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Should you buy or lease your solar panels?

Last updated 7/15/2020

The decision about how to finance your solar power system depends on your particular financial goals.

The main practical distinction between buying and leasing a solar PV system is in ownership. If you buy a solar panel system, you own the system, either outright (if purchasing with cash) or after repaying your solar loan. If you lease the system or sign a power purchase agreement (PPA), a third party owns the solar panel system.

This distinction impacts the cost, maintenance, terms, financial offsets, and savings/returns on investment of your solar panel system. In addition, not all companies offer solar leases and/or PPAs—confirm that your chosen provider offers the financing option that you want most. Note that PPAs are not legally permitted in some areas.

Should you buy or lease?

This video reviews the benefits of buying and leasing solar panels.

Purchasing a solar panel system with cash, or financing a purchase with a solar loan, is your best option when you…

  • Want to maximize the financial benefits of installing a solar panel system, rather than solely benefitting from the system’s environmental benefits;
  • Are eligible to reduce your federal and state tax liability through the federal investment tax credit;
  • Are a business, and can realize tax benefits by treating the solar panel system as a depreciable asset; and/or
  • Want to increase the market value of your home by installing a solar panel system.
buy or lease solar panels

A solar lease/PPA is your best option when you…

  • Are primarily interested in using electricity generated from renewable resources, rather than maximizing the financial benefits of installing a solar panel system;
  • Want to avoid the responsibility of maintenance or repairs for a solar panel system;
  • Are ineligible for federal or state investment tax credits resulting from your investment in a solar panel system; and/or
  • Do not want to wait until the following year to receive the financial benefits of tax credits.

Compare and contrast: buying and leasing solar

There are practical differences in cost, maintenance, terms, opportunities for financial offsets, and savings/returns on investment, depending on the financing decision that you make.

Installation cost

Solar loan/cash purchase

  • Solar power systems can cost $15,000 to $30,000 before rebates and incentives.
  • Cash rebates can reduce the total cost by up to 50 percent. Most solar installers will manage the paperwork and adjust the purchase price to reflect the net amount.


Solar lease/PPA

  • You can get a solar energy system for little or no money down.
  • You don’t qualify for tax credits, rebates, or incentives – those belong to the third party owner of the system.


Solar loan/cash purchase

  • You own the system and are responsible for maintaining it. Note that solar equipment is durable and carries warranties, so you won’t have much maintenance to worry about.
  • Your purchase may not include an app to track your system’s performance.


Solar lease/PPA

  • The solar company owns and maintains the solar power system.
  • Most leases include free apps that track the performance of your system.


Solar loan

  • Loans are generally available for 10 to 20 year terms, at which point you own the solar panel system outright.
  • Interest rates range from 3 percent to 8 percent, depending upon a number of factors including your FICO credit score and the length of the loan.


Solar lease/PPA

  • Solar leases and PPAs are generally for 20 to 25 years, at which point you can renew your agreement or purchase the system outright.


Solar loan/cash purchase

  • You can save between 40 percent and 70 percent on electricity costs over the lifetime of your solar panel system, depending on your property and the incentives in your state.
  • You receive free electricity for the life of the solar energy system (usually 25 to 30 years).


Solar lease/PPA

  • You can save between 10 percent and 30 percent off the prices you pay your utility for electricity, depending on your property and the incentives in your state.
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