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Check out our detailed guide to learn about leasing solar panels, including the pros and cons of a solar lease and alternative financing options. Solar Panel Kits
Leonardo David is an electromechanical engineer, MBA, energy consultant and technical writer. His energy-efficiency and solar consulting experience covers sectors including banking, textile manufacturing, plastics processing, pharmaceutics, education, food processing, real estate and retail. He has also been writing articles about energy and engineering topics since 2015.
Tori Addison is an editor who has worked in the digital marketing industry for over five years. Her experience includes communications and marketing work in the nonprofit, governmental and academic sectors. A journalist by trade, she started her career covering politics and news in New York’s Hudson Valley. Her work included coverage of local and state budgets, federal financial regulations and health care legislation.
Homeowners who are considering solar panels have multiple buying options, including a cash purchase, solar loan or leasing solar panels. While a single cash purchase can be viable if you have the funds available, there are also ways to go solar at zero upfront cost — like with a solar lease.
With a solar lease, you pay a solar company a monthly fee to use solar panels without owning the equipment directly. In this article, we at the Guides Home Team will cover what you need to know about leasing solar panels, including what a solar lease is and the pros and cons of this financing option.
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Solar leasing involves paying a monthly fee to use solar panels installed on your property but owned by the lease provider. You can use all the electricity generated by the solar energy system, and your monthly power bill decreases as a result. Leasing typically follows these guidelines:
A solar lease makes sense financially if you cannot afford a high upfront cost, and your monthly payment would be lower than your power bill savings. In this case, your energy savings would offset your out-of-pocket cost and result in net savings. Leasing solar panels may not be the best option if the monthly payment is higher than or equal to your utility bill savings. If local electricity costs decrease even slightly, your solar lease can end up being more expensive than using the grid.
Like any other contract, a solar lease has terms and conditions that you must read carefully. Your lease providers may let you keep the solar panels at the end of the contract, but there may be cases where you must purchase the system in order to keep it.
Since the solar lease provider assumes all financing and maintenance costs, your contract will likely have a penalty for early termination. However, lease providers may give you the option of ending the contract early if you purchase the solar panels at a specified price.
Like with any purchase decision, a solar lease has advantages and disadvantages . The main benefit is delegating all the financing, installation and maintenance costs to a provider. So if your system needs a repair during your lease term, your provider is responsible. The downside is having to use your energy savings to cover monthly payments. You also miss out on financial benefits such as federal and state tax credits, which only the legal system owner can claim.
Another downside to solar leases is that, if you decide to sell your home before your leasing contract ends, you’ll likely run into a few issues.
You may want to end your solar lease early iIf you’re moving to a new home, are dissatisfied with the terms of the lease or decide you want to own your panels.
Unfortunately, solar lease contracts typically last between 15 and 25 years, and it’s rarely easy to walk away from one without taking legal action . Many providers don’t allow homeowners to terminate a lease for a small fee . Instead, there are typically three options for ending your solar lease early:
A solar lease is a long-term commitment. If you plan to move before your agreement expires or aren’t ready to enter a decades-long contract, you may want to reconsider entering into a solar lease. If you still decide you want a solar lease, make sure to read the details regarding early termination, as cancelling can be costly.
In most cases, a solar lease provides lower monthly payments but also lower savings than a cash purchase or solar loan. A lease helps you avoid the upfront cost of solar panels, which cost around $15,000 to $20,000 on average. You can also avoid upfront costs with a solar loan, but the financial requirements are more demanding than with solar leases. For example, a solar loan normally requires a minimum credit score and a potential down payment, which a solar lease does not.
From a financial standpoint, a solar lease may fit homeowners who meet the following conditions:
A solar lease also delegates system maintenance to the provider, although solar panels typically do not require much maintenance beyond regular cleaning.
However, we do not recommend selecting a lease if you have the option of a cash purchase or solar loan. You can achieve higher savings by owning solar panels directly, whereas you will never own a leased system. As a solar system owner, you also receive tax breaks and incentives, some of which you cannot claim under a lease.
