Buying vs. Leasing Solar Panels: What Should You Do?

About half of Americans surveyed in a Pew study released in late 2019 said they had either considered or already installed solar panels at home. Despite the growing interest in renewable energy, the elevated cost of a residential solar system—with panel cost averaging between $2 and $3 per watt—is an impossible hurdle for many. Those reluctant or unable to drop up to $25,000—more than a third of the average middle-class American's annual income—on a home setup can lease the equipment for a lower cost.

Whether to buy or lease your home solar system comes down to your budget, tax credit eligibility, and willingness to commit to a contract that could impact your house's market value.

Cost of Leasing vs. Buying

The principal reason for leasing solar equipment instead of buying it is to save money. A full residential solar setup, including the 20 to 25 panels needed to completely offset the average electricity bill, can cost between $15,000 and $25,000, depending on the quality of the equipment and locality. Considering the average cost of fossil fuel-generated electricity in the U.S. is about $115 per month, the system would pay for itself in 10 to 20 years, and that's without all the available solar tax credits and incentives. In 2021, solar panel purchasers are granted 26% in investment tax credit, which can take up to $6,500 off the total bill.

Leasing solar equipment doesn't qualify you for those tax credits and incentives but can cost as little as $50 per month (for a small, 3.8-kilowatt Tesla system, for instance) with little to no down payment. Larger installations can cost upwards of $150 per month.

Purchase Power Agreements

Purchase power agreements (PPAs) are another form of solar rental, but contrary to a lease, in which the consumer pays monthly to utilize a company's panels and equipment, PPAs permit a company to use your property for solar coverage and charge you just for the power itself, not the panels. Depending on the agreement, you could be charged a fixed monthly rate or for the amount of electricity you actually use. The latter agreement can cause monthly costs to fluctuate throughout the year, like a normal electricity bill would, but it typically winds up being comparable, price-wise, to a lease agreement annually. Both agreements last between 20 and 25 years on average.

Maintenance and Repairs

Solar panels require very little maintenance save the occasional light cleaning, but when they do need repairing or replacing, the cost won't come out of your pocket if you have a lease agreement. According to HomeAdvisor, a home repair marketplace powered by Angi Homeservices, solar panel repair and renewal can cost $196 to $1,219. Solar panel technicians charge about $100 per hour, and annual maintenance costs about $18 per panel—so, about $400 for a full solar set. The glass can break (that's $20 for a DIY epoxy job or hundreds for a full replacement), the metal can crack (requiring one or two hours of labor), connections can fail, and solar panel owners are responsible for all those damages.

Impact on Home Value

A 2018-19 analysis of listing descriptions and transactions by the online real estate marketplace Zillow showed that homes with solar panels sold for 4.1% more than those without. However, although solar power is widely considered to be a house "upgrade," a leased solar kit can actually deter buyers. The requirement of entering into a decades-long solar contract is a much harder sell. What's more, transferring a lease may be tricky—or impossible, at worst—if the new homeowner doesn't meet the credit requirements. According to Rocket Mortgage by Quicken Loans, the manufacturer of your leased panels can also place a lien on your property, making it even more difficult to sell your home.

Is Leasing or Buying Better?

Overall, it's better to buy a home solar system than to lease one, given you have the means to do so. Although purchasing panels comes with steep upfront costs plus the burden of maintaining and repairing them, the equipment is a smart investment likely to boost your home value and lead to bigger savings in the end. 

That said, leasing is a great alternative for those who are keen to switch to renewable energy but don't qualify or prefer not to take a loan, or aren't eligible for the federal tax credits and Solar Renewable Energy Certificates (SRECs) that help offset the cost. It's crucial to know exactly what you're getting into—including the implications of canceling your agreement or selling your home—before entering into a long-term contract with a solar leasing company.