There are a number of factors to consider when comparing leasing vs purchasing a solar system, including the upfront cost, monthly payments, tax benefits, and long-term savings.
Leasing Your Solar System
Leasing a solar system has a few benefits. In the section below we are going to see what are the pros and cons of leasing solar panels.
For starters the monthly payments for a leased system are often lower than the monthly payments a homeowner would make to a utility company. Solar leases are typically a zero down option to go solar, no need for a large down payment.
Leases also do not affect a homeowners debt-to-income ratio, which can be beneficial depending on your current and projected future situation.
Some companies, such as SunPower, offer production guarantees with their leases that compensate the homeowner if their solar system doesn’t produce the expected amount of kWh in a given year. Not every solar lease is like this, so its best to speak to a solar consultant to learn more.
How much is a solar lease per month?
This is a very slippery question, and in all honesty there is no one answer, but generally its less than your average electric bill with your local power company.
The cost of a solar lease is going to depend on a great number of things, such as:
- Where do you live?
- How much power does your home consume annually?
- Do you plan to buy an electric vehicle in the future?
Once you answer these questions you can speak with a solar advisor who can give you an idea of your monthly costs.
Owning Your Solar System
Owning a solar system outright has some distinct advantages.
First, you’ll receive the full benefit of all the energy your system produces, rather than just what’s left after your lease payment is made. Depending on your utility company you also may get a check back at the end of the year in what is commonly known as a “true up.”
Second, owning generally results in lower long-term costs since there are no leasing fees or other ongoing charges.
Finally, if you sell your home or business, you can transfer the ownership of the solar system to the new owner.
There are a few things to consider when deciding whether to pay cash or finance your solar system. If you have the cash on hand, paying upfront will likely save you money in the long run. However, if you don’t have the cash available, financing can be a good option. There are a number of different financing options available for solar systems, so it’s important to compare terms and find one that works best for you.
Federal Investment Tax Credit for Solar
The Solar Investment Tax Credit (ITC) is a federal tax credit that applies to both leased and owned systems, however the homeowner takes advantage of the tax credit on a purchase and the financing company / bank takes advantage of the tax credit on a lease. This is one of the largest differentiators between leasing vs purchasing a solar system.
The ITC allows you to deduct 26% of the cost of your solar system from your federal taxes. The ITC is set to decrease to 22% in 2023, so if you’re considering solar, it’s important to act soon.
Leasing vs Purchasing a Solar System: which option will save you the most over the next 25 years? The answer will likely depend on your current tax liability and which company you lease or purchase from. The benefits of owning solar panels go beyond saving money; peace of mind and energy independence are the real reasons to go solar.
Talk to one of our solar professionals to learn more about your options and find the best solution for you.