Sunrun is our top pick for solar leasing because of the unique financing programs it offers. The company has both a prepaid and monthly solar leasing option, allowing customers to either pay upfront or month-to-month. You can also finance your system with Sunrun’s BrightAdvantage solar loan program.
In addition to its many financing options, Sunrun installs high-quality solar panels from Tier 1 manufacturers, but its website does not disclose the specific brands it sells. Sunrun also installs LG Chem and Tesla Powerwall battery systems.
Although Sunrun has several purchasing options — including cash, loans, leases and PPAs — it focuses on solar leasing. You can choose between a monthly or a prepaid 25-year lease with a lower total cost. In both cases, you receive free solar panel maintenance for the term of the lease. Sunrun can transfer the lease to the new owner if you move homes.
Founded in 1985, SunPower has nearly 40 years of experience in the U.S. solar industry.
SunPower manufactures its solar panels through a spin-off called Maxeon. These panels feature the highest efficiency and longest warranty in the industry.
SunPower offers a free initial consultation to analyze your energy needs and estimate potential savings. SunPower also installs battery systems and electric vehicle (EV) charging stations.
SunPower offers solar leases with flexible conditions:
You have three options at the end of the lease term: extending your contract, removing the solar panels at no cost or buying the system outright. SunPower will keep you on a temporary lease with monthly renewals while you choose one of these options.
Solar Energy World installs high-quality solar panels made by Silfab, LONGi, Qcells and REC. It also installs the Tesla Powerwall, Enphase IQ and SolarEdge home batteries. Plus, the company offers a first-year energy production warranty — if your solar system does not deliver at least 90% of the estimated savings, you can receive financial compensation for 200% of the missed savings.
According to the company’s website, Solar Energy World lease payments are 20% to 30% lower than what you would pay in monthly power bills. Solar Energy World has a locked rate, ensuring no increases in lease payments during your contract term.
If you sell your home while you have an active solar lease with Solar Energy World, you can transfer it to the new owner. You can terminate the lease by covering any remaining monthly payments at once.
Momentum Solar has a wide production selection and offers many customization options. It installs solar panels from many top-rated brands, such as Canadian Solar, JinkoSolar, LONGi, Qcells, REC, Silfab, Maxeon and Trina Solar. It also sells the Enphase IQ battery storage systems in some areas.
Momentum Solar leverages solar incentives and net metering programs for customers nationwide. These programs can increase the return on investment when you buy solar panels, and Momentum can ensure your solar project qualifies.
Momentum Solar offers solar leases with a flat monthly rate that lowers your power bill savings to ensure positive cash flow from the first month of operation. Solar leases with Momentum also include maintenance services.
If you sell your home while the solar lease is active, the contract can transfer to the next owner.
Palmetto sells and installs Qcells monocrystalline panels, frequently ranked among the best solar panels on the market. Palmetto also offers tiered protection plans for its solar panel systems, which range from $8 to $49 a month. It also installs energy storage systems and EV charging stations.
Palmetto calls its solar lease option the LightReach energy plan. Leases come with the Palmetto Protect Performance plan, which includes services like active monitoring and troubleshooting. The plan includes a 95% performance guarantee, and the company will compensate you for the difference if your solar system does not achieve 95% of the projected savings. And if your solar system malfunctions, Palmetto will cover part replacements and labor.
If you sell your home, Palmetto Solar can transfer solar leases to another use. You can also buy the solar panel system and end the lease starting in year five of your contract term.
Going solar is a beneficial home upgrade from a financial standpoint. High-quality solar panels have a lifespan of over 25 years, and your payback period can be less than five years in places with high electricity prices. However, the upfront cost of solar panels and installation can be high. For example:
Leasing solar panels is just one of several financing options. There are many ways to get solar energy for your home, each with pros and cons.
