Leasing vs. Buying: What is the Difference?

Other than the ownership, buying and leasing solar panels are not different. Regardless of whether you buy a solar panel system with a loan or cash, you’ll enjoy its ownership. However, if you leased a solar panel, the actual ownership would belong to the leasing agency. In our opinion, ownership is a preferred option. That said, there are many cases when leasing solar panels might be the better choice. If you want to switch to green energy, the simplest way to begin is by leasing or through a power purchase agreement. In this method, you’ll not require any upfront money. All you have to do is reach out to the solar leasing agency, and they’ll install the panels for you. The advantage of leasing is that you don’t have to deal with maintenance costs or taxes. Pay your monthly leasing bills, and you’re good to go! On the flip side, purchasing solar panels comes with the headache of maintaining and paying interest rates (if you opted for a loan).

When is Buying Solar Panels a Good Option?

The overall cost of purchasing solar panels is lesser than leasing them. Plus, you become eligible for several federal tax benefits. You can save up to around 50% of the initial investment through incentives and rebates by the local government. Also, you don’t have to stress about escalator clauses, which typically eat into your savings. Leasing companies seek to make profits with your agreement. As a result, they offer mandatory clauses that secure a profit for them. With complete ownership of solar panels, you can also steer clear of inflation rates. Unlike leasing, buying solar panels is a one-time investment, though they may have some maintenance costs. The warranty that comes with solar panels is yet another reason why you should consider purchasing them. Most sellers include a few free rounds of maintenance and repairs.

When is Leasing Solar Panel Systems Better?

As we’ve mentioned before, leasing solar panels is beneficial since you don’t have to struggle with the upfront costs. Many of us might not qualify for a loan, and leasing remains the only option. Many people don’t like to deal with paying monthly interest rates and federal taxes. If you are one of them, then leasing is perfect for you! When you lease a solar panel system, you don’t have to worry about anything other than monthly payments. Better yet, maintenance is effortless. Plus, you stay assured of the latest solar panel technology. In essence, you should opt for leasing solar panels in the following situations: If you don’t meet the requirements for SRECs or any other form of rebates. In case you don’t qualify for a loan. If you cannot access the federal tax credits.

When Should You Avoid Leasing Solar Panel Systems?

If you are leasing solar panels, you are missing out on several incentives and federal tax benefits. Such incentives reduce the overall cost of your solar panels. The main difference between leasing and buying panels lies in the savings. Avoiding upfront costs might lure you into leasing solar panels. However, in the long run, the monthly expenditures do more harm than good. The worst part is that solar panel leasing also includes escalator classes. This policy can increase your annual payment by 3%. Solar panel leasing isn’t a great idea if you own a home and plan to sell it in the future. You also lose control of your roof by leasing solar panels. Further, the leasing agencies may also disregard the appearance of your home.

What Should I Consider Before Buying Solar Panels?

There are a few things you should consider if you opt for buying solar panels. First off, you need to understand if you qualify for solar panels. Your FICO score will determine your eligibility for the same. You should also calculate the payback period. Any more than ten years of payback is not recommended. Another factor to consider is your loan interest rate. If the interest rates are too much, they’ll use up your savings. It’s advisable to check for local government incentives on solar panels. Such rebates and incentives can reduce your expenditure.

Leasing Vs. Buying Solar Panels - Solar Panels Network USA

If you’re considering solar, one of your first questions will be whether to buy or lease. Both options have merit, but the answer is clear for most homeowners: buying wins long-term. This guide breaks down the pros, cons, and financial reality of each option so you can make an informed decision.

Contents

1 The Quick Answer
2 Buying Solar: How It Works
3 Buying Pros and Cons
- 3.1 Pros of Buying
- 3.2 Cons of Buying
4 Leasing Solar: How It Works
5 Leasing Pros and Cons
- 5.1 Pros of Leasing
- 5.2 Cons of Leasing
6 Solar Loans: The Middle Ground
- 6.1 Key Advantages Over Leasing
- 6.2 Key Disadvantages vs Buying Outright
7 Home Sale Implications
8 Who Should Lease vs Buy?
- 8.1 Lease Makes Sense If:
- 8.2 Buy (Cash or Loan) Makes Sense If:
9 Frequently Asked Questions
10 Summing Up

The Quick Answer

For homeowners planning to stay in their home 7+ years, buying solar panels (either outright or with a loan) beats leasing financially. You keep the 30% federal tax credit, all future electricity savings are yours, and your home value increases. Leasing makes sense only if you have poor credit, rent your home, or are certain you’ll sell within 2-3 years and need zero upfront cash.

Buying Solar: How It Works

Upfront Cost

A typical 6 kW residential system costs $18,000-$20,000 installed before the federal tax credit. If you pay cash, that’s the amount. If you finance with a solar loan, you spread the cost over 5-20 years at 3-8% interest.

Federal Tax Credit

You claim 30% of the installed system cost as a federal tax credit—available through 2032 under the Inflation Reduction Act. On an $18,000 system, that’s a $5,400 credit, cutting your net cost to $12,600. This is one of the biggest financial advantages of buying: with a lease, the installer claims the credit, not you.

Home Value Increase

Studies show homes with owned solar systems sell for roughly $15,000 more than comparable homes without solar (Lawrence Berkeley National Laboratory). Leased systems typically add little to no home value.

Long-Term ROI

Most homeowners reach full payback in 7-12 years, then enjoy 15-20+ years of nearly free electricity. Total return on investment over 25 years typically exceeds 200%.

