Should I Buy or Lease Solar Panels?

buy or lease

Deciding whether to buy or lease your solar panels can be a tough choice. Both options have certain advantages, but evaluating your personal goals and preferences is the only way to know which is right for you.

Buying Solar Panels

Buying solar panels has many advantages. Financially, buying your own solar panels makes the most sense, since it will always result in the most savings. Depending on how much energy your solar power system produces, you might even be able to totally eliminate your monthly electricity bills.

You can buy solar panels either outright with cash or, as most qualified consumers do, with a $0 down loan. There are several financing programs that allow qualified homeowners to purchase a solar power system at no upfront cost.

At PowerScout, you can begin your journey towards clean energy with no initial costs by choosing a $0 down financing option offered by our partners, including several that offer property assessed clean energy (PACE) financing options. (Loans obtained through PACE financing usually have lower credit requirements, and the loan itself is repaid through the property tax bill.)

Taking out a loan for your solar power system doesn’t negate the potential savings, either. Depending on the size and terms of your loan, you stand to save 40 to 80 percent of the potential cost savings that you would if you simply bought your solar system outright.

Owning your own system also qualifies you for a number of incentives. You could, for instance, receive 30 percent off the total cost of your system through the investment tax credit (ITC). Depending on your state, you might also be able to get a Solar Renewable Energy Certificate (or Credit). SRECs are distributed by your state energy regulatory agencies and can be sold to electrical utility companies. The price of the SREC depends on local market conditions, but some reach prices as high $680. Another valuable incentive is a rebate, which will give you an up-front discount on the total cost of your solar system. Click here to find out which incentives you qualify for and how much you can save from adopting solar panels.

Through a combination of tax incentives, rebates, and savings from reduced or eliminated electricity bills, your solar panels will likely pay for themselves after 2 to 10 years, with an average return-on-investment after just 5 years. Not only that, but buying solar panels can also increase your home’s value. A recent study from Berkeley Lab estimates that a home solar installation will add about $15,000 to the value of your home.

Most solar panel installations are worry-free and come with a variety of guarantees: a 25-year guarantee for the electricity produced by the panels, a 10-25 year warranty for the inverters, and a 10-year workmanship warranty for the installation itself.

Leasing Solar Panels

Customers who prefer a simpler approach might want to simply lease their solar panels or sign a Power Purchase Agreement (PPA). In either case, a third-party company will take care of the installation, identify financial incentives, and perform maintenance (if necessary). Both leases and PPAs enable you to enjoy the benefits of clean solar energy without the hassles of ownership.

The primary difference between a lease and a PPA is that under a lease, you pay a fixed monthly fee. In a PPA, you pay for the electricity produced by the system each month. In a PPA, you’ll likely pay more during the summer months when the solar panel system is producing more electricity than it does during the winter.

Both leases and PPAs last for a fixed period, typically 20 years. At the end of the lease period, you can typically choose to buy the panels - a great option if you have a high-efficiency system that can still perform well after the end of the lease period.

PPAs and leases also pass at least some financial savings onto you. PPA agreements, for instance, typically charge about 30 percent less per kilowatt-hour than the standard local electricity rate. While your electricity rates will probably rise even under the terms of a lease or a PPA, the increases still tend to be lower than those you’d face from your local electric company.

While leases and PPAs typically don’t deliver as much financial savings as buying your own system, they are better for consumers who have little to no income tax liability. In such a case, you wouldn’t be able to see much tax savings from the 30 percent federal income tax credit, so opting for a lease or a PPA would make more sense. Instead, the solar company that owns the system can capture those tax incentives and pass the benefit to you in the form of a reduced monthly lease or PPA payment.

Leasing or signing a PPA also releases you from responsibility for any maintenance or repairs that might be necessary. While solar panels are generally built tough and require little or no maintenance, accidents do happen, and sometimes even the best-made solar panels may require maintenance.

Choosing the Right Option for You

In 2014, most residential solar users (72 percent) did not own their own solar panels. But that number has declined significantly in recent years, and is expected to continue falling as more people recognize the advantages in purchasing their own systems. The increased affordability of buying your own solar panels has meant that leases and PPAs have quickly fallen out of favor. A recent survey of 350 solar installers found that 75 percent of them did not offer leases or PPAs, up from about 50 percent the year before. These options are increasingly available only in sunny states that offer generous subsidies.

There’s no doubt that buying your own solar panels entails more work, from figuring out which incentives you qualify for to (potentially) connecting the system to your home. But if you’re someone who enjoys really getting invested in a project, that kind of nitty-gritty detail might be attractive.

Ultimately, the decision to lease or buy will require you to evaluate how costs, financial benefits, maintenance, and savings associated with each option will impact you. If you’re still struggling to determine whether you should lease or buy your solar panels, PowerScout has a handy calculator that can help. With just some basic financial and geographical data, we’ll calculate how much you can save by switching to solar.

Remember: whether you buy or lease, solar energy is a smart choice for both the planet and for your wallet.

To find out more about your energy solar panel options, compare installers in our network right away. We take your individual situation into account, and we match you with a solar panel provider that helps you to meet your financial goals.