ven though the global solar market is facing a decade-long dramatic price drop, the cost of residential PV systems is still a big barrier to the broader adoption of solar. Installing a PV panel system currently costs between $18,000 and $20,000 before solar incentives. But even after accounting for incentives and rebates, the price ranges from $12,600 to $14,000, which is still beyond the budget of many homeowners.
At first glance, solar panels lease may seem like the most reasonable solution, as you get the opportunity to cut your energy bills with little to no upfront costs. But things are not that simple. Let’s find out whether it is better to buy or lease solar panels.
What is a solar panels lease?
Solar panels lease is the contract under which a solar installer retains ownership, and a customer pays a monthly fee for using the energy from the PV panels on their property. Depending on your location, energy consumption, and credit score, leasing a solar system will cost from $50 to $250 per month. Most companies offer zero-down contracts, but some may require a small down payment.
Most solar panels lease contracts are long-term, usually between 20 and 30 years which is generally the lifespan of solar panels.
How is solar leasing different from PPA?
Another financing option often confused with the lease is the Solar Power Purchase Agreement or PPA. Under a solar PPA, the consumer only pays for each kilowatt-hour (kWh) energy at an agreed price. So basically, you will buy power from your solar company instead of the utility, but the rates in a solar PPA will undoubtedly be lower than the local utility tariffs. In both leasing agreements and PPA, the providers are fully responsible for installing and maintaining the solar system.
Benefits of solar leasing
Lower upfront cost
This is probably the most considerable advantage solar panels lease has to offer. While buying PV modules can be beyond one’s budget, leasing a solar system is an option available to almost everyone. And having no payback period means you can save on your electricity bills from the first day of use.
The solar owner is responsible for the maintenance
Your solar company keeps ownership of the modules after installation, meaning it will take care of the routine maintenance and servicing. And if any solar equipment fails, it will be responsible for all repairs.
Drawbacks of solar leasing
No tax credits and rebates
The upfront cost can be a sticking point for some. Still, there are options available to cut them significantly, such as the Solar Investment Tax Credit (ITC) or various local incentives and rebates. But if you choose to lease, only your installer will benefit from them.
Fewer savings down the line
Solar panels lease can save you from 10% to 30% on your electricity bills, which is quite a bit but still much less than in the case of buying your own PV modules.
Selling your property with leased modules may be challenging
A solar panels lease can make selling your property an arduous task. Since the solar panels are not in your possession, you will have to transfer the obligations under the contract to the new property owners, and the buyers are rarely willing to take on such responsibilities. So most likely, you will have to terminate the agreement and pay an early exit fee.
Pros of buying solar modules
Greater overall savings
While solar leasing will reduce your electricity bills by 30% at best, buying a PV system adequately sized for your needs could reduce your electricity bill by up to 100%. In the US, the solar payback period is usually six to ten years, and after breaking even with your investment, you will be able to reap the full financial benefits of solar power.
The opportunity to use solar incentives
For example, if you buy a solar system by the end of 2032 are eligible for a 30% tax credit, meaning you can claim a deduction on your federal taxes equal to 30% of the total cost of the installation. Additionally, some states and utilities, and solar panel manufacturers offer their own credits and rebates. By combining these financial incentives when buying PV modules, you can reduce the installation cost by up to 50%.
Increased property value
One more advantage is a positive impact on your property value. Zillow’s study shows that homes fitted with solar modules cost around 4.1% more on average.
Cons of buying solar modules
Higher upfront cost
On the other side of the coin, long-term savings require quite a hefty initial investment. Even though solar incentives can significantly ease the financial burden, paying thousands of dollars upfront for a PV system isn't for everyone.
Solar panels need very little maintenance, but you will still have to carry out regular inspections and cleaning to ensure the excellent work of your solar system.
Bottom line: when deciding whether to buy or lease solar panels, think about the long-term benefit
So should you buy or lease solar panels? There is no single answer here; it all depends on whether you are ready for a pretty significant investment. But remember that paying more upfront will lead to much greater savings in the long run.