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Solar basics

Solar Panel Leasing Pros and Cons

16 Jan 2025 10 min read

When we face big decisions like buying a house or a car, we often have the option to rent instead of owning. Solar panels are no different. You can “rent” them through what’s called a solar panel lease and you’re on your way to enjoying solar energy.

But whether or not a solar lease is a good idea depends entirely on your circumstances. We do have a clear stance on it (Spoiler: We’re not huge fans). Still, there are merits worth considering that might make it a viable option for some.

In this article, we’ll go into solar panel leasing pros and cons so you can better understand when this option might work (and when it’s better to look for alternatives), and to help you make the right call for your transition to solar energy.

What is a Solar Panel Lease?

A solar panel lease is an agreement where you pay a solar company a fixed monthly fee to use a solar energy system installed on your property.

Lease terms usually last 10 to 25 years. As to how much exactly you’ll be paying per month, it’s determined based on the size of your system or the expected yearly energy your panels produce.

A baseline figure you can expect would be $50 to $250 dollars a month.

If the solar leasing company offers a fixed payment structure, you can expect to pay the same amount throughout the entire lease – the ideal scenario. However, others impose annual escalators that increase your monthly payments each year.

At this point, solar panel leasing seems just like any standard rental agreement, right? People rent things all the time without issues and, in many cases, it’s a practical and wise course of action – so why not solar panels?

Admittedly, we’re a little biased against solar leases – they’re basically like pulling a rug out from under your feet. And we recommend that you, as much as possible, buy (or at least finance/loan) your solar panels instead.

You’ll see why as we explore the pros and cons of solar panel leasing, but ultimately, we’ll leave it up to you to be the judge in the end.

Pros of Solar Panel Leasing

No Upfront Costs (and “Instant” Savings)

The main benefit – and the primary selling point – of solar leases is that, in almost all cases, you pay $0 upfront.

Especially when we look at the cost of solar panels, the more solar leasing can make sense. On average, a residential solar system can cost around $20,000 – and that’s definitely not pocket change.

So, if you’re someone excited to enjoy the benefits of solar but don’t have the capital to buy a system outright, this is an option you’ll definitely want to think about.

“Instant” Savings

Solar lease payments are designed to be cheaper than the cost of electricity from the grid, especially in areas with high utility rates. In that sense, leasing gives you lower energy costs right off the bat.

Let’s talk numbers to illustrate this further.

The average price of electricity in the US is $0.17 per kilowatt-hour (kWh), while the average monthly electric consumption of US households is around 899 kWh monthly. That leaves us with an electric bill amounting to roughly $153 per month (0.17 x 899).

Now, if your solar lease costs you a flat $100 per month, that’s a monthly savings of $53 – about 34% less than your utility bill. Over a year, that adds up to approximately $636 in savings, all without any upfront cost.

With that said, these instant savings only hold true if your energy consumption stays consistent and doesn’t exceed what your solar panels can produce. This is something you should factor in when deciding to move forward with a solar lease.

Avoid Installation and Maintenance Fees

When you lease solar panels, the installation and maintenance responsibilities fall on the solar company, not you, because the company owns the system.

Typically, the solar company will monitor your system remotely and send technicians if any issues come up, making the entire process hassle-free for you.

On the other hand, homeowners who buy and own their systems must shoulder the costs of installation, repairs, and maintenance themselves.

For some, it’s not even the cost that’s the main concern (though repairs and maintenance can definitely add up and take a toll on your wallet). Rather, it’s avoiding the headache of finding a trusted professional that can get the job done.

Cons of Solar Panel Leasing

Costs More in the Long Run

All is well if you’re on a flat-rate solar lease. The real issue arises when your agreement includes annual escalators or other additional fees, typically ranging from three to five percent increases in your monthly payments.

That means, if you’re paying $1,200 annually ($100 per month) for the lease, a three percent increase would push the cost to $1,236 in year 2, $1,273 in year 3, and so on.

Your solar lease will likely still cost less than utility rates, even as those rates increase annually. However, the fact remains that you’ll face rising costs each year, just as you would with electricity bills.

