Going solar at home can be a no-brainer if you want to do what's best for the environment and your energy bills. However, deciding exactly how to go solar can be a much tougher decision and require some critical thinking.
Specifically, we are talking about a question as old as time—or, well, really just about 15 years or so. Should you buy or lease your solar panels?
In this article, we outline the key differences between buying and leasing solar panels so that you can make a more informed installation decision.
See how much you can save by going solar with Palmetto
Leasing Solar Panels
Like with personal vehicles, a solar panel lease agreement enables you to lease, or rent, a renewable energy system for a fixed monthly fee. In an auto lease, you get to drive the car. In a solar lease, you receive long-term energy savings as the panels’ solar energy production lowers your electricity bill.
Pros of a solar lease
The exact financial benefits of leased solar panels vary for every homeowner. Generally speaking, the key advantages of a solar lease are:
- Little or no upfront costs during design, installation, and interconnection
- Complete lifetime system coverage with no additional fees for maintenance
- Instant electric bill savings with fixed monthly payments to lower long-term energy costs
Cons of a solar lease
Before you sign with your leasing company, there are a few important things to know about solar panel leases. Potential drawbacks of solar leasing include:
- Long-term contracts that can complicate real estate deals when selling your home
- Lower lifetime savings potential versus buying solar panels outright
- Missing out on most tax incentives and rebates
Buying Solar Panels
Before leasing solar panels, consider whether buying your system is possible. Although making a cash purchase for solar panels can be difficult, doing so usually delivers the most lifetime savings. Most solar buyers finance their purchases with a solar loan.
Pros of buying solar panels
If you purchase solar panels, you can unlock many benefits beyond reducing your carbon footprint. As a homeowner in the US, this includes:
- Qualification for the federal tax credit and other solar incentives
- Higher long-term savings potential compared to a solar lease
- Increased property value
Cons of buying solar panels
When buying solar panels, your experience will depend tremendously on your installer and the terms of your contract. Although not true for every transaction, potential downsides to buying solar panels include:
- Maintenance responsibilities with repair liabilities beyond included warranties
- Loans may require a down payment or large monthly installments to maximize value
- High interest rates can limit long-term savings
See how much you can save by going solar with Palmetto
An Alternative to Utility Company Electricity Bills
When you install solar panels (purchased or leased), you can achieve lower and more predictable energy expenses than the variable and rising costs of grid-supplied electricity. After substantial increases in the first half of the decade, the International Energy Agency expects the average price for grid power at home to continue rising through 2025 and beyond.
The cost of leasing solar panels vs. your electric bill
Leasing solar panels enables electricity bill savings without any upfront cost. The true value of a solar lease, however, is that there are rarely any out-of-pocket lifetime expenses beyond your monthly lease payments.
Therefore, a solar lease presents a more predictable alternative to ongoing electricity bill payments over its multi-decade lifetime.
To illustrate, let's do a little bit of math.
At the beginning of 2024, the average retail price is 12.78 cents per kWh. From 1990 to 2023, this figure rose from 6.57 cents to 12.72 cents, an average annual increase of 2.83%, a rate similar to the price escalators in most solar leases.
When utility rates rise faster than lease escalators, homeowners stand to save even more money over the lifetime of their lease.
Cash flow of an outright solar purchase vs. electric bill
If you purchase a solar panel system outright, your cash flows will be relatively simple.
Let's say you buy solar panels for $24,000 and qualify for a federal tax credit worth 30% of your total project costs. In this scenario, you would pay $24,000 upfront and receive federal tax credits worth $7,200, resulting in a net investment cost of $16,800.
Your solar panels would "pay for themselves" once you've reached $16,800 in utility bills avoided.
With 10,800 kilowatt-hours of annual electricity consumption at 12.78 cents per kilowatt-hour, the average American home pays roughly $1,380.24 for grid-supplied electricity in 2024. Therefore, if the above system lowered that average bill to zero, it would "pay for itself" in 12.17 years of energy bill offsets or even sooner if electricity rates continue to rise as expected.
