Leasing vs Buying Solar Panels – Which is Best For You?

If you’re considering switching to solar energy, you generally have two options: you can lease a solar system or buy your own. The main difference between these two options is ownership: 

• When you purchase solar panels, either through cash or solar loans, you own the entire solar power system outright. 
• When you lease a solar system, you pay a solar company a monthly fee to install solar panels at your home and let you access the system. You get to take advantage of solar energy and save money on energy bills, but you do not own the solar system itself. 

Both of these are good choices that have their own pros and cons depending on your circumstances and priorities. To help you make an informed decision, we compare leasing vs buying solar panels so you can find out which option is best for you. 

Key takeaways:

• Leasing solar systems allows homeowners to go solar without having to invest money upfront. 
• Buying solar panels generally costs more upfront but gives you the best long-term savings and return on investment. You are also eligible for tax incentives and credits which can offset some of the costs involved.
• People who lease solar systems don’t qualify for solar incentives and tax credits, and they might end up paying more overall. 
• Buying solar panels is generally the best option, unless you don’t have the cash upfront, don’t qualify for incentives and rebates, or are unable to secure a solar loan with a reasonable interest rate or not at all. 

Leasing a solar system

Solar leasing is when you pay a fixed monthly fee in exchange for having a solar energy system installed on your property. Unlike buying a solar system outright, when you lease a solar system the leasing company retains ownership of the solar panels and other related equipment. 

Leasing a solar system allows you to benefit from using solar energy and saving on utility bills without having to invest in solar panels yourself. To help you understand whether solar leasing is right for you, let’s look at the pros and cons. 

Pros of leasing a solar energy system

The benefits of solar leasing include minimal upfront costs, no maintenance cost, predictable monthly payments, and no payback periods. Let’s look at each of these points in more detail. 

Minimal upfront costs

One of the most significant advantages of leasing a solar system is that it comes with little to no upfront investment. In fact, most leases are $0-down agreements. This means you can get solar panels up and running with minimal start-up cost.

Of course, you’ll still be making payments throughout the term of the lease (usually fixed monthly payments), but this can be more manageable for some homeowners who can’t or don’t want to make a large upfront investment. 

Maintenance is included

While solar panels are generally low-maintenance, they may require upkeep from time to time. If you have a solar lease, you won’t have to worry about maintaining and repairing the solar system as it would be the leasing company’s responsibility. This means all you’ll have to do is clean the panels occasionally. 

No payback periods

When you lease solar panels, you can start saving on monthly utility bills immediately - without having to wait for payback periods. On the other hand, when you buy solar panels it may take several months before you start seeing a return on your investment. 

Predictable payments

Most lease agreements offer fixed monthly payments for the duration of the lease term. This provides a degree of financial predictability that can make it easier to budget energy expenses without worrying about fluctuating electricity prices. 

Performance warranty

Some leasing companies provide a performance warranty that guarantees your solar panels will generate a certain amount of electricity over time. Because solar cells can sometimes degrade as the years go by, this provides reassurance that your panels will continue to operate efficiently into the future. 

Cons of leasing a solar energy system

While solar leasing has many benefits, it can also come with its own set of drawbacks that may not make it viable for some homeowners. We look at the cons of solar leasing below.

You won’t be eligible for rebates or incentives

One of the main drawbacks of leasing solar panels is that you won’t be able to claim government or private rebates and tax benefits, such as the 30% federal solar incentive tax credit. Depending on where you live, these incentives and rebates can make buying solar panels much more feasible financially. In some cases, they can shave off up to 39% of the total price of purchasing solar. 

You might end up paying more over time

While leasing solar panels comes with little to no upfront cost, you might actually end up paying more over the long term when compared to buying a solar system outright. Lease payments can add up over the duration of your lease term and potentially surpass the cost of buying and owning your own system.

You may struggle to move or sell your home

Lease agreements usually come with long-term commitments, often spanning 20 years or more. This can make things complicated and costly if you choose to move or sell your home during that period. Ending a solar lease agreement early can be difficult, so your three best options are: 

• Buying the panels: Some leases lets you buy out your solar lease by paying for the solar system at market value. Some also have built in provisions for early buy out terms.
• Moving the solar panels: If it’s feasible, you may be able to remove and reinstall the solar panels in your new home with a certain cost.
• Transfer the lease: You may be able to transfer the remainder of your lease to the new homeowner. Of course, this depends on whether the leasing company allows it and the new homeowner is interested.

