Should I Buy or Lease My Solar Panels?

More and more U.S. homes are going solar every year, largely because of leasing options now available to consumers. But before you sign on the dotted line, it's important to consider the differences between leasing and owning to determine which option is right for you.

If you've already decided that purchasing your own solar equipment is the right move, BankFive can help! Click here to learn about our solar financing options.

Learn More About Solar Loans!

What does it mean to "lease" or "buy" a solar power system?

  • Leasing - With a lease or Power Purchase Agreement (PPA), someone else (usually the leasing company) owns the solar energy equipment. With a solar lease, you make a monthly payment to use the solar system for a specified period of time, usually between 15 and 20 years. In other words, you will make monthly payments for the entire time you use the solar equipment. As soon as your lease is up, the system is removed from your home.
  • Buying - Another option is to buy your solar system outright, either by paying upfront or taking out a loan to finance the purchase. A solar loan allows you to spread the cost of the system over time, while still maintaining ownership of the equipment. When the loan is paid off, you continue to reap the benefits of solar energy for the lifetime of the system (usually 25-30 years).

Which option will save me more money?

Buying your solar panels, rather than leasing them, will allow you to maximize the financial benefits of solar power. Reasons include:

  • Tax Credits
    • When you purchase your solar energy system, you're eligible for federal and state tax credits that help reduce the cost of the equipment. These include a Federal Investment Tax Credit that rebates you 30% of the cost of your system, and the Massachusetts Personal Income Tax Credit which gives you back either 15% of the total cost of the system, or $1,000 (whichever amount is lower). On the other hand, if you lease your system you forfeit these tax credits, giving them away to the leasing company.
  • Energy Savings
    •  If you've taken out a loan to finance the purchase of your solar panels, you'll pay down the loan each month. Once it's paid off however, you'll receive free solar electricity for the life of your energy system, without having to make any monthly payments toward the equipment! That can translate into huge savings given that the average solar system lasts between 25 and 30 years. If you've leased your equipment on the other hand, the savings won't be nearly as large. For starters, you'll never get away from your monthly payment. You'll be paying your lease for as long as you use the solar panels. You can still save money if your monthly payment is less than your utility bill would have been, but it's important to keep in mind that lease payments for solar equipment typically increase over time. This means that you could actually end up paying more for your solar lease every month than you save on utility payments.
  • Increased Home Value
    • If you've purchased a solar energy system, either by buying it outright or financing it through a loan, you can breathe easy knowing that solar panels typically add value to homes. Even if you still have payments left on your loan when you're ready to sell, you can usually pay off the remaining balance with the additional revenue you get from your home sale. On the contrary, if you're leasing your solar panels you may find it more difficult to sell your home. When your home has a solar lease attached to it, you can't simply back out of the lease. You either have to convince your buyers to assume the lease (which many are hesitant to do), or you'll be forced to make the remaining payments in one lump sum before you can sell your home. And even if your buyers agree to take on the lease, they must qualify with the leasing company before it's a go.

What about maintenance?

If you lease your solar power system, the leasing company is responsible for maintaining and servicing it, since they own it. This is appealing to many consumers who fear having to maintain solar equipment after purchasing it. It's important to note however that solar equipment is very durable and carries warranties, so there shouldn't be a huge amount of maintenance to worry about. Unlike generators which are composed of moving components that require repair or replacement, solar panels don't have moving parts that can rust or breakdown.

  • For the most part, maintaining your solar panels will consist of keeping them clean.
    • This can usually be accomplished by rinsing them off with a standard garden hose to ensure dust, dirt, bird droppings and other debris don't block the sun from being absorbed by the panels.