generates.
Key differences between solar leasing and solar buying
|
Leasing
|
Buying
|
|
|---|---|---|
| Ownership | Owned by a third party |
Owned by buyer |
| Upfront cost | No or low upfront cost |
High upfront cost |
| Long-term cost | High long-term cost |
Low long-term cost |
| Tax credit eligibility | Not eligible for tax credits |
Eligible for a 30% tax credit |
| Net metering eligibility | Not eligible for net metering |
Eligible for net metering |
| Payments | Monthly payments |
Multiple financing options |
| Maintenance | Maintenance covered by lease |
Maintenance covered by buyer |
Solar leasing considerations
When leasing solar panels, you’ll want to consider cost, maintenance, impact on your home’s value and types of lease. Let’s break down each category to help you weigh whether leasing solar panels works for you.
Costs
The average cost to lease solar panels ranges from $50 to $250 per month, depending on the length of your lease, the system size, your credit score, your regional cost of living and the leasing company. Most solar leases have terms of 20 to 25 years, so you’ll spend between $12,000 and $75,000 by the end of the lease.
Though you’ll pay less monthly than most solar purchases, your overall costs are higher in the long run. According to the Solar Energy Industries Association (SEIA), solar installation costs have dropped by more than 40% over the last decade, decreasing from $40,000 in 2010 to around $25,000 today.
Maintenance and upkeep
One of the biggest perks of leasing your solar panels is not having to perform maintenance. Most third-party leasing companies offer maintenance and upkeep as part of your lease.
Impact on home value
Because you don’t own the solar panels in a solar panel lease, the solar lease won’t add value to your home. On the contrary, leasing solar panels can complicate the sale of your home. If you’re locked into a solar lease agreement, you might have to:
- Fulfill your end of the contract before you can have the panels removed
- Pay a fee to break your contract
- Transfer the lease to the new homeowner — if your solar leasing company allows it
Lease or power purchase agreement
Some solar companies offer a Power Purchase Agreement (PPA) option. With PPAs, the solar company acts as a third-party owner, installer, manager and operator for the solar panel system. Instead of paying to lease the panels, your third-party solar company will charge you a fixed rate for your energy consumption.
Pros and cons of leasing solar
A solar lease has advantages and disadvantages that should influence your decision. Let’s review the pros and cons of solar leasing.
Pros
- Low upfront cost
- Low monthly cost
- No maintenance and repair costs
Cons
- High long-term cost
- Possible increase in monthly payment
- No ownership
- Not eligible for tax savings and rebates
- Not eligible for net metering
- Can complicate selling a home
- No increase in home value
Buying solar considerations
Buying solar panels requires more upfront money or choosing one of a few financing options. There are other considerations, too. Here’s what you need to know.
Costs
The average solar panel system costs between $13,620 and $26,686. After the 30% federal solar tax credit, you will spend around $9,534 to $18,680 for your solar panels. However, the ITC isn’t guaranteed. Because it’s non-refundable, you won’t receive extra credits if your solar panel refund exceeds your income tax, but you can roll the excess credit to future tax returns.
Maintenance and upkeep
One of the only significant downsides of owning solar panels is that you are responsible for handling and paying for maintenance and repairs. The good news is that most solar panels come with a 10-year warranty, and some come with 25- or 40-year warranties. Some solar installers give workmanship and comprehensive warranties ranging from five to 25 years. Once these warranties expire, you must pay for any repairs or replacements.
Impact on home value
According to Zillow Economic Research, between March 2018 and February 2019, homes with a solar energy system in several major coastal metro cities sold for 4.1% more than homes without a solar system.
At the end of 2023, the median sales price of a U.S. home was $417,700, according to the Federal Reserve Economic Data (FRED). Using Zillow’s data, a home solar system would yield an increase of $17,126 to the value of your house.
How to pay
Your total out-of-pocket cost for solar panels also depends on how you pay for the solar panel system. You have two options for solar panel financing — paying in full or taking out a loan.
Solar panel loans have interest rates ranging from 2.99% to 36%, depending on the loan length, how much you put down and your credit score. Because most solar loans have terms of five to 25 years, you’ll pay between $70 and $265 per month on your loan when you factor in the federal tax credit, interest rates and the loan duration.
Pros and cons of buying solar
Pros
- Solar panel ownership
- Pays for itself over time
- Increased property value
- Eligible for tax credits
- Net metering eligibility
- Stable monthly payments
Cons
- Higher upfront or monthly costs
- You’re responsible for maintenance
Is it better to lease or buy solar panels?
The verdict on whether buying or leasing solar panels is better depends on your situation. Buying solar panels is the best option for long-term savings, a higher home value and a cleaner energy footprint.
When to lease solar panels
Leasing solar panels may be the right choice for your home if you’re:
- Cash-strapped
- Looking for the lowest possible monthly payments
- Want to put very little money down and
- Plan to live in your home for the length of your solar lease
Leasing may also be the better option if you aren’t eligible for the 30% tax credit — because you don’t have a tax liability to offset or because your panels are not a first-time installation on your primary residence, for example.
When to buy solar panels
Buying solar panels is the better option for most homeowners because of the available tax credits, rebates and net metering options.
A solar panel purchase eventually pays for itself by offsetting your electric bills. According to the U.S. Energy Information Administration (EIA), the average household spent an average of $145 monthly on electricity in 2023. If your solar panel system costs $15,300, it will be just under nine years before you break even. After that, you’ll get your electricity for free.
Bottom line
While leasing solar panels used to be the most affordable option for benefiting from solar energy, solar panels have become cheaper over the years. Ownership is increasingly possible for homeowners on tight budgets.
If you’re still on the fence about the pros and cons of leasing vs. buying solar panels, consider talking with solar installation companies near you to compare quotes.
