Maximizing Solar Savings: Is Leasing or Buying the Better Option?
Consider two ways of employing
solar for a house: renting or leasing and buying solar panels. Each of these
options has some advantages, financial considerations, and long-term
implications. It's tough to be sure which will save you more money because that
choice depends on your financial situation, the way you consume energy, and
your long-term goals. Proceeding onward, buying and solar leasing will be
discussed in depth to determine which option fits the needs of homeowners in
the United States.
The financial viability of
harnessing solar energy has increased for years. On one hand, a Solar Energy
Industries Association report cited that the cost of solar panel systems has
fallen by more than 70 percent over the last decade. Generally speaking, this means
people increasingly show interest in harvesting renewable energy while cutting
electric bills—however, a decision to lease or buy influences how much you save
over time.
Leasing a solar panel system means
contracting with a solar company to install such a system on your roof while
owning the equipment. Homeowners usually pay a fixed monthly fee for the energy
produced, generally less than their utility rate. Leasing provides a conduit to
realize solar energy without the high upfront purchase cost of a system that,
in the U.S., ranges in estimates from $12,000 to $30,000, depending on the size
and type of system. In fact, according to the data, an average residential
solar system in the United States costs about $20,000 before incentives.
With leasing, the up-front costs
are minimal or zero: most leases involve no down payment; therefore, solar
energy can be made accessible to many who could not afford the money to buy a
system but immediately begin to save on their energy bills, as they are paid a
fixed monthly lease payment less than what they would pay through electricity.
Indeed, state utility rates in California and New York have been so high that
with leasing, one can save up to 10% to 30% per month on utility bills.
Another significant advantage of
leasing is that it requires the company itself to maintain, repair, and monitor
the system. If any part of the system gets damaged, the company will take
charge of it for free. This provides peace of mind to homeowners afraid of long
repair costs. Besides, most solar leases are complemented by performance
guarantees that the system will give at least a minimum amount of energy every
year. And if the panel underproduces, the solar company compensates you for the
shortfall.
This makes leasing less attractive
for those looking for more long-term financial advantages of going solar. This
program allows savings on utility bills, but you do not own the system and
cannot, therefore, benefit from financial incentives of any sort that may come
your way due to ownership. For instance, the ITC allows homeowners to take a
tax deduction of 30% of the cost of a solar system off federal taxes. That can
save the average homeowner $6,000 on a $20,000 system in tax credits in 2024.
If you lease, the solar company that owns the system claims the tax credit, not
you.
Leasing contracts are also mostly
20 or 25 years. These include options to renew your contract, purchase the
system at fair market value, or have the company take their equipment off your
roof at the end of the lease term. The problem is that the monthly lease
payments don't stop when the system is paid off, and you could be stuck paying
for the equipment for years and years. If you sell your house before the lease
expires, you must transfer the lease agreement to the new homeowner,
complicating the sales process.
Buying a solar panel system
outright has more significant financial returns in the long run. This may be
higher upfront in cost, but then you would outright own the solar system and be
able to take advantage of all the tax credits, rebates, and incentives. The ITC
alone could offset some installation costs; many states and utilities have
additional incentives available. The incentives vary from state to state, but
taking homeowners in Massachusetts as an example, one such incentive is the
SMART program. Similarly, New Jersey has an SREC program where, if the
homeowner installs panels, they will be issued SREC certificates according to
the amount of solar energy produced, which they can sell to realize extra
income.
One of the most alluring things
about owning a solar system is that its energy is virtually free after the
payback period. The payback period refers to the time it takes for the savings
on electricity bills to pay off the system's initial cost. With the range of
the local energy rates and incentives available, the average payback period in
the United States is between 6 and 8 years. This means, within its useful life,
about 25 to 30 years of free electricity after the mentioned payback time. Over
time, this adds to tens of thousands of dollars in savings. For example, just
by buying a solar system, an Arizona homeowner who pays an average of $1,500
per year in electric bills can save over $30,000 in electricity costs over 25
years.
Another fantastic benefit of buying
is that the value of your home will increase. One of many studies conducted by
the Lawrence Berkeley National Laboratory has found that homes with owned solar
systems consistently sell at a premium compared to similar homes without solar.
For every kilowatt installed, a home's value increases on average by $4,020.
Therefore, a typical 6 kW system adds a home value of $24,120. It only applies
to those homeowners who own their solar system, as leased systems provide a
different boost in property value.
Solar system ownership realizes the
most significant savings over the long term. Ownership also carries some risks
and responsibilities. You will maintain and repair the system yourself; there
are usually additional costs over time. Solar panels rarely require
maintenance, but when they need repair, it's pretty expensive. Most solar
panels have 20- to 25-year warranties on equipment and performance. The
inverter changes the energy from your panels into usable electricity.
Generally, the warranty is much shorter, usually 10 to 15 years, though most
options allow purchasing an extended warranty.
Whether leasing or buying saves you
more money depends on your financial goals and situation. If savings with
little or no upfront costs and greater access to solar energy for more
homeowners is any consideration, then leasing takes precedence. Leasing will
also ensure a maintenance-free system and a pre-calculated monthly payment.
Conversely, buying a system offers the highest long-term savings and total
financial incentives. Buying the panels tends to be a better deal if you can
afford the high upfront cost of financing and plan to be in your home for the
long term. If one is a renter looking for savings without any long-term
liability or responsibility for the ownership and maintenance of a system, then
leasing might be considered better. Either way, it will be a wise investment
that will significantly reduce dependency on traditional energy sources and
ultimately result in a monthly reduction in utility bills.
