Thinking about solar panel installation? Great. But now comes the big question—lease or buy? There’s no one-size-fits-all answer, and the right choice depends on your financial situation, how long you plan to stay in your home, and how much control you want over your system. Let’s break it down.
Analyzing the Financial Impact of Leasing vs. Buying
A University of Arizona study, Cost Benefit Analysis of Leasing Versus Buying Solar, analyzed the financial outcomes of purchasing versus leasing solar systems. The research found that purchasing outright was the most financially beneficial option across all residential system sizes studied (4.83 kW to 8.43 kW), with an average return on investment (ROI) of 11-12 years—even before factoring in tax credits.
For smaller residential systems (under 8 kW), leasing through a Power Purchase Agreement (PPA) provided minimal savings compared to utility costs, sometimes making solar financially unjustifiable for homeowners.
In contrast, commercial systems had a faster payback period—around 7 years for purchased systems, compared to 11-12 years for residential. The study also found that larger commercial systems (43.8 kW to 65.71 kW) saved money whether leased or purchased, making solar a viable investment in either case.
Notably, system sizes above 8 kW were where leasing started to show stronger savings, suggesting this as a potential economic threshold for residential solar leasing.
Understanding the Difference: Buying vs. Leasing Solar Panels
Buying and leasing are two completely different approaches to going solar. Each has pros and cons—some obvious, some less so.
Buying a Solar System
- Ownership: You own the system outright, either by paying in cash or financing with a solar loan.
- Upfront Costs: Higher. Expect to pay anywhere from $15,000 to $25,000 for a standard residential system.
- Long-Term Savings: Higher. Solar panels last 25-30 years, and once they’re paid off, your energy is essentially free.
- Incentives: You get the 30% Federal Solar Tax Credit plus any state/local incentives available to you.
Leasing a Solar System
- Ownership: A third-party company owns the system on your roof—you just pay them for the energy it produces.
- Upfront Costs: Low. Sometimes $0 down.
- Long-Term Savings: Lower than buying, but you’ll still see reduced electric bills.
- Incentives: None. The company that owns the system claims all tax credits and rebates.
Power Purchase Agreement (PPA)
A PPA is similar to leasing, but instead of paying a fixed monthly fee, you pay a per-kilowatt-hour rate for the electricity the system generates.
- Usually cheaper than buying power from the grid.
- No maintenance costs—the solar company takes care of everything.
- Unlike leasing, PPAs sometimes offer more flexible payment terms.
A study from EnergySage found that while both leasing and PPAs offer $0-down solar, PPAs often provide more customizable pricing structures than fixed-rate leases.
Pros and Cons of Buying Solar Panels
Pros:
- Bigger Long-Term Savings – Once the system is paid off, your electricity is essentially free.
- Increased Home Value – Zillow found that homes with owned solar panels sell for about 4.1% more than comparable non-solar homes.
- Tax Incentives – You keep all tax credits, rebates, and local incentives.
- Energy Independence – You own the system and control your power.
Cons:
- High Upfront Cost – Even with loans, the initial investment is significant.
- Maintenance Responsibility – You’re in charge of repairs (though solar panels are relatively low-maintenance).
- Performance Risk – If your system underproduces, there’s no company guaranteeing savings.
Pros and Cons of Leasing Solar Panels
Pros:
- Low or No Upfront Cost – No large investment required.
- Maintenance Included – The company that owns the system handles all repairs.
- Guaranteed Performance – Many leases come with production guarantees to ensure you’re getting a certain level of savings.
- Immediate Bill Savings – You’ll start saving on electricity right away.
Cons:
- Lower Overall Savings – You’re paying a company for power, so you’ll save less than if you owned the system outright.
- No Tax Benefits – The leasing company gets all available tax credits and rebates.
- Selling Your Home Can Be Complicated – If your buyer doesn’t want to take over the lease, you may have to buy it out or find another workaround.
- Annual Payment Increases – Many solar leases include an escalation clause, meaning your payments go up every year.
Is It Cheaper to Lease or Buy Solar Panels?
There’s no simple answer—it depends on what “cheaper” means to you. If you’re looking for the lowest upfront cost, leasing is the clear winner. But if you want the most savings over time, buying will almost always come out ahead.
The 20-Year Savings Comparison
A Consumer Reports analysis examined the financial impact of a 5-kW solar system over a 20-year period. The findings?
- Buying: $64,769 in total savings
- Leasing: $41,589 in total savings
That’s a difference of over $23,000—a significant amount of money to leave on the table.
Do Leased Solar Panels Increase Home Value?
While owned solar panels typically increase home value, leased panels can be a different story. Buyers may be hesitant to take over a lease, and some mortgage lenders won’t approve loans for homes with solar leases. If selling your home is a possibility in the near future, buying might be the better option.
How to Decide Whether to Lease or Buy Solar Panels
- Financial Situation: If you can afford the upfront cost or qualify for a low-interest solar loan, buying leads to better financial returns.
- Homeownership Plans: If you plan to stay in your home for 20+ years, buying is the best choice. If you might move soon, leasing could complicate a future sale.
- Tax Benefits: Buying allows you to take advantage of the 30% Federal Solar Tax Credit and other incentives.
- Maintenance & System Control: Buying gives you full control, while leasing provides a hands-off experience with no maintenance responsibility.
If you’re considering financing options, check out solar financing options to explore ways to make purchasing solar more affordable.
Lease or Buy? A Side-by-Side Comparison
| Factor | Buying | Leasing |
|---|---|---|
| Upfront Costs | High ($15,000–$25,000) | Low ($0–$1,000) |
| Long-Term Savings | Higher | Lower |
| Tax Incentives | Yes | No |
| Maintenance | Owner’s responsibility | The leasing company handles it |
| Home Value Impact | Positive | Neutral/Potentially Negative |
| System Control | Full | Limited |
| Performance Risk | Owner bears the risk | Leasing company guarantees production |
| Contract Length | None | Typically 20-25 years |
Choosing between leasing and buying depends on your financial priorities and long-term goals. If you can afford it, buying solar panels remains the best investment in the long run.
