Do you find it frustrating to decide whether to buy or lease solar panels for your needs? Did you know that understanding and appreciating the different pros and cons of leasing solar panels can help you make a better-informed decision?
Let us face it. Solar panels do not come cheap. While there are budget versions on the market, you will still need many of these devices to generate enough power to run all the electrical appliances in your home. There is also the issue of installation and other related expenses.
So, is leasing solar panels worth it? Or would it make more sense to buy solar panels? Let us find out.
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Advantages of Leasing Solar Panels
Leasing solar panels offer several unique advantages for the cash-strapped family. These pros also favor people with a busy lifestyle. Here are the benefits of leasing solar panels you should know.
1. Zero or Minimal Upfront Costs
Leasing solar panels is like renting a car for several days, a dorm room for the semester, or an apartment for a year or two. You enter into a contract with a solar panel provider to install and use their solar system in your home for a predetermined period.
Some solar lease providers require payment upfront (down payment), while others do not. The only charges you will pay are the monthly or yearly fees, depending on the contract terms.
On average, you can start enjoying clean and renewable solar energy for as low as $50 or as high as $250 per month. It would be wise to understand that the solar panel lease rate depends on various factors, including your credit score, location, solar energy requirements, and the provider.
On the other hand, buying solar panels is a huge investment. According to Consumer Affairs, an average-sized US home needs a budget between $11,144 and $14,696 for good quality solar panels, with solar tax credits applied.
There is also an installation cost that can further increase the overall project cost. High-end solar systems can set a family back by at least $40,000, roughly the price of a 2021 Acura RDX, a 2021 Mercedes-Benz A-Class, or a 2021 Audi Q3.
Looking at the huge upfront cost differential, it is not surprising why many families consider leasing solar panels.
2. No Worries about Installation and Maintenance
Most solar panel lease providers offer free installation and maintenance as part of their commitment to making lives easier for solar consumers. After all, not everyone has the right competencies for installing and maintaining a solar system.
Some companies also provide warranties for their products while continuously monitoring their solar gathering and generating performance.
Installing your purchased solar panels yourself can be a worthwhile DIY project. Unfortunately, setting up these gigantic slabs of mirror-like devices on the roof is fraught with dangers and risks. That is why most experts recommend expert installation.
Sadly, solar panel installation can cost families thousands of dollars. You can expect to spend $6,000 on a 2,000-watt solar panel array or $9,225 for a 3-kW system installation. Large families who need at least 8 kW of solar power can spend up to $24,500 on labor alone.
Repairs are also costly. People spend $195 to $1,225 to repair their solar systems. The good news is most solar panel manufacturers provide a 25-year solar performance warranty, a 5-year solar panel workmanship guarantee, and a 10-year solar panel manufacturer’s assurance.
Installation, maintenance, and repairs are not the only things people must consider when buying solar panels. The cost of ensuring the upkeep of the solar system is also a factor worth thinking about.
Downsides of Leasing Solar Panels
We now know that leasing solar panels is more economical for cash-strapped folks. But what about solar lease disadvantages? Well, there are several.
1. No Solar Tax Credits, Rebates, and Incentives
Did you know that you can enjoy up to 26% federal tax credit for 2023 solar systems or 22% for PV systems set up in 2023? Maybe you did not know that states also offer incentives to entice homeowners to go solar?
For example, a 6-kW solar system in Alaska might cost $13,454, but homeowners get a $3,498 tax credit in 2020. On the other hand, setting up the same array in California can cost families $15,240 and give them a $3,962 rebate.
Many municipalities across the US also have rebates and special programs for easing the financial burden of going solar.
Unfortunately, if you do not own the solar system, you do not get to enjoy these tax credits and incentives. The solar panel lease provider enjoys them.
2. More Expensive in the Long Term
Like everything else, lease prices tend to increase over time. For example, the $200 monthly fee you pay now might become $250 next year or in three years.
Suppose you have a $200 monthly lease contract with a provider. In that case, you will spend about $2,400 in the first year. Let us say the contract price increases by three percent every year. You will pay $2,472 in the second year and $2,546 in the third year.
Without going into complex calculations, you spend at least $12,000 on leasing solar panels for five years. Hence, five years’ worth of lease payments is enough to buy solar panels.
Moreover, solar panel lease contracts are long-term, tying you to the company for 15 to 20 years. Even if you get a $50/month lease contract, you will still spend about $9,000 to $12,000 by contract expiration.
3. More Challenging to Sell
Here is another downside to leasing solar panels. If you decide to sell your house, the buyer must assume responsibility for the solar panel lease. Hence, if you entered into a 15-year contract and plan to sell your property by the sixth year, the buyer must continue paying the remaining nine years.
While some home buyers do not mind, most will. Selling your property with leased solar panels can become a challenge.
Should You Buy or Lease Solar Panels?
According to Forbes Advisor, it makes perfect sense to buy solar panels than to lease them from a provider. Unfortunately, not all families can afford the cost of setting up a solar array for the modern home.
Setting up a 3,000-watt to 8,000-watt residential solar system can cost the modern family anywhere between $9,255 and $28,000, averaging $18,628. This figure presupposes that the house is only 1,500 square feet, and the solar panels only cost between $2.50 and $3.50 per watt.
Sadly, this is not often the case. Homeowners can spend more on solar panels per watt or require more solar arrays to supply their home’s power requirements. You might also want to factor in your home’s solar potential, local labor costs, and local solar panel prices.
Hence, buying solar panels is beyond the reach of the average family. That is why many households are considering leasing solar panels.
Unfortunately, there are also caveats to this method. Understanding the different leasing solar panels pros and cons should help you make a better-informed decision.
What Other Options Do I Have?
Buying solar panels makes more sense than leasing them in the long term. Unfortunately, it requires a substantial investment related to solar panel prices and installation costs. The good news is homeowners can look for the financing options below.
1. Home Equity Loan
If you have home equity, you can apply for a Home Equity Line of Credit or HELOC. You can get as much as 85% of your home’s equity and use it to buy solar panels. You can then pay off the loan. It is often wise to ask your lender about the loan’s terms and conditions before applying.
2. Solar Loan
Some financing institutions offer a solar loan, which you can use to buy and install solar panels on your property. It works like a solar panel lease, except you have ownership of the solar panels.
The best part about getting a solar loan is that you are eligible for federal solar tax credits, rebates, and incentives.
3. Power Purchase Agreement
The main difference between a power purchase agreement and a solar panel lease is the monthly fee. Leased solar panels have a fixed monthly rate. On the other hand, PPAs have variable monthly dues, depending on energy consumption and other factors.
Conclusion
To summarize, here are the pros and cons of leasing solar panels.
- Pros – Low to zero upfront costs and worry-free installation, maintenance, and repairs
- Cons – Ineligible for federal tax credits and incentives, costlier in the long run, and extended contract periods making reselling the home a challenge
I agree with experts recommending buying solar panels instead of leasing them. If you have problems with the initial cash out, you can always look for financing assistance, such as HELOC and solar loans.
Hi, I am Eddie, Cleanenergysummit’s content editor. It’s so much joy to work alongside Justin, as the idea of providing knowledge about using clean energy excites us.
I’ve been working to address any concerns or questions you may have as you transition to using solar electricity to power your home. Tune in to hear our advice and suggestions on anything clean energy. Welcome!