Buying Pros and Cons

Pros of Buying

30% federal tax credit (saves $5,000-$8,000)
All electricity savings are yours
$15,000 home value increase on average
Full ownership; no long-term contracts
Qualifies for state and local incentives
Payback in 7-12 years for most homeowners
No annual payment escalators

Cons of Buying

High upfront cost, even with financing ($120-$200/month payments)
Responsible for maintenance after warranty expires
Requires good credit for low-interest financing
If you sell within 5-7 years, payback may not fully materialize

Leasing Solar: How It Works

With a lease, a solar company owns the system and installs it on your roof. You pay a monthly fee ($60-$150) to use the electricity it produces. The key differences from buying:

Who Gets the Tax Credit?

The solar company claims the 30% federal ITC, not you. They factor that into the lease payment, but you never directly benefit from the $5,000-$8,000 credit—that’s a key disadvantage.

Maintenance and Support

The solar company owns and maintains the system. Panel failures, inverter replacements, wiring issues—all handled by the lessor at no cost to you.

Lease Term and Escalators

Leases typically run 20-25 years with monthly payment escalators of 2-3% per year. That means your payments grow over time while your savings benefit erodes slightly each year.

Home Sale Complications

If you sell while leasing, the buyer must assume the lease or you buy out the remaining balance (typically $8,000-$15,000). Many buyers balk at inherited leases, which can slow or kill a sale.

Leasing Pros and Cons

Pros of Leasing

$0 upfront (no cash required)
No maintenance or repair responsibility
Works if you have poor credit
Simple: lessor handles all service and monitoring

Cons of Leasing

You forfeit the 30% federal tax credit
20-25 year contracts lock you in
Payments escalate annually (2-3%/year)
Complicates home sales (buyer must assume lease)
Total savings are lower than buying (15-30% bill reduction only)
No home value increase

Solar Loans: The Middle Ground

There’s a third option gaining popularity: solar loans. You borrow to purchase the system but own it from day one.

Key Advantages Over Leasing

You own the system and keep the 30% federal tax credit
You qualify for state and local incentives
After payoff, electricity is nearly free
No home sale complications
Monthly payment often equals or is less than lease payment

Key Disadvantages vs Buying Outright

You pay interest (adds 15-25% to total cost over loan life)
Monthly payments continue for 5-20 years
Responsible for maintenance after warranty expires

Solar loans are ideal if you can’t afford the full upfront cost but have good credit (650+ FICO). You get ownership benefits without the large cash requirement.

Home Sale Implications

Buying (Most Advantageous)

Owned solar increases home value by ~$15,000 on average. The system transfers to the new owner with warranties intact. No complications.

Leasing (Complicates Sale)

The buyer must assume the lease (taking over your monthly payments) or you buy out the balance ($8,000-$15,000). Most homebuyers avoid inherited leases and may demand a price reduction to compensate.

Solar Loan (Clean Transfer)

Solar loans are personal (not secured by the property), so the buyer doesn’t assume your debt. You’d typically pay off the remaining balance at closing. Clean transfer, no buyer complication.

Who Should Lease vs Buy?

Lease Makes Sense If:

You have poor credit and can’t qualify for a loan
You need $0 upfront and can’t afford payments
You want zero maintenance responsibility
You rent your home (with landlord permission)

Buy (Cash or Loan) Makes Sense If:

You plan to stay in your home 7+ years
You have good credit (650+ FICO)
Your electricity bill is $100+/month
You want to maximize financial return
You want the system to increase home value
You want to avoid home-sale complications

Frequently Asked Questions

Can I buy out my solar lease early?

Yes, usually. Most solar leases allow early buyout at fair market value—typically $8,000-$12,000 depending on system age and remaining term. If you decide you want to own the system, buyout is possible, but you’ll pay more than if you’d bought outright from the start.

Does the federal tax credit apply to solar leases?

No. The 30% federal ITC applies to owned systems only. With a lease, the solar company claims the credit. They don’t pass it directly to you—it’s factored into the lease payment calculation. You never directly receive the $5,000-$8,000 benefit.

If I lease, can I take the panels when I move?

No. With a lease, the solar company owns the system. You can’t take it when you move. You must either transfer the lease to the buyer, buy out the remaining balance, or have the lessor remove the system. The system stays with the property.

Are solar loans available to most homeowners?

You typically need a 650+ FICO score for low-interest rates (3-7%). With a score below 640, you may not qualify, or you’ll face rates above 10%. In that case, leasing might be your only option. Home equity loans or HELOCs are another route if you have substantial equity.

What happens to my solar lease when I sell my home?

The buyer must assume the lease (taking over your monthly payments and remaining contract term) or you pay the buyout to terminate it. Many buyers resist inherited leases and may demand price concessions. Make sure to disclose the lease details early in any sale negotiation.

What happens after my lease ends?

At the end of the lease (typically 20-25 years), you can renew at new terms, request removal of the system at no cost, or buy it out at fair market value. Most homeowners at that stage either renew or have the system removed, since 20+ year old panels have reduced efficiency.

Is leasing solar ever worth it?

Leasing is worth it for homeowners who can’t qualify for a loan, need zero upfront cost, and want no maintenance responsibility. The financial return is lower than buying, but for some situations, having solar at all—even leased—beats paying full retail electricity rates for 20 years. Just go in with eyes open about the limitations.

Summing Up

For most homeowners, buying solar (cash or loan) beats leasing by a significant margin. You capture the 30% federal tax credit, own an appreciating asset, and maximize long-term savings. Leasing makes sense only if you have poor credit, rent your home, or need absolute zero upfront cost with zero maintenance responsibility. Solar loans split the difference: you own the system and get the tax credit while spreading cost over time.

Ready to get quotes from local installers? Call (855) 427-0058 or get a free quote to compare options in your area.

Updated May 2026