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By now, just about everyone is aware of the many benefits that solar panels provide.

Solar power is perfect for businesses looking to mitigate long-term energy costs and offer the same value to residential homeowners as well.

While the average solar panel cost is going down, they are still pretty expensive to buy upfront.

Like with vehicles, many people choose to lease their solar panels rather than buy them outright. Leasing solar can have both positive and negative aspects to it.

The decision of buying or leasing solar panels ultimately comes down to your situation.

When it comes down to your residential solar, making the best choice is essential.

The decision will ultimately fall to whether you want to buy or lease your solar panels.

Types of Leases

Leasing means, rather than owning it and having to pay the full price upfront or take out a solar loan; you agree to pay a small monthly fee over an extended length of time, usually 20 years.

You’ll end up paying more in the long run but the small financial hit each month is usually very easy to handle for most people.

Not all leases are the same, though. Here are the three different types.

  1. Finance Lease
  2. Operating Lease
  3. Solar PPA Agreement

A finance lease is the most common type of lease. It’s typically contracted for more than 75% of the life of the solar panels.

Choices at the end of the lease are 1) usually a buyout clause at the end of the lease for a discounted price, or 2) the choice to remove the system, or 3) renew the lease at a new price to be determind at that time.

This kind of contract is much more like a loan, with the panels kept on the balance sheet of the third-party lender.

The company will fix all problems with the system or reuce your payment by the lost amount of power multiplied by your agreed upon per kWh price.

In contrast, an operating lease is how the majority of contracts, in general, are structured. The lease is like a renting situation with the monthly payments seen as an operational expense.

Should You Buy Solar Panels or Lease Them?

The apparent advantages of leasing are not having to pay as much upfront and not having to handle the maintenance of the panels. This is enough to entice most people, but there are some disadvantages as well.

In some cases, the solar panel installation cost can be higher when you lease. When this occurs, you can end up paying more money over the length of the contract than a buyer would if they payed the upfront price. You might also lose all your benefits and access to the extra-energy credits offered by many state governments if you lease.

When you buy, you might need some financing help to cover the costs, but you’ll still enjoy certain benefits that leasers won’t.

Although you’ll have to take care of the panels yourself, you’ll be the full owner of them.

Ownership entitles you to all the tax credits and free electricity after the system is paid off.

The Decision to Buy or Lease Depends on Your Situation

While there are significant benefits and drawbacks to both buying and leasing solar panels, your choice depends on your current situation.

By taking into account all of the factors in this article, you should be able to comfortably finance your solar panels and enjoy all the benefits they bring.

See our Complete Guide to a Solar PPA, Lease, and Purchase.

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Phil Edwards

President at Jamar Power Systems
Phil Edwards is President of Jamar Power Systems. With over 30 years of electrical contracting experience, his companies have wired over 30,000 housing units, including 1000's of residential solar installations. His company is a member of WECA and BIA.
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