Assuming you have the capital, paying the full price of your home solar system upfront is an option. This method allows you to skip the interest payments associated with a solar loan and all the monthly fees charged under a solar lease. A cash purchase results in the highest long-term savings compared to other purchasing options and means you own your system immediately.
Although you pay off your system immediately with a cash purchase, you will still have to wait a few years before breaking even. As a quick example, assume you purchase a 5 kW solar system for $16,350:
However, the best residential solar panels include product warranties of up to 25 to 30 years, which means you benefit from clean energy for a long time after breaking even. That said, you must be willing to wait out the payback period if you purchase a solar panel system in cash.
A solar loan covers your upfront costs, and you can pay over time using part of your monthly savings. If you can get a low-interest rate, the monthly loan payment will normally be much lower than the lease payment for an equally sized solar system. You can also find solar loans with zero down payment, which means you get positive cash flow from the first month.
Solar loans are viable when you can get attractive interest rates, and monthly payments are much lower than your power bill savings. You also own the solar panels right away, which means you are entitled to any cash rebates and tax benefits available. If you don’t have access to a low-interest financing option, a solar panel lease may be a better option.
A solar power purchase agreement or PPA is similar to a lease in that you pay a provider a monthly fee to use solar panels. However, there is an important difference in determining your monthly cost:
A solar lease charges you the same monthly fee regardless of electricity generation, while a PPA has a variable fee depending on the power you use. Under this arrangement, you may pay more during the summer when your solar panels are more productive, and less during the winter when the amount of sunlight decreases.
Generally, you will achieve higher savings in the long run if you purchase a solar power system upfront. You can also claim the federal solar tax credit and incentives offered by your local government or utility company.
Purchasing solar panels is recommended if you can pay the full price upfront or have access to a low-interest solar loan. However, a solar lease or PPA is viable if these financing options are not available to cover installation costs. For example, a homeowner who cannot get favorable interest rates due to a low credit score may prefer to lease solar panels.
We recommend signing a solar lease in cases where customers do not have options for a cash purchase or solar loan. A lease does not require a large upfront investment or a high credit score, which can be beneficial if you cannot secure a loan. In addition, the lease provider must keep your solar system in optimal condition during the entire term of the contract.
However, solar leases also have some disadvantages to be aware of, including:
Solar leases also include free maintenance, but solar panels do not require much upkeep. The most important requirement is regular cleaning, and you must also plan for an inverter replacement after 10 to 15 years. Overall, solar maintenance costs are small compared to the extra power bill savings you would see by owning solar panels directly.
Solar leases and PPAs offer comparable savings. The main difference is that a solar lease charges you fixed monthly fees, while a PPA charges variable fees based on the system’s electricity production. In both cases, the average energy bill savings are smaller than those achieved when owning solar panels directly through a cash payment or loan.
A solar lease provides a financing alternative if you cannot secure a low-interest loan or purchase a system in cash. While you can achieve modest power bill savings with a solar lease, you can expect much higher savings if you buy the system directly.
A solar lease has a few disadvantages:
The following steps summarize the solar leasing process:
When purchasing solar panels, make sure the equipment is from a trusted manufacturer and covered by a solid warranty. Look for a qualified solar installer accredited by the North American Board of Certified Energy Practitioners (NABCEP) — even the best solar panels can malfunction if not installed properly.
High-quality solar panels can provide renewable energy for more than 25 years while increasing the value of your home and lowering your electricity bills.
Leonardo David is an electromechanical engineer, MBA, energy consultant and technical writer. His energy-efficiency and solar consulting experience covers sectors including banking, textile manufacturing, plastics processing, pharmaceutics, education, food processing, real estate and retail. He has also been writing articles about energy and engineering topics since 2015.
Tori Addison is an editor who has worked in the digital marketing industry for over five years. Her experience includes communications and marketing work in the nonprofit, governmental and academic sectors. A journalist by trade, she started her career covering politics and news in New York’s Hudson Valley. Her work included coverage of local and state budgets, federal financial regulations and health care legislation.
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