One of the most important decisions you’ll make when you install solar panels is financial. Should you buy or lease? When you buy your solar panels, you have the option of purchasing them outright or through financing. When you lease solar panels, a third party owns them, and you make monthly payments for the right to use them. Leasing isn’t available everywhere. This option is typically only available in sunnier states that offer stronger subsidies for going solar.
Whichever option you choose depends on your financial goals, how much work and responsibility you’re willing to take on for your panels, and if you expect to move out of your current home.
Here are the main differences between buying and leasing solar panels.
Installation And Upfront Costs
- Buy: Buying represents a larger upfront cost because you have to purchase both the panels and the installation. Prices can range between $15,000 and $30,000, though only a solar consultant can give you an exact number. If your credit is in good shape, you might have the option to finance the panels and have them installed with no money down. Federal tax credits can also help make installation more affordable. For example, the Solar Investment Tax Credit (ITC) is a 30% tax credit on solar panels. It is currently valid through 2018, and will decrease gradually until 2022.
- Lease: Leased solar panels are much easier to have installed with no money down. However, you don’t get to benefit from any government subsidies. Those all go to the third party that owns the panels.
- Buy: Solar panels are very low maintenance and require very little upkeep for the first thirty years. Most purchased solar panels come with a 25-year warranty that guarantees to deliver a set level of energy efficiency over time. Since older solar cells are less efficient, these agreements assume that your panels will produce slightly less energy with age. However, if there is damage or maintenance that is not covered by the warranty, then you will need to fix it in order to keep your solar panels working efficiently.
- Lease: Much like a landlord who is responsible for fixing a renter’s sink if it springs a leak, the third party owner handles all maintenance issues.
- Buy: Like any loan, the cost of financing will depend on its length, your credit score, and whether the loan is secured or unsecured. Interest rates range between 3 and 8 percent. Loans typically last between 10 to 20 years. Shorter loans mean you pay less in interest, but have higher monthly payments. You might have the option of getting a secured loan if there is sufficient equity in your home. This will reduce your interest rate, but you will have to put up your home as collateral.
- Lease: You agree to lease solar panels for a particular time period. 20 years is typical. At the end of the lease, you may have the option to upgrade to newer solar panels, extend the lease, or have the solar panels removed for free. Some lease agreements even give you the option to purchase the panels for a discounted price at the end of the agreement.
- Buy: If you own the panels outright, then transferring them to a new owner is simple. They simply come with the home. Owned solar panels can actually increase your home’s value. However, if you are financing your panels, you will have to transfer the remainder of the loan to the new owner.
- Lease: The lease will have to be transferred to the new owner, who will be responsible for fulfilling the terms of the lease.
Return On Investment
- Buy: If you want solar panels in order to slash your energy costs, then buying is the best choice. In addition to the long term energy savings, you may also be eligible for subsidies and tax credits.
- Lease: It’s e asy to lease your solar panels for no upfront costs. But you should check to see if the solar energy you receive from them will reduce your energy bills enough to make the lease financially worthwhile. Since you don’t own them, you won’t get the long term savings that would be possible with panels that you own outright.
Should You Buy Or Lease Solar Panels?
The truest answer is “it depends.”
Homeowners Who Buy Solar Panels…
- Have the best return on investment over time
- Can benefit from government subsidies and tax benefits
- Increase the resale value of their home
Homeowners Who Lease Solar Panels…
- Can reduce their need for energy from the grid with little upfront costs
- May have the option to upgrade or purchase panels at the end of the lease
- Are not responsible for repairs or maintenance of their solar panels
The best choice depends on your personal goals and assets. Both options turn your home’s roof into your own personal solar-powered energy source. But they differ in upfront costs, level of benefits, and amount of responsibility.