A solar panel purchase is expensive and out of reach for many. But there’s another option: Renting or leasing your solar panels. 

There are plenty of reasons to invest in solar panels right now. The climate crisis is urgent as ever, the cost of solar is the lowest it has ever been and the financial incentives for installing panels are only growing.

If you hope to see the most financial benefit from a solar panel system, experts say buying is better. 

Buying leads to ownership and leasing doesn’t. “It’s kind of akin to buying or leasing a car,” said Gilbert Michaud, an assistant professor in the School of Environmental Sustainability at Loyola University Chicago. 

But leasing or renting is also a worthy option as it reduces the barrier to entry, says Michaud. And leasing can be tricky if you plan to move.

So which is better? Buying a solar system outright or leasing one from a solar company?

The answer depends a lot on your personal circumstances. There are pros and cons to each option, and they serve different goals. But experts say buying or leasing can both be good paths, as long as you know what you’re getting yourself into.

Here’s everything you need to know to decide if buying or renting solar panels is better for you.

What’s the difference between renting and buying solar panels?

When you buy a solar system for your home, you have to pay for (or finance) the entire cost of the installation, and the panels and equipment belong to you.

“If you buy panels, you own the system and you have to pay those high upfront costs, but there’s a lot of pros to it, too,” Michaud said. 

Here some of the advantages and disadvantages to buying solar panels:

Buying a solar panel system

Leasing solar panels, on the other hand, is an entirely different scenario. Instead of purchasing and owning the system, you would allow a third-party company to install panels on your roof with little or no upfront cost, and then pay monthly to lease the panels.

You’ll still be generating clean energy and potentially lowering your electricity bills. But here are some other things to consider when leasing solar panels:

Leasing or renting solar panels

Is it better to buy or lease solar panels?

There’s no one-size-fits-all recommendation when it comes to buying or leasing solar panels.

“It depends on how much disposable income you have, and what your goals are,” Michaud said. 

If you have the money saved up, and you’re planning to stay in your home for 20 or 30 years, it’s probably better to buy the panels, Michaud said. Buying gives you the best solar payback period, and will give your home value a boost when you eventually do sell. 

But maybe you don’t have a lot of cash for the upfront costs, and you want to start generating solar energy as soon as possible, for the environmental benefits. In that case, a lease might be the better, faster path to solar, Michaud said. 

“Not everyone owns a big home and can afford spending $20,000,” Michaud said. 

How much does it cost to lease or rent solar panels?

Lease arrangements for solar panels vary widely, depending on the size of the solar system and who your installer is. (Again, think of the analogy of leasing a car.) 

Generally speaking, a solar lease will cost between $100 and $200 a month, according to Michaud. But the best way to know for sure is to get an estimate from a solar company.

How to lease or rent solar panels

The process for leasing solar panels is a lot like working with any other type of home contractor. Here are the steps you’ll need to take:

Reach out to an installer (or two)

Contacting a solar installer is the first step on this journey. The company will likely want to come to your home, assess your property and walk you through your options.

Michaud advises getting a couple of estimates, and working with trusted solar companies. If you’re not sure who to call, talk to your friends and neighbors and see who they would recommend.

You can also check out CNET’s list of best solar companies of 2023. CNET did the legwork for you by rating and scoring solar companies using these three criteria: equipment, warranties and service, and whether or not the company offers a lease or rent option. 

Deciding between a lease or a power purchase agreement

Once the solar installers have done their homework, they’ll give you some price estimates. Depending on the installer, you might have to choose between a traditional lease, and something known as a power purchase agreement.

With a PPA, a solar company will install, own and operate the solar panels, just like in a lease. But instead of paying the company to lease the panels, you’ll pay the company a fixed rate for the electricity you use (some of which, of course, will be generated by your solar panels), according to Michaud.

“The advantage of it, again, is you don’t have to pay those upfront costs,” Michaud said. And locking in a fixed electricity rate could hedge against future energy cost increases from a traditional utility provider.

Review and sign the contract

Once you’ve decided between a lease or PPA, you’ll want to take some time to review the solar contract. It’s not a bad idea to have a lawyer review it if you’re unsure about anything, Michaud said.

After you sign the contract, the solar company will get to work installing your panels, and you’ll be generating clean electricity in no time.

How much does it cost to buy solar panels?

Just like with leasing, the cost to buy solar panels will depend on your home, how many panels you buy and who your installer is. 

Michaud said he sees most residential customers spending around $15,000 to $20,000, including the cost of labor. That’s the total cost before any rebates or incentives; leveraging the federal solar tax credit, for example, could reduce that cost by 30%. 

Another way of thinking about the price of solar panels is the average price per watt. According to 2022 data from research firm Wood Mackenzie, the average 8-kilowatt residential solar panel system cost about $3 per watt. A 6-kilowatt sized solar system at this price per watt would equal roughly $18,000 before incentives or rebates. 

How to pay for solar panels 

There are a lot of different ways to pay for your solar panels (and any other home improvement project, for that matter). Here are some of the options you might consider:

Cash

If you’ve got enough money saved up to pay for a solar installation in full, this is a great option. You’ll avoid paying any interest on a loan, which will also allow you to recoup your investment faster. 

If you don’t have $20,000 laying around right now, you could save up for it using a high-yield savings account.

Solar loan

Many banks and solar installers offer loan products that are specifically designed for solar panels. Some states even offer low- or zero-interest loans to incentive solar installations.

Check with your local bank or utility company to see what’s available in your area. A solar loan could allow you to install solar panels a lot sooner, but the downside is that you’ll pay a lot more in interest, which prolongs the payback period of your panels.

Other types of loans

Most financial products can, at the end of the day, be used to pay for solar panels.

• A personal loan is a quick and relatively easy way to secure some cash, but it will come with a high interest rate and generally unfavorable terms.
• A home equity loan allows you to tap into your home value and draw a lump sum of cash. This type of a product has a lower interest rate, but it can be risky to use your home as collateral for the loan.
• A home equity line of credit is another way to tap your home equity, but it works more like a credit card than a lump sum of money. Be aware, though, that these loans usually have variable interest rates, which could mean your payment increases over time.

Lease or power purchase agreement

A lease or power purchase agreement allows you to get solar panels with basically no upfront costs. Instead, you’ll be on the hook for a monthly payment.

Because you don’t own the panels, you’ll either have to transfer the lease to the new homeowner, or have the panels removed. “It’s a lot of logistical headaches,” Michaud said.

Credit card 

Some credit cards have a high enough limit to cover a $15,000 solar installation. But that doesn’t mean you should take advantage of it.

Generally speaking, credit cards are not meant to finance large home improvements. Unless you can pay off the balance in full when your statement rolls around a month later, carrying a massive balance will quickly rack up interest at a high rate, and could trap you in a cycle of debt.