If you’re planning on getting into solar energy use, there’s a big question waiting for you this side of installation.
Which is better: leasing or buying solar panels?
You may be like I was when I first started using solar and had no idea you could lease, or you may be fairly familiar with the concepts and just aren’t sure which is the better choice for your situation.
We’re going to take a look at the various aspects of owning vs leasing solar panels including up-front costs of both, savings over the years, incentives, maintenance costs, and more. So, if you’re ready, grab a notebook, your calculator, and a cup of joe.
The basic answer to whether it’s better to buy or lease solar panels is this: if you have tens of thousands of dollars to buy a solar panel system, it is likely to save you money in the long run, and is likely to increase the value of your home. If you do not have a large up-front chunk of cash, leasing still gives you the ecological benefits of solar, but won’t save you much versus traditional electricity.
Why Use Solar Energy in the First Place?
Let’s start with a quick overview of the benefits of solar energy as it relates to your home or business.
Eco-Friendly Energy
Probably the first and foremost thing people think about with solar energy is the green factor.
Solar energy is renewable, clean, and doesn’t do damage to the environment to actually use.
And since most equipment is designed with automatic power offs to avoid overcharging – and therefore fires – this energy source is a good thing for the environment.
Long-Term Savings
The up-front costs of solar energy systems can sometimes be high, but over the years, you’ll save a fair amount on your energy bill, especially if you’re able to power your entire home or business location on solar energy.
Low Maintenance
Nearly all solar equipment is low maintenance. You install the devices, keep them clean – particularly the solar panels – and do semi-annual checkups and checks after severe weather. Generally speaking, that’s it for many years.
Easy to Install
Technically, solar energy systems can either be easy to install or require a contractor.
There’s not much between.
If you’re handy and have the right setup, installation is easy.
If you’re using singular use solar devices – such as a pool heater, solar-powered security camera, or solar lanterns – you don’t need to do anything but follow the instructions that come with the items and place the solar panels as close to direct sunlight as possible.
If you’re doing a full system to power your entire house, you’ll have some other things to consider which would determine how easy or not your installation will be.
What Will You Need for a Solar Power Setup?
The second component of this overview is looking through everything you’ll actually need to get things set up and going. This can reveal a whole lot more about your overall investment and need and demonstrate more strongly whether you should buy or lease solar panels.
A quick glance at average costs on each component can give you an immediate clue on what you’re looking at.
I’ll provide some different figures below, based on the different aspects of solar lease vs buy setups, but here’s the detailed list on average costs.
(Prices are based on general retailer costs from sites like Amazon, not specialty shops which will likely charge a bit more for the same pieces.)
- Solar panels – $80 to $200 per 100-watt panel
- Solar wiring – $25 to $100 per 12-feet
- Solar power inverter – $190 to $450
- Digital monitoring unit – $15 to $25
- Solar generator or batteries – $130 (low Wh) to $500 (high Wh)
- Mounting hardware – $10 to $50 – many solar panels and kits include this
- One-off solar devices – This varies widely from $10 for pathway lights to $500 for specific, high-end pieces like solar security setups
What is the Estimated Cost of Buying Solar Panels?
Above, you see the average costs of general pieces required for a solar energy system for your home. But let’s take a more detailed look – with some already factored figures – for your situation.
Up-Front Costs for Setting Up a Solar Energy System
There are several things to consider in your setup costs.
The three primary items that drive your cost, however, are going to be solar panels and solar generators, and the cost of installation if you need to hire a contractor. The other things – solar wiring, solar power inverters, mounting hardware, etc. – are more fluid based strictly upon the exact models you purchase.
Your Cost for Solar Panels
As mentioned above, the average price of a 100-watt panel can range pretty widely between $80 and $200. They can go higher or lower, as well, depending on the quality and if the model has been replaced with a newer version.
To better understand what your actual cost will be on this, you’ll have to determine how many panels you’d need to run your system.
Grab your calculator and last three months’ of energy bills to determine what you’re looking at in watt-hours (Wh) you use per month. This will determine the number of panels you need.
Next, figure out how much sunlight you get on average. There are maps for checking this, but most American locations get between 4 and 6 hours of direct sunlight each day in winter – which is what you need to plan for.
If you get five hours per day, for example, and you average 30 kWh per day, you need to divide that 30 kWh by 5 hours of sunlight to determine how many watts per hour you need to generate during the sunlight hours to cover your energy needs 100% via solar power.
In this case, you’d need to generate 6 kWh (or 6000 watts per hour) from your solar panels, and store that for use over the entire day.
As an example, this 6 kWh solar system includes 20 305 watt panels and costs about $8000, without including installation costs.
You can also determine less precisely what you need based on the types of appliances and devices you power each month. The chart offers a basic figure for the most common items used in the average home.
- Ceiling fan: 10-50W
- DVD Player: 15W
- CB Radio: 5W
- Modem: 7W
- Laptop: 25-100W
- Drill (1/4 inch) 250W
- Toaster Oven 1200W
- Blu-ray Player: 15W
- Tablet Recharge: 8W
- Satellite Dish: 30W
- Cable Box: 35W
- TV – LCD: 150W
- LED Light bulb (40-watt equivalent): 10W
- LCD Monitor: 100W
- Smart Phone Recharge: 6W
- Coffee Machine 1000W
- Fridge (16 cubic feet) 1200W
Once you’ve determined the number of panels/watts you need, you can estimate your actual costs by reviewing some solar panel prices.
Your Cost for Solar Generators or Batteries
Solar generators and batteries are the other big chunk of money in your initial investment in solar equipment.
Listed above, you notice a wide range of cost between $130 and $500. That’s a huge difference because there’s a huge range of the watt-hours that generators can power. The best way to determine your cost on this is by figuring out how many watt-hours you need to store in your solar energy system.
