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Solar Power: Lease vs. Buy

Solar power brings with it a wide variety of different benefits that can't be ignored. For many, solar power is seen as a convenient way to do your part to help the environment and to leave the Earth in a better condition than it was when we arrived. For others, going solar is a way to reduce dependence on traditional energy providers and take matters into their own hands.

When you make the decision to switch to solar energy, one of the most important questions that you'll have to ask yourself is whether to lease a system or buy one outright. This can be determined by approaching the situation from a few key angles.

Leasing Pros and Cons

The major benefit of leasing a solar system has to do with the initial costs. It is significantly cheaper (usually between $15,000 to $20,000 cheaper) to lease a system than it is to purchase one outright. Solar panels lease agreements are also ideal if you don't qualify for any of the federal or state investment credits or programs that are designed to help offset some of those initial costs.

If you don't want to get into financing solar panels and are instead looking to lease outