If you're thinking about going solar, choosing between a solar loan and a solar lease is probably one of your biggest decisions. Some of you may be able to simply buy your solar power systems with cash, but that's uncommon, so I'm not going to discuss that option in this article.
Of course, if it was a simple issue, this article would be over by now, but it's really not as simple as you might hope.
Solar leasing is often sold on the idea that you can pay as little as $0 down and then have electricity bill savings forever after (er... till the end of the solar leasing contract, which is typically 15 to 20 years) that are greater than your monthly solar leasing payments.
Solar loans, however, are also available for as little as $0 down all across the United States.
A lot of people rail on solar leasing. The main reason is the simple assumption that solar leasing companies are profiting from their customers, taking away some of the money that homeowners could be saving from going solar by themselves. Compared to paying cash, homeowners certainly won't save/make as much money (not taking opportunity cost into account, anyway), but solar leasing competes more with solar loans than paying in cash. If you got a loan for your solar system, you would of course have to pay a good bit of interest on it, which is essentially the same as giving away some of your savings to a solar leasing company.
Sometimes, a loan will end up providing you with a net positive in savings compared to a lease, and sometimes a net negative. Sometimes, it will provide a net positive for several years and then a net negative after that, and sometimes the opposite. The most obvious thing to do if you are going solar is to get installer quotes from as many places as possible and then compare them.
Using EnergySage's instant estimate solar calculator, I recently checked out houses in 10 different cities (in 10 different states) to see how the different options would turn out (cash versus a solar loan versus a solar lease). It wasn't a scientific study, of course, but I ended up getting a 20-year win for solar leasing 5 times and a 20-year win for solar loans 5 times. Interesting. I actually thought the solar loan option would beat out solar leasing most of the time.
But it's not only about estimated 5-year, 10-year, or 20-year savings. There are other matters to also take into account.
For one, solar leasing companies do take care of the tax paperwork, can sometimes take advantage of tax breaks you can't, and typically cover solar system monitoring and maintenance.
On the flip side, at the end of your solar leasing contract, you don't own your panels.
You should also consider the fact that, if you decide to move after a few years, passing on a loan versus a lease is a different process. You would generally have to get the buyers to take over the lease, whereas the loan would be on you but you could sell the home for more money. Studies have shown that solar power system do increase the value of homes, often even more than the system cost, and studies have also shown that homes with solar panels on them sell faster.
Lastly, note that a solar power system can work well for over 30 years, and probably many more. If you're a very long-term thinker and planner, that definitely gives the upper hand to a loan and eventual ownership. However, it is hard to know how long solar panels built today will last, as there are no real-world examples that fit the bill. Solar panels built about 30 years ago and still performing well are from a whole different generation of solar panel production.
In the end, a loan may work better for some of you and a lease for others. You really have to crunch the numbers yourself (or have a solar calculator, like the one linked under this post or the EnergySage one linked above, crunch the numbers for you), and you have to consider the payment terms, conditions, and assumptions that go into the different options.
If I were going solar, I'd lean towards getting a solar loan (or paying in cash), but a big factor would be estimating my savings from the different options, which can vary tremendously.