Should You Buy or Lease Your Solar Panels?
Solar panels are becoming more popular by the day, but for many people, the upfront cost of installing home solar is a barrier. Solar leasing companies have popped up all over the place, giving homeowners the option to rent solar panels for no money down, reducing the barrier. It sounds like a good idea, but is it?
Solar leases have their upsides, but they can also be extremely predatory. In our experience, buying is almost always the better option. In this guide, we explain how a solar lease works and compare the pros and cons of leasing vs buying solar panels to help you decide which payment option makes the most sense for your solar installation.
Buying vs. Leasing Solar Panels: What’s the Difference?
What Does It Mean to Buy Solar Panels?
When you buy solar panels, you either pay for the system in cash or finance it with a solar loan. The main benefit of buying your solar panels outright is ownership. Owning your solar panels gives you full control over the system, increases your overall savings, and allows you to receive financial incentives like tax credits and rebates.
What Does It Mean to Lease Solar Panels?
Leasing solar panels is a lot like leasing a car. A solar leasing company pays to install solar panels at your house, and retains ownership of them. You pay a monthly fee to essentially rent the system, and the energy produced reduces your electricity bill. In the ideal scenario, your lease payment is less than what you currently pay for electricity, saving you money.
Pros and Cons of Buying Solar Panels
Pros of Buying
Long-term savings - Although the upfront cost is higher, you will save more money if you buy your solar panels than if you lease them. When you buy, you eliminate your electric bill without replacing it with a lease payment. All of the money you save on electricity goes toward earning back your initial investment or paying off your loan. As soon as you break even, you are powering your home for free.
Tax credits and incentives - When you buy your solar panels, you are eligible for the 30% federal solar tax credit and any other state/local incentives available in your area.
Increased property value - Solar panels increase the value of your home by 4.1% according to Zillow. But only if you own your solar panels. Leased systems can make your home harder to sell.
Control and customization - You have the freedom to upgrade, expand, or adjust the system as needed if you own it, which is ideal if you plan to add battery storage or expand your system in the future.
Cons of Buying
Upfront cost - Solar panels require a significant upfront investment. There are, however, plenty of financing options available, including low-interest loans.
Maintenance - When you own your system, any repairs or maintenance your solar panels require will be your responsibility.
Pros of Leasing
Low upfront cost: Leasing is a more accessible option for homeowners who don’t have the cash or financing to buy solar panels.
Hassle-free maintenance: The leasing company owns the system, so they are responsible for repairs and upkeep.
Cons of Leasing
Lower savings: In a lease, you will save some money on your electric bills, but your savings will be lower because you will always have a monthly lease payment. Most solar lease agreements also have price escalators, which increase your monthly rates every year. Leases ultimately benefit the leasing company, which profits off of you.
Ineligibility for tax credits: Since you don’t own the solar panels, you can’t claim the federal tax credit or other local incentives. These benefits go to the leasing company.
No property value increase: Leased panels do not contribute to your home’s value, as they are not considered a permanent part of the property. They can actually make it harder to sell your home because a buyer will have to agree to take over the lease.
No control - When you lease solar panels, you are essentially transferring control of your electricity from a utility company to a leasing company instead of taking that power into your own hands.
Key Factors to Consider
1. Financial Situation
If you have the financial means to purchase your solar panels in cash or can secure a low-interest loan, buying your solar panels is the best option. It will maximize your long-term savings and increase the value of your home. If buying solar panels outright is not an option for you, consider making more affordable energy efficiency upgrades to your home instead. Upgrades like attic insulation and air sealing will save you money on your energy bills and have a much lower upfront cost than rooftop solar panels.
2. Length of Stay in Your Home
If you plan to stay in your home for many years, buying is likely the best choice, as you’ll have enough time to recoup the initial investment through savings on energy bills. If you might move soon, a lease could potentially be more flexible. Just be aware that transferring a solar lease to a new homeowner can complicate the sale process.
3. Energy Independence and Self-Sufficiency
Owning solar panels allows you to produce your own electricity, reducing reliance on the grid and insulating you from rising energy costs. As electricity rates continue to increase, this type of energy independence is especially valuable. Leasing, while providing some savings, doesn’t offer the same level of self-sufficiency since you don’t own the system, and the leasing company retains control over the equipment.
4. Maintenance Preferences
Solar panels are low maintenance, but they do occasionally require servicing. If you’re comfortable handling minor maintenance tasks, buying makes sense.
Final Thoughts
If you’re looking for the highest financial return and have the means to invest upfront, buying solar panels is the better choice. Sustainergy Cooperative can estimate your upfront cost and lifetime savings to help you decide whether buying solar makes sense for your home. We are a local, worker-owned solar company that’s committed to helping our customers make the best decisions for their homes. Call us today for a free, no-pressure consultation.
