<img height="1" width="1" style="display:none" src="https://www.facebook.com/tr?id=322836955126994&amp;ev=PageView&amp;noscript=1">

Pros and Cons of Leasing vs. Purchasing a Solar Energy System

Shannon Higgins

November 2021

solar install on tile roofWhen installing solar on your home there are several financial avenues to consider. Whether you want to finance your solar purchase, pay cash for it, or lease your solar panels, there are different pros and cons to each option. If you'd like to learn more about all these choices, take a look at our solar financing page

In this blog, we're going to focus on leasing vs. purchasing, and explore the pros and cons of each in greater detail.

Our most significant piece of advice when deciding between a lease, loan, or cash purchase is to first ensure that you're working with a trustworthy and reputable solar installation partner. An experienced company will help assess your unique energy footprint, financial status, and savings goals while guiding your financial path forward. Solar is a considerable investment that will pay you back over many decades. So, make sure that you're trusting someone who has your best interest in mind and won't disappear after the sale is inked.

Leasing a Solar Energy System

In general, leasing a solar energy system is best for those homeowners who don't have a tax liability and who are less likely to sell the house during the lease term. We say this because the best solar incentives are available as tax credits, and when it comes to selling a home with leased panels attached, transferring a lease to a new home buyer can be tricky. Let's take a closer look. 


Pros For Leasing Solar

Minimal upfront cost

The biggest pro to leasing is you'll typically enjoy lower upfront costs. Many offers include no down payment with a simple monthly lease payment. Of course, you'll want to ensure your monthly lease payment is lower than your current electricity bill. Also, remember that you will still have a utility bill for the utility power that you purchase at night when your solar panels aren't generating electricity.

Download Our Complimentary Guide: Is Solar Right for You?

Cons For Leasing Solar

No incentives

With a lease, you don't own the panels. As such, you can't take advantage of lucrative tax benefits. Currently, the biggest solar tax incentives are the 26% federal solar incentive tax credit, as well as an Arizona state tax credit up to $1,000. These tax benefits will go to the company that owns your solar system.

 

Difficult to transfer during a home sale
If you're planning on moving in the next couple of years, leasing your panels complicates the sale somewhat. Again, since you don't own the system, a prospective buyer will have to qualify to assume the lease from you. This additional payment may impact their ratios and ability to qualify for the lease or even the primary home loan. Fully owned panels do not have this complication. Plus, fully-owned panels add value to a home, but a leased system does not. Sometimes prospective buyers don't want to deal with these additional hurdles and might decide against purchasing a home with a leased system. If you find yourself in this situation, take a look at our blog about buying out your solar lease or staying in it.

 

You cannot add to or alter the system

If you think you might want to add a battery or additional battery down the road, most leased systems cannot be altered from their original design. So, if an electric vehicle is in your future, or a pool, or another home addition that could dramatically change your energy profile, a leased system may not be the best option. 

 

Purchasing a Solar Energy System

Buying your solar energy system is the easiest route since you own the system outright and have much more freedom to do with it as you please. Plus, all available incentives come back to you rather than the leasing company. You can pay cash or finance all or part of the system through a traditional loan. Modern loan packages offer very competitive terms, and many even allow for a minimal downpayment, depending on credit score.


Pros For Purchasing Rather Than Leasing

You keep the tax incentives

With an owned solar energy system, you can take full advantage of the lucrative tax incentives available. These incentives will dramatically lower the overall cost of going solar while making your ROI even more attractive. 2022 is currently slated to be the last year of having the solar tax credit at 26%. In 2023, it will decrease to 22% before permanently ending for homeowners in 2024. With our 2021 installation schedule already filled, if you want to take advantage of the 26% rate, we recommend starting your solar process now.

 

Easier if you sell

If you own your solar panels, it becomes much easier to transfer the system to a new owner if and when you sell your home. Plus, owned solar adds value to your home. Leased solar does not.

 

Freedom to add or upgrade the system

Owning your system gives you much greater freedom to expand it down the road. If an electric vehicle is in your future, or a pool, or another home addition that could dramatically change your energy profile, a fully-owned solar energy system provides you with nearly unlimited freedom to build upon your success without penalty.


Cons For Purchasing Solar

Upfront Costs

When you buy your solar panels - whether through a traditional loan or with cash, there is typically a higher down payment required. With that said, loan packages are quickly evolving and many offer terms on par with leasing. Like any loan, this is all contingent on credit score, of course. 

 

If you're interested in discussing potential payment options for your solar energy system with one of our solar integrators, contact us today! If you'd like to learn more about the various factors that make up a solar purchase, including different payment options, we invite you to download our free guide, "Is Solar Right For You?"

Download Your Free Solar Guide