Is it better to buy or lease solar panels?

Solar financing options have evolved immensely over the last decade, and even more so in the last year. But one thing  that remains is this: Installing a home solar panel system is a smart long-term investment. Whether you should purchase or lease your solar panel system ultimately comes down to what matters most to you—maximizing lifetime savings or minimizing upfront costs and maintaining flexibility.

Buying a solar panel system generally delivers the highest long-term return over 25-30 years, especially in areas with strong state and local incentives. However, it requires either significant upfront cash or taking on a loan.

Leasing, on the other hand, requires little to no money down and lets you start saving on your electric bills right away. In exchange, you forgo some of the long-term financial upside.

With the federal solar tax credit no longer directly available to homeowners, leasing can be more financially competitive in certain scenarios than it once was—particularly in states with limited incentive programs and lower utility rates. In some cases, it may offer a better balance of savings and capital flexibility than purchasing outright.

No matter which path you choose, going solar can still deliver tens of thousands of dollars in electric bill savings over the lifetime of your system. The key question is which trade-offs best align with your financial situation and goals.

If you buy with cash

Your upfront cost is significant—an average of $30,505 before incentives according to EnergySage data—but you'll have no monthly payments afterward. Your only ongoing cost is your (much lower) utility bill for any electricity your solar panels don't cover.

Buying solar outright requires no application or approval process. Once you've selected an installer and signed a contract, you move directly to installation scheduling.

If you buy with a solar loan

You'll make fixed monthly payments throughout your loan term, which typically ranges from five to 25 years. Given that average solar loan interest rates typically fluctuate between 6-12%, let’s say yours is 7.5%. So, your monthly payment might be $220 to $350 for a typical $30K system (depending on your loan terms and credit score). Once you pay off the loan, you own the system free and clear—and many people pay off their loans early.

The good news: Your electricity savings often exceed your loan payment from day one, meaning you see net positive cash flow immediately.

Loan applications typically take a few weeks because lenders need to verify your creditworthiness and may require a home appraisal. The wait is worth it if ownership matters to you. 

Your credit score significantly impacts your interest rate, so if you have time before going solar, working to improve your credit can save you thousands over your loan term.

"If you do decide to finance, make sure that your credit score is in a good place because that's going to have a dramatic effect on what interest rates lenders are willing to lend to you at," said Jordan Naffa, director of financial planning at Arista Wealth Management. "The better your credit, typically the lower the interest rate is."

If you lease or sign a PPA

You'll pay a monthly fee to the solar company that's typically lower than your previous utility bill. However, most lease agreements and power purchase agreements (PPAs) include escalators—annual rate increases of 1-3% that boost your monthly payment each year. Over a 20- to 25-year term, these escalators tend to reduce your total savings compared to ownership.

Look for providers with low escalators (1% or less) to minimize this effect. Some newer lease products offer fixed monthly payments with low escalators, which can make leasing very attractive.

Lease applications can often be approved in a single meeting with a solar company representative. While this speed is convenient, don't feel pressured to sign the same day. Take time to review the contract terms, understand escalator clauses, and compare offers from multiple providers.

Pre-paid leases and PPAs

Pre-paid solar leases are a twist on third-party ownership (TPO) that’s gaining traction now that the federal solar tax credit is no longer directly available to homeowners. Instead of making monthly payments, you pay for the system upfront, similar to a cash or loan purchase.

Why pay upfront without owning the system immediately? Because as long as the solar company retains ownership, the system is treated as a commercial installation and is eligible for the federal commercial solar tax credit. In practice, that credit is built into the pricing structure, so you typically receive a discount on your upfront payment that you otherwise wouldn’t have access to through a direct purchase. 

After a set holding period—usually around six years—ownership can be transferred to you without a tax penalty, since federal rules require the system to remain under third-party ownership for at least five years to avoid tax credit recapture.

Terms vary by provider, and while many agreements allow for low-cost or $0 transfers at the end of the term, the exact buyout language isn’t always guaranteed and may be tied to “fair market value” provisions.

The fundamental distinction between buying and leasing comes down to ownership.

When you own your system (cash purchase or loan)

You're eligible for valuable incentives that can dramatically reduce your costs. State tax credits, cash rebates, and performance-based incentive programs typically only go to system owners, so research what's available in your area. 

With ownership, you typically increase your home's resale value—recent research from SolarInsure shows owned solar systems boost home values by up to $79,000. You're responsible for maintenance, but solar panels require minimal upkeep over their 25-30 year lifespan. Your equipment warranties (typically 10-30 years) cover most issues that might arise, and your installer's workmanship warranty protects you against installation problems.

When you lease your system

The solar company owns the equipment on your roof and typically handles maintenance during your lease term. You won't receive state tax credits, cash rebates, or other incentives—those go to the system owner. Your home's resale value likely won't increase from the leased system.

You'll make monthly payments for 20-25 years, but at the end of your agreement, you don't own the system. You'll need to either buy it out (often at a premium), extend your lease, or have the company remove the panels.

Solar leases and PPAs are now the only residential solar installations that still qualify for the federal tax credit. While the credit goes to the leasing company rather than you, competitive providers should pass some of those tax savings along through lower monthly rates.

In some cases, this shift in the tax credit landscape has made leasing more financially competitive than it was historically. The gap between ownership and leasing has narrowed—though ownership still typically delivers higher total savings over your system's lifetime.

Planning to move in the next 10-15 years? Your financing choice impacts how easy it will be to sell your home.

Selling with a purchased system

Recent research shows that homes with owned solar panels sell for 5-10% more than comparable homes without solar. 

• If you paid cash: The system increases your home's value, and there are no complications. It's a straightforward selling point.

• If you have a solar loan: You have two options. You can pay off the remaining balance using proceeds from the sale, or you can sell the home with the loan in place. If you financed with an unsecured loan, you can sell before paying off the loan (though you'll still owe the balance). If you used a secured loan like a home equity loan, you typically must pay it off before selling.

Selling with a leased system

Leased systems can complicate home sales—but it depends on the terms of your lease and the goals of the new homeowner. With a lease, you have two main options when selling:

• Buy out the lease: You can purchase the system and either keep it on the roof or have it removed. Be aware that many lease agreements include buyout premiums. For example, if you have $15,000 in remaining payments, your buyout clause might require $20,000—an additional $5,000 you hadn't anticipated.

• Transfer the lease: If the buyer is willing and meets the leasing company's credit requirements, you can transfer the agreement. This is usually straightforward because mortgage approval typically indicates sufficient credit for a solar lease.

Read your lease agreement carefully before signing to understand your buyout terms and transfer options. These details matter significantly if you're planning to move.

Your ideal financing option depends on your financial situation, goals, and what you value most. Here's how to think through the decision:

For most homeowners, buying solar panels, especially with cash, delivers better long-term savings than leasing. You'll save more money over your system's lifetime, increase your home's value, and have more control over your energy future.

That said, leasing has become more competitive and offers legitimate benefits for homeowners who prioritize capital flexibility over maximum returns. If you don't have significant upfront capital, can't benefit from state tax incentives, or simply prefer the simplicity of letting someone else own and maintain the system, a lease can still deliver meaningful electric bill savings.

Either way, going solar is a smart financial decision that will save most homeowners thousands of dollars over time. The key is choosing the financing option that aligns with your specific situation and priorities.

As with any contract, carefully review your financing agreement to understand all terms and conditions. Walk through potential scenarios with your solar installer or schedule a free call with an EnergySage Energy Advisor before signing. Ask what happens if you move, need maintenance, or want to end your solar lease agreement early. Don't hesitate to keep asking questions until you're completely comfortable with the commitment you're making.