No control over the solar system

When you lease a solar system, you generally won’t be allowed to make additions or modifications. This gives you less control over your solar system, like making upgrades or changes to suit your needs.

Buying a solar system

Buying a solar system means you own the panels and related equipment outright. While you may have to make an initial investment for the system and installation, you'll be able to benefit from long-term energy savings, incentives and tax credits, and increased property value - all while reducing your impact on the environment. 

To see if buying a solar system is a better option for you, let’s look at the pros and cons. 

Pros of buying a solar system

The benefits of buying your own solar panel system includes being eligible for tax incentives and rebates, increasing the value of your property, and long-term financial returns. Let’s look at each of these benefits in more detail. 

Eligibility for tax incentives 

Owning a solar system lets you take full advantage of tax incentives and rebates. These incentives can help offset the initial cost of installing solar panels and make them more financially viable. 

Tax credits and incentives you may qualify for when owning solar panels include: 

• Federal Solar Tax Credit: This incentive allows you to deduct 30% of the cost of installing solar panels on your home from your federal taxes. 
• State Tax Credits: You may also be eligible for a tax credit for purchasing solar panels depending on the state where you live. In Arizona, for example, you qualify for a solar tax credit of 25% of your installation costs, up to a maximum of $1,000. This is in addition to the federal solar tax credit. 

You can read more about how federal solar tax credits work on the Office of Energy Efficiency and Renewable Energy website.

You will add value to your home

Owning a solar system has been shown to increase your property’s market value. According to a study by Zillow, solar panels can increase the value of a home by 4.1% on average, depending on where you live and the strength of your solar market. Another study by the US Department of Energy's Lawrence Berkeley National Laboratory (Berkeley Lab) similarly found that homebuyers were willing to pay an extra $15,000 or more for a home powered by solar energy.

More control over your solar system

When you own your own solar system, you’ll have more flexibility to upgrade or modify your system according to your energy needs and preferences. For example, you can add more panels or install a solar battery.

Long-term financial returns

People who buy their own solar panels generally end up saving more money and getting more return on investment. According to EcoWatch, the average long-term savings for a solar lease are around $5,000 compared to $22,379 if you buy your own. This is because when you buy solar panels, you’ll eventually pay back the initial investment and just enjoy the reduced electricity bills. With solar leases, on the other hand, you’ll always have to pay the monthly fees which can reduce your savings. 

Cons of buying a solar system

It’s clear that buying your own solar system has numerous benefits for homeowners. But as with anything, there can be some drawbacks too. Let’s look at the cons of buying your own solar system. 

You’ll have to make an upfront investment

Buying solar panels requires a significant upfront investment, which can be a barrier for some homeowners. If you don’t have sufficient funds to buy solar panels, you can always take out a solar loan, however that means paying interest. 

You’re responsible for maintenance

When you own your own solar system, you’re solely responsible for maintenance and upkeep. While solar panels are generally very low maintenance, last a long time, and most major items are covered in manufacturer warranty, if any repairs are not covered, you might have to bear the cost. 

Financial implications

For many homeowners, the decision whether to buy or lease solar panels rests on their financial situation and long-term goals: 

• Leased solar offers immediate savings but less long-term financial benefits. 
• Buying solar is initially more expensive but provides significant savings over time thanks to solar incentives and no fixed monthly fees.

Leasing vs buying solar panels

Ultimately, both leasing and buying solar panels have their advantages and disadvantages depending on your priorities and goals. Below, we compare the difference between leased and owned solar systems. 

Summary: Should you lease or buy solar panels?

Switching to solar power without having to invest money can be tempting, and for some people, it’s the only way they can make the switch. But if you have the ability to invest in buying solar, then doing so will offer far more long-term benefits and returns. 

Leasing solar might be best for you if: 

• You want to start generating solar energy immediately
• You want to help the environment without investing too much money at once
• You’re unable to secure a solar loan
• You don’t qualify for tax credits and rebates.

Buying solar might be best for you if:

• You have the money to invest in solar systems
• You plan to stay in your home for the next few decades
• You qualify for tax credits and rebates
• You don’t mind upfront costs if it means long-term returns.

If you’re still unsure which option is best for you, a reputable solar installer can guide you through these choices and make the decision easier. Don’t hesitate to reach out to the friendly team at Sun Valley Solar Solutions to discuss your options. 

As one of Arizona's top solar installation companies trusted by over 10,000 homeowners and countless businesses, we can help you settle on a decision that meets your financial goals and abilities. Contact our team now for a free quote or to explore solar financing options.