Cash flow of solar financing vs. electric bills
When you finance solar panels, your monthly payments depend on a few factors: whether you elect to make a down payment, the length of your agreement, and the total price of your investment after interest and lender fees.
The key benefit of a solar loan (compared to a lease) is that you’ll eventually own your solar panels outright. And, in most cases, your solar panels will continue to produce electricity well after you've paid them off in avoided utility bills, leading to further lifetime savings.
Before you purchase solar panels, it is critical to know that you may be responsible for any repair or maintenance costs outside of manufacturer or installer warranties. For this reason, read all of the fine print before signing your contract and working with a solar company that offers lengthy, comprehensive coverage.
Making the Decision: Lease or Buy?
So, to lease or buy your solar system? That is the question.
Either option may work, but deciding which is more valuable will depend on your unique circumstances.
While paying outright for your panels will likely deliver the most long-term savings, choosing a loan, lease, or PPA with no upfront cost may work best for you. Reach out to a Palmetto Solar advisor for personalized guidance and assistance.
Every homeowner is different, but here are a few scenarios in which buying or leasing your solar system may make more sense.
Solar leasing may be a better option if…
- You do not qualify for the full federal tax credit (as well as local tax credits).
- You prefer third-party ownership that includes all solar system maintenance.
- Your financing options are not worth it due to high interest rates or extended terms.
Buying solar panels may be a better option if…
- You qualify for solar tax credits to reduce the total cost of your investment.
- You plan to move within the operating lifetime of the solar panel system.
- You can save more on utility bills over time than with a solar panel lease agreement.
Going Solar With Palmetto
With services spanning half of the continental US, Palmetto Solar offers custom home solutions for purchasing, financing, and leasing solar panels.
The LightReach Energy Plan
When you choose Palmetto's LightReach Energy Plan, you can avoid upfront costs and guarantee energy savings. When you enroll in LightReach, Palmetto will own the system and be responsible for its performance while you reap the cost-saving benefits of solar.
Your Palmetto LightReach Energy Plan means consistent monthly payments designed to reduce your electricity bill. You’ll also get a 90% production guarantee and 25 years of system monitoring and maintenance.
Explore solar leasing and PPAs with Palmetto.
Purchasing a solar panel system with Palmetto
If tax credits are calling your name and you decide to purchase solar panels, Palmetto offers competitive prices, comprehensive protection, and unparalleled customer service for homeowners in the US. When you buy solar panels with Palmetto, our team will help facilitate the ideal purchase for your property with flexible system design and multiple options for financing and service.
Palmetto Protect system monitoring and maintenance
To safeguard your renewable energy investment, the Palmetto Protect plan includes industry-leading warranty coverage for solar panels, inverters, workmanship, and roof penetrations.
All Palmetto Protect customers benefit from proactive remote system monitoring, real-time energy savings insights, and 5-star customer service.
In the Performance Plan powered by Omnidian, Palmetto Protect guarantees your panels will generate at least 95% of the solar energy production estimated in your contract.
Palmetto customers with a LightReach Energy Plan are automatically enrolled in Palmetto Protect for the duration of their agreement.
Summary and Next Steps
Whether you lease solar panels or invest in your very own renewable energy system, it's all about being in the green—that is to say, solar panels can help you save money on your home's electricity bills with emission-free solar power.
Choosing to buy or lease your solar panels is a critical decision that will ultimately impact your savings and overall experience.
If you want to learn more about buying or leasing panels, explore your possible savings with Palmetto’s interactive solar benefits calculator, or contact a solar professional today.
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Note: This content is for educational purposes only. Palmetto does not provide tax, legal, or accounting advice. Please consult your own tax, legal, and accounting advisors.
Brian ChurchWriterBrian is a writer, NABCEP PV associate and outdoor enthusiast living in Denver, Colorado. As a freelancer, Brian has written hundreds of articles to help individuals, businesses and our planet benefit from solar power and sustainable energy systems.
