Solar System Lease vs. Buy

The price of solar panel systems has never been lower, while the cost of power purchased from electric utilities continues to rise. Between the environmental benefits and cost savings, there has never been a better time for installing solar power in your home. Because the cost of installing solar can be significant, homeowners have a choice to make about how they will pay for their new solar panel system. Here are three options:

Cash Purchase

An outright purchase gives the homeowner the fastest return on investment (ROI), typically in 4-6 years. The energy savings equals all or most of the current electrical bill and the savings begin immediately. A federal tax credit of 30% of the system cost can be claimed in the same year that the system is installed. If the solar system generates more power than is being consumed, you get full retail credit applied to your utility account. For APS Solar customers, these savings typically pay back the cost of the system within 4-6 years.

Financed Purchase

APS Solar works with several banks who offer loans specifically for solar power systems. While the financing cost will make the ROI time slightly longer than it would be for a cash purchase, the energy savings still begin on day one. The homeowner may also take advantage of the 30% federal tax credit. For homeowners who expect to sell their home, an owned system adds to their equity and provides an added value to buyers.

Leased Systems

Leased systems are owned by the company that provides the system, rather than the homeowner. For this reason, the homeowner can not take the 30% federal tax credit. Typically, power costs are 15-30% lower than PG&E, however this cost will increase over the life of the lease. Solar leases usually run for 20 years and include the cost of maintaining the system. Because the system is owned by the leasing company, it does not automatically transfer with the sale of the home. In fact, the lease becomes an encumbrance on the title of the home. It does not increase the equity value of the home and the new owners must agree to assume the lease.

Power Cost Savings Compared

Take a look at the chart below. It shows the estimated cost of electricity over the expected 25 year life span of a solar panel system, for a homeowner who currently spends $200 per month buying power from PG&E.

If the homeowner does nothing, the cost of power is expected to rise at about 5% per year until at the end of 25 years, they are paying $645.02 per month!

With a leased system, the homeowner can expect the cost of power to initially drop to $160 per month. However, it will still continue to increase at about 3% per year, topping out at $325.25 per month.

The homeowner who buys a solar power system will pay approximately $200 per month to finance the system for 5 years. In many cases the cost of power will then drop to zero. However, in our example the homeowner is still buying $10 worth of electricity per month from PG&E, which increases at 5% per year. Even after 25 years the homeowner is only paying $25.27 per month.

It’s even more impressive to compare the total costs of power over 25 years:

  • Buying from PG&E - $114,545.04
  • Leased solar system - $70,001.79
  • Purchased solar system - $15,967.91

Cost of Power

Comparing Benefits and Drawbacks

Benefit/Drawback Purchased System Leased System
Tax Benefits

30% federal tax credit available to the homeowner through 2021.

For financed systems, the interest on the loan may be tax deductible.

As the owner of the system, the leasing company takes the 30% federal tax credit.

Lease payments are not tax deductible.

Monthly costs For financed systems, interest payments are fixed. Lease contracts typically contain a payment escalator that is chosen by the customer.
Reduction of your energy bill All or most of your current bill is eliminated, depending on the installed system capacity and energy usage. Typical cost savings of 15%-30% versus buying power directly from the electric utility.
System configuration The solar system can be custom designed for the structure and property. Ground mounted panels or shade structures are also available if roof mounting is not appropriate. Rooftop mounted panels only. The roof of the home must receive adequate sunlight or the cost savings will be minimal.
When home is sold The solar system increases the value of the home and enhances saleability. This increase in value helps recover the cost of the system. If the home buyer cannot or will not assume the lease, you are still obligated to the leasing company for the term of the lease. As an encumbrance on the home’s title, the system is a liability to the buyer, not an asset.
Ownership/Equity after completion of financing (typical 5 year payoff) After completion of financing, a solar power system will continuing producing free power for many years. Solar panels are typically guaranteed for 25 years and have a life expectancy of 40 years or more. Inverters have a 10 year warranty with a life expectancy of 15-20 years. Depending on the terms of the lease, you may have no equity or ownership of the solar system. You may have the option of extending lease payments, or purchasing a 20 year old system.
System upgrades A purchased or financed system may be upgraded at any time, if additional capacity is needed. Typically, no modifications may be made to the system for the duration of the lease.
System Maintenance A properly installed solar system needs virtually no maintenance, other than periodically rinsing off the panels. If a panel is physically damaged, your system should be covered by homeowner’s insurance. All maintenance and repairs are performed by the leasing company.


Today’s solar panel systems deliver reliable, inexpensive electricity for almost any home. Homeowners have several options when it comes to paying for a system, including outright purchase, bank loans and leasing. Those who own their systems will realize the fastest return on their investment and greatest total savings. But no matter how the system is paid for, solar panel systems result in lower energy costs and contribute to a healthy environment.

Contact APS Solar today and let us help you save on your energy bills.

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