Items like refrigerators and air conditioners tend to run all the time – or at least most hours of the day in season – which means these watt hours don’t need to be stored but can technically run on a trickle-charge setup.
However, the rest of your stuff – lights, fans, radios, televisions, etc. – will need that stored energy to keep them going.
Take a look at that energy bill to determine what your average monthly watt-hours usage is. Then, divide that number by 30 to come up with the average watt-hours you need to store on a regular basis. This will tell you the size of your generator.
Hiring a Contractor to Install
The final heft of your up-front cost for installing your own system will be hiring a qualified and licensed solar installer.
Depending on the system you’re installing, you may not need to do this – or, of course, if you’re handy and know enough about electricity yourself you won’t need to – but you’ll probably need to if you’re doing a full system setup.
I can’t estimate exact costs for you since each contractor is different, but you’re looking at anything from $1000 to several thousand, depending on how extensive the system, how old your current electrical wiring is, and how much the contractor actually charges per hour.
Some of the estimates I’ve seen given – which include the equipment costs for installation, not just labor – goes upward of $34,000 for a 4kW system in California. That’s about $9 per watt of power. This figure does not usually include the generator(s), however, so you’ll need to factor in a few other figures, depending on what the contractor includes.
Providing your own panels, generator, wiring, et cetera may or may not reduce your installation costs, as an installer will be familiar with certain equipment systems. If the system is fairly standard, it should potentially drop your costs, however, so it’s worth inquiring.
Savings Over Time with a Purchased Solar Energy System
Now, let’s take a look at the savings you’ll have in owning your solar energy system.
Government Incentives, Rebates, and Savings Programs
One of the biggest incentives for purchasing a system versus leasing – at least while these incentives are still available – is the government granted financial rebates and discounts programs for installing a solar energy system at home.
To discover the incentive programs offered by your local government, check out a database to discover your given state incentives for installing solar energy systems at home. Some of the rebates and tax credits are big enough to make installing your own system worth well more to you than leasing.
Just keep in mind that many of the incentives programs are dropping and disappearing as solar energy becomes more popular. For example, the current federal renewable energy tax credit is 30 percent through 2019. Be sure to read up on the current programs to guarantee you’re getting what you think you are.
Increasing Your Home Value
If you install your own solar energy system, the value of your home will increase.
I’ve done a hefty breakdown on the topic that shows the significance of the value increase of your home.
But in the short of it, according to the Lawrence Berkley National Lab, you can expect that 1 watt of power adds $4 value to a home.
So, generally speaking, you can expect a $20,194 boost for your home resale price if you install your own system instead of leasing one. This could be higher or lower depending on the state, the size of the system, et cetera.
Maintenance Costs Over Time When You Own the System
These systems are generally built to last something like 25-years. Throughout the lifetime of your solar energy system, you’ll have limited maintenance costs.
Your basic maintenance is done through keeping the solar panels clean, checking up on everything after severe weather – hurricanes, tornadoes, heavy rain or snowfall, extreme heat days over 120-degrees Fahrenheit, et cetera – and the occasional replacement of an inverter, wiring, or other components.
This means, maintenance costs are fairly low and don’t have much of an impact on cost-based decisions about solar energy systems.
I would, however, recommend some kind of savings for maintenance for the occasional freak weather situation, however, just in case one of those solar panels gets broken or cracked.
What is the Estimated Cost of Leasing Solar Panels?
As you look into the costs of leasing versus buying solar panels, you’ll have similar issues to review for determining your best route.
Up-Front Costs
With leasing solar panels, there are a few different issues that you’ll come across on the up-front costs.
Some companies actually offer $0 down for leasing panels.
These contracts tend, however, to reduce your control over the packages you are able to lease. The companies tend to determine how many panels you receive, and that can cost you in the long run.
In 2017, the average cost to lease panels ran anywhere from $50 to $250, depending on the company, location, and, of course, the number of panels you have installed. The current figures seem to be about the same, though it greatly varies by company – thus the massive disparage – and can be hard to determine until you get an actual, specific estimate quote.
You’ll also generally have to pay an installation fee which may be charged up front or be spread out across your lease term in monthly payments, again, depending on the company you work with. This installation fee can be anywhere from $1000 to several thousand dollars.
Savings Over the Years
Often, the lease for solar panels costs approximately what your energy bill would cost per month, so there may not be significant savings in the years to come. If you can get a reasonably accurate estimate, though, you can cross-check this with your average monthly energy bill and see how much of a difference there may be.
Maintenance Costs for Leased Solar Panels
The primary advantage in solar energy leases is that you won’t have much in the way of maintenance costs. If you’re leasing panels, the company should generally cover the costs of maintenance, though you may still have to pay some fees for the contractors to come and do inspections, etc.
When Buying Makes Sense
Buying your solar energy system makes the most sense when you have a long-term housing plan and want to save on energy costs over the next couple of decades.
Check out this section of our article on whether solar panels are worth it to see how long it typically takes to start seeing cost savings.
It also makes sense if you want to increase the value of your home for resale. Leasing solar panels tends to be problematic for selling your home due to the various issues with transferring leases, et cetera.
Simply put, buying makes sense for savings or resale value.
When Leasing /Renting Makes Sense
If you’re looking to save money in the long run, leasing is not the most logical way to do this.
However, if you’re wanting to go green, use off-the-grid power due to location, or need a short-term investment in your solar energy, leasing can be the logical choice.
If you don’t have the tens of thousands of dollars it takes to install your own system, but still want the benefits of solar energy, leasing can help you achieve that without the up front costs.
Simply put, leasing makes sense if you’re looking for short-term investments or simply want to go green.