6 Pros and Cons of Leasing Solar Panels
While you can avoid upfront costs by leasing solar panels, giving up a significant tax credit is just one drawback of leasing solar panels instead of buying
Going solar is becoming increasingly popular across the country, and for good reason. Installing solar panels can increase your home’s value by over 4% and help you save $10,000 to $30,000 across their lifespan, according to EnergySage. While the initial costs of solar panel installation may be out of reach for some homeowners, solar leases have made going solar possible without the upfront cost. Giving up ownership means giving up a significant share of the profits of going solar, you may find it more beneficial to lease your solar panels. Here are six pros and cons of leasing solar panels so that you can decide whether or not this energy-efficient investment is worth it for your home.
What Is a Solar Panel Lease?
Much like renting a car or a home, a solar panel lease is a financial agreement with a solar energy company where you choose to pay a fixed monthly amount to receive the energy that comes from the solar panels on your property. You don’t own the solar panels, but you also aren’t required to pay for installation, maintenance, or repairs. Plus, you don’t have to cover the hefty upfront costs of installing a solar farm.
Pros of Leasing Solar Panels
Renting exists for a reason—the option to lease is not a new financial exchange. And, as with any type of large investment, sometimes it’s just not possible to put down large payments or installments for an expensive but important asset. This can certainly be the case for solar panels.
With this in mind, here are a couple of benefits of leasing solar panels.
1. You Avoid Upfront Costs
Solar panels can cost upwards of $30,000—though most cost between $1,900 and $13,600, with an average cost of $7,750. Most homes require 10 to 20 panels to completely cover the costs of their electricity, so prices vary by household energy consumption.
If the steep cost of owning solar panels sends you wobbling on the fence, leasing is another option that may work better for you. The cost of leasing solar panels upfront is often $0. Compare that to the cost of buying a solar panel upfront, and you might find that this is the best choice for your budget.
2. You Can Avoid Installation and Maintenance Fees
No one likes installing and maintaining a piece of equipment—especially if you’re unfamiliar with the installation process or troubleshooting any issues that may arise. To make it easier on homeowners, some leasing programs have free installation, maintenance, monitoring, and warranties on the rented panels.
Purchased solar panels, on the other hand, often have the following warranties:
25-year performance warranty
10- to 12-year manufacturer warranty
Five-year workmanship warranty
Having a general warranty through the duration of your solar panel lease can save you big time, as owned solar panels can have issues after these various warranties expire, leading to unexpected repair costs.
Homeowners end up spending between $195 and $1,225, or an average of $710, to repair solar panels. You can cover these expenses if you choose the right leasing program. As with all major investments, speak to a solar panel company near you to learn about the kinds of programs in your area before deciding.
Cons of Leasing Solar Panels
You know what they say: every rose has its thorn. When it comes to leasing solar panels, there are a few cons that you should keep in mind before you seal the deal.
1. It Costs More in the Long Run
Though you save on upfront costs when you lease a solar panel, you end up paying more over time. Just like renting a house instead of buying one, the costs may be cheaper initially, but purchasing an asset and having ownership leads to more significant savings in the end.
To put this into context, it takes about 15 to 25 years to pay off ownership of solar panels. Once you’ve paid off a solar panel, you get free electricity for 25 to 40 years, depending on how quickly you pay it off. Alternatively, if you lease your solar panels, you don’t get free electricity over time.
2. You Don’t Receive Rebates or Tax Credits
In addition, a solar panel lease does not receive the 30% federal tax credit or any local incentives that may exist in your community for choosing an energy-efficient option for your home.
On the other hand, if you purchase your solar panels, the Office of Energy Efficiency and Renewable Energy states that ownership of solar panels qualifies you to receive the following tax credits:
30% tax credit for systems installed before 2020
26% tax credit for any solar panel systems installed from 2020 to 2022, and
22% tax credit for systems installed in 2023
Keep in mind that the tax credit might expire in 2024 if Congress chooses not to renew it.
3. Having a Lease Can Scare Away Homebuyers
A lease can cause prospective homebuyers who don't understand or want the long-term obligation to turn away from your property. Think of it like this: a lease term for solar panels is for 20 years. With the average home selling in five to seven years, that means a potential buyer gets both a home and lease obligation.
4. You Miss Out on a High ROI
When you lease solar panels, you lose out on annual returns on investment of 10% to 30%, depending on your location, state incentives, and property characteristics. Therefore, if you hope to make your house easier to sell at a higher price, it’s more beneficial for you to own solar panels.