Missed Opportunity for Big Savings

As mentioned earlier, solar leases are designed to cost less than utility rates, so it’s almost certain you’ll save on your electric bills. This, however, is not what we mean when we talk about big savings

Let’s break it down with some simple calculations and compare leasing to buying a system outright, assuming the following values to be the case:

  • Solar System Cost (after tax reduction): $20,000
  • Average Monthly Electricity Bill Before Solar: $150
  • Solar Lease Payment: $100/month
  • System Lifespan: 25 years

For simplicity sake, let’s also assume your solar system offsets 100% of your electricity needs, with a payback period of 11 years for an outright purchase. Here’s how the savings stack up over time:

Year

Solar Lease

Buying Outright

Cumulative Savings

Cumulative Savings

Investment Remaining

Net Savings

1

$600

$1,800

$18,200

$0

5

$3,000

$9,000

$11,000

$0

10

$6,000

$18,000

$2,000

$0

11

$6,600

$19,800

$0 (payback achieved)

$0

15

$9,000

$27,000

$0

$7,200

20

$12,000

$36,000

$0

$16,200

25

$15,000

$45,000

$0

$25,200

As shown in the table, with a solar lease, your savings cap at around $15,000 over 25 years. On the other hand, if you buy your system outright, you’ll essentially enjoy “free” energy after year 11, resulting in net savings of $25,200 by year 25.

That’s roughly a staggering $10,000 difference – the kind of big savings you miss out on when you choose a solar lease.

Solar Rebates or Tax Credits Won’t Apply

You may have heard about those valuable solar rebates or tax credits that make solar systems more affordable.

The federal tax credit lets you deduct 30% of the cost of your solar system from your federal taxes, while state and local rebates offer cash incentives for installing solar.

Unfortunately, these benefits won’t apply to you if you lease your solar panels. That’s because these incentives are meant for the system’s owner – the solar company, not you.

Selling Your Home Becomes Complicated

Selling a house with solar panels generally means more profit, and it’s also likely to be quick and easy thanks to the savings and other benefits solar provides. This, however, is no longer the case when you lease your solar panels, and here are three reasons why:

#1 Buyers are hesitant to take on a lease transfer.

Most people want to avoid taking on additional debt. So, the thought of having to assume a solar lease along with the mortgage or loan would more likely than not be a deal breaker.

You can expect buyers to negotiate a much lower price, essentially excluding the value of the solar lease from the home’s price, or insist you pay off the lease entirely before closing – which in itself is a challenge considering that…

#2 Opting out of the solar lease comes with a hefty price.

Getting out of a solar lease before its term ends means buying out the remaining contract value, paying early termination fees, and possibly covering panel removal costs – all of which can add up to a staggering amount that might make you regret not buying your system outright in the first place.

And the unfortunate saga of not owning your solar panels doesn’t stop there. Some leasing companies lock you into the contract for a set number of years (around 5 to 7 years) before buyouts are even allowed.

So, unless you’ve reached that point, you’re basically stuck. And you’ll need to get more creative with your offer to close the deal.

#3 Buyers find lease transfers confusing and a hassle.

Even if you manage to find someone who can afford to take on the lease, those potential buyers will still have to go through the leasing company’s credit check process.

Extra steps mean extra effort and extra mental bandwidth – things that are a real turn-off no matter how you look at it during the selling process.

Delays and Poor Customer Service

We’re not saying this happens with every solar lease agreement. But delays, poor customer service, and even companies going “MIA” are unfortunately not uncommon in the solar leasing industry.

One major reason is that many of these leasing companies act as intermediaries. They don’t manufacture the panels or perform installations themselves but, instead, partner with third-party certified solar installers.

As a consequence, there’s an inherent disconnect in the chain of responsibility. The leasing company is effectively tied to the solar installer’s schedule, workload, and resources, often resulting in delays, miscommunication, and sometimes, even finger-pointing when issues arise.

Ultimately, it’s you, the customer, who ends up dealing with the hassle and headache.

What are Alternatives to Leasing Solar Panels?

We always stand by this: If you can afford it, buy your solar panels outright. It’s by far the best option.

If that’s not possible, consider solar financing or a loan. While it may leave you with slightly lower savings than buying outright, you’ll still come out ahead compared to a solar lease.

In both cases, you own your panels, which is a huge advantage in itself, given the benefits we’ve already discussed and the headaches you’ll avoid.

You might have heard of Power Purchase Agreements (PPAs) as an alternative to solar leases. But when you look into it, they’re pretty much set up the same way.

The only difference is that instead of renting the system, you pay a monthly fee for the specific power your panels generate. It’s not much better, and we’re still not fans of it either.

If, for some reason, you do decide to go with a solar lease, aim for an arrangement where you pay a flat monthly rate or one with an annual increase as close to zero as possible. That way, you’ll minimize your losses as much as you can.

Thinking About Working With a Certified Solar Installer?

Working with a certified solar installer lets you enjoy the benefits of owning your solar panels while saving you the burden of installing and maintaining the system yourself.

At Quote for Solar, we connect you with reputable solar professionals in your area who offer excellent customer service and personalized guidance throughout the solar transition process – from design and installation to maintenance and other after-sales support.

Simply request a quote from us and we’ll provide you with three competitive solar quotes you can easily compare.


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portrait.png Jan Watermann Co-Founder, Quote for Solar

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