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Buy vs Lease Solar Panels

Buy vs lease solar panels – what is the difference, and which is better? Turn to SmartSolar.org today to learn more about buying and leasing solar panels.
Solar Panels
7 minutes
Written by:
Joey Cheek
Updated on:
January 13, 2023

It is a common question and concern: Should you buy or lease solar panels? Both options allow you to have solar panels installed on your home so that you can begin relying on this form of renewable energy going forward. 

Yet it is critical to know the difference between these two methods to ensure you choose the option best suited for your needs. 

Before you purchase solar panels or lease solar panels, there are a few things to consider. SmartSolar can help you to determine whether leasing vs buying solar works best for your situation. Reach out to us today to learn more.

What Does Leasing Solar Panels Mean?

When you lease solar panels, you are not purchasing solar panels outright. That is, you do not own the solar panels themselves. Leased solar panels are owned by the installation company or the solar company.

Do you benefit from leasing solar panels?

As the property owner, you agree to allow the solar company to install a solar power system on your home. That system is maintained by the solar company itself, not you. You benefit from accessing low-cost energy from the leased solar panels.

What are the upfront costs of leasing solar panels?

One of the most important benefits of leasing is that you do not have to pay out of pocket for your solar panels at the time of installation. That is, you do not pay initial upfront costs for solar panels. Rather, you enter into a power purchase agreement with the company that installs them. 

Solar companies agree to pay for the solar panel equipment and pay to have it installed on your home, and you make payments to them for lower solar energy costs.

If you do not want to make a significant purchase to install solar panels, work to better understand how leasing works. It could help you lower your costs by working with the leasing company and allow you to continue to save on utility bills without having to spend a lot on the initial costs.

What about leasing and tax credits?

One key thing to remember when it comes to making the most of solar panels is that you may qualify for tax credits and incentives when you buy solar panels. If you work with a leasing company and lease solar panels, you do not qualify for these tax credits and incentives. This includes the federal tax credit that is designed to lower income tax for those who install solar panels.

The reason for this is simple: you are not making a solar panel purchase. As a result, you are not making any type of investment into the use of solar energy when installing them. 

The solar incentives available are typically only available for those who pay to install the solar panel system. Solar leasing companies still make this a beneficial investment because of the utility bill savings you are likely to have.

What Does Buying Solar Panels Mean?

If you purchase solar panels, that means you are paying a fee to have a solar energy system installed on your home. Buying solar panels involves purchasing the solar panels and paying to have them installed. Also, when buying solar panels, you are taking ownership of them. That means that it is up to you to maintain the solar panels long term.

A solar panel system can be expensive, and that can be one of the reasons why some people may want to avoid buying solar panels. Yet there are ways to reduce the upfront costs, and it may still offer financial benefits to you if you buy them instead of leasing.

Can you use a solar loan to buy solar panels?

Solar loans are very common and highly recommended for those who want to avoid paying upfront costs. When installing solar panels, you can pay out of pocket for the full cost if you want to do so. If you do not want to do that but want to own the solar panel system outright, solar panel loans are a solid solution.

Keep in mind that when you install solar using a loan, you will need to make monthly payments. Loans also have interest payments on them, which can add to the cost. Paying them off as soon as possible can help you to get the most out of solar panels and save you the highest amount possible.

Do you qualify for the federal solar tax credit if you buy a solar power system?

Yes, and this is one of the best reasons to purchase solar panels instead of leasing them. With this method, you qualify for the federal tax credit, which may offer as much as 30% of the actual cost applied to your federal income taxes. 

That means you will lower your federal income tax liability by as much as 30% of the cost of installing solar panels. Solar companies can help you to determine what that savings may be.

What to Know If You Plan to Use a Solar Lease

If you plan to obtain a solar system with a solar lease, there are a few things to keep in mind before you make your decision.

  • You can choose from various solar companies. Look for one that offers the best terms on solar leases.
  • Know as much as you can about the power purchase agreement, including what you will still pay for electricity generated from solar power.
  • Take to the solar provider about the overall investment upfront to ensure there are no additional costs. You also want to know how the company will maintain the system. Will the solar installer maintain it, or another solar company? Be sure you understand all solar maintenance costs.
  • What is the monthly loan payment for the power purchase agreement PPA? If you are not sure, do not sign the contract for the solar lease until you know what the terms are.
  • How much solar energy are you able to obtain? What is the cost? Will this save money compared to the costs you are paying now?

What to Know If You Plan to Buy Solar Panels

If you want to purchase solar panels upfront, you are likely to notice several differences. Here are some things to keep in mind:

  • Solar rebates from your state and utility company can help to keep the cost down.
  • Be sure to choose a home solar system that qualifies for the solar incentives from the federal government, as that can be significant savings to you.
  • Choose highly efficient solar panels to get the most savings on your electricity bill.
  • Find out how much energy your home needs before you have the solar installation done to ensure you are getting the most for your investment (you can only claim the federal tax credit one time!)
  • Work with solar installers that you trust and that have a proven track record. This can make a big difference in the long term.

While you want to save money, it is always wise to have as much information upfront about the company, the solar panel installation process, timelines, and costs. If you are unsure of any of these things, do your research to ensure you are choosing the best solar energy company. A big component of the work they do is to help you learn how solar energy can help you while also working to reduce any costs associated with you.

Realize the benefits that these panels can offer. Solar panels increase home value, save money on electricity bills, and they can help you to do your part in reducing the impact on the environment. 

Consider the long-term savings that solar panels can offer to you, especially when you factor in the tax incentives if you pay the upfront cost.

Learn as much as you can about solar energy and how it can impact your home.

Joey Cheek

Leasing and Buying Solar Decisions

Take the time to learn as much as you can about leasing panels or buying them. Work with the solar installer to learn how much your electric bill is likely to be, what a cash purchase benefit will be for you, as well as what local incentives are available.

With federal tax credits available, you don't want to miss the opportunity to take advantage of these benefits. Yet a lease payment can be affordable, and the reduction in upfront costs is worth it to many people.

Let Us Explore the Options with You

Don’t make a decision without all of the information you need. Contact SmartSolar today to learn more about how we can help you save money on your solar energy purchase.

Meet the author:

Joey Cheek

Joey Cheek spent 10 years on the US National Speedskating Team where he competed in two Olympic Games, winning gold, silver, and bronze medals. He attended Princeton before diving into the startup and tech world. In 2011 he launched a livestreaming platform for sports before leading a team of engineers building next-gen news and content apps for Fortune 100 companies. He is the CEO and co-founder of SmartSolar.org, whose mission is to move the earth to cheap, abundant, carbon-free energy.

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