Leasing solar panels costs $50 to $250 per month on average, with most contracts lasting 10 to 25 years and monthly payment amounts increasing yearly. In comparison, buying solar panels costs $12,600 to $31,500 but offers the most benefits and the highest lifetime savings. Contact online >>
Leasing solar panels costs $50 to $250 per month on average, with most contracts lasting 10 to 25 years and monthly payment amounts increasing yearly. In comparison, buying solar panels costs $12,600 to $31,500 but offers the most benefits and the highest lifetime savings.
Financing the solar system comes with monthly payments but provides greater long-term savings than leasing and you own the panels once you've paid off the loan.
Solar panel costs have decreased significantly in recent years, but the investment is still high for many homeowners. Leasing solar panels offers a way for more people to shift to renewable energy but comes with drawbacks. This guide covers the details, pros, and cons of both options to help you make an informed decision.
The option to lease solar panels allows homeowners to go solar without a big initial investment, removing the main barrier to entry into the world of clean, renewable energy. Leasing solar panels also means the company, not the homeowner, handles all the maintenance and repairs for the life of the lease.
However, leasing solar panels instead of buying them means you don't own the equipment and do not qualify for any tax credits, incentives, or net metering. With a solar lease, you're committing to a decade or more of monthly payments that increase each year and leave you with no benefit once the lease ends.
Buying solar panels requires a large upfront investment but allows you to take advantage of the many available tax credits and incentives that help to reduce the cost. Most solar panel installations also increase your property value.
Owning the panels also makes you eligible for your utility company's net metering program, allowing you to earn money by selling excess solar energy back to the grid.
Many solar companies offer competitive financing options, sometimes with no down payment, so your initial investment may be lower if you have decent credit and shop around.
While leasing solar panels does not offer as much cost savings as buying them, it still offers several benefits. Since most solar leases do not require a down payment, leasing may be the best choice for those on a tight budget who do not qualify for other financing.
Depending on where you live, you may have more than one option to get the benefits of solar power without buying the panels. Solar leases and Power Purchase Agreements (PPAs) are similar in that you are "renting" and do not qualify for tax credits or incentives, but there are some key differences.
Solar lease – With a solar lease, you pay a fixed monthly fee. The amount of solar power you use each month does not affect the monthly payment. Most solar lease contracts have a planned annual increase—also called an escalator clause—so your savings dwindle over time as the monthly payment increases.
Power Purchase Agreement (PPA) – With a PPA, a third-party developer installs the panels at little to no cost. You then pay only for the solar power you use, at a rate typically lower than the local electricity rate. Many PPA contracts also have escalator clauses with planned annual rate increases.
Not all states allow solar leases and PPAs. Additionally, some states allow them but have legal barriers that make PPAs difficult to obtain. Check the Database of State Incentives for Renewables & Efficiency (DSIRE) to see which programs are available in your area.
Solar panels cost $12,600 to $31,500 installed on average. While this is a hefty upfront investment, it provides the most long-term savings. If you qualify for a solar loan, paying for the system over time costs more than purchasing it outright but still offers significant benefits and long-term savings.
Paying the total cost of your solar panel installation up front yields the best savings. Still, other options exist that allow you to pay for the system over time through bank or solar company financing. Some financing options require a down payment, while others do not.
Cash – Paying in full up front means you own your solar system outright from day one and can start reaping the renewable energy benefits immediately. With no added interest and many solar incentives to help reduce the cost, this option is the most lucrative if it fits your budget.
Solar loan – Solar loans typically have fixed monthly payments with competitive interest rates and no down payments. Your total cost depends on the interest rate and the length of the loan, which may be 5 to 20+ years. In general, the longer it takes to pay off, the higher the total cost.
Home equity loan – A home equity line of credit (HELOC) allows you to buy the solar panels with a lower-interest loan using the equity as collateral. The downside of this is that defaulting on the loan could result in foreclosure.
Combo loan – A combo loan consists of a primary loan for the system's net cost and a short-term "bridge" loan for the 30% tax credit value. This decreases your initial loan, lowering your monthly payments, but is only ideal if you can claim the full tax credit and use it to pay off the bridge loan.
Re-amortizing loan – A re-amortizing loan allows you to delay making a down payment until you receive the federal tax credit. This loan type has higher monthly payments initially but is recalculated after the lump sum payment from the tax credit, reducing the remaining payments.
Speak with a licensed tax advisor to determine the best way to pay for your solar panels based on your financial situation.
In most cases, buying solar panels is the better choice as it provides greater long-term savings. Leasing panels allows you to save on utility bills and help the environment, but it's a significant financial commitment offering drastically lower savings. However, the decision ultimately depends on your budget and goals.
Consider leasing solar panels only if your electricity rates are high, you don't have the capital to buy solar panels outright, and you don't qualify for a solar loan. You'll reduce your utility bills and your carbon footprint. And, as a bonus, you aren't responsible for any maintenance or repairs.
Consider buying solar panels if you can pay for the system up front or qualify for a loan to pay for it over time. You'll increase your home value, reduce your electric bills, and with a 6- to 10-year average payback period, you'll enjoy free electricity for 15+ years.
You can only participate in your utility company's net metering program—which allows you to profit by selling excess solar power back to the grid—if you own the solar panels.
Hire a contractor accredited by the North American Board of Certified Energy Practitioners (NABCEP) and associated with other relevant professional organizations, such as:
Solar Energy Industries Association (SEIA)
American Council on Renewable Energy (ACORE)
Check out their profile and reviews on HomeGuide and Google.
Ask for a list of local references you can contact.
Schedule a consultation and site evaluation with at least 3 solar companies who have been in business for several years. Ask for detailed estimates to compare.
Choose a solar company that is licensed, bonded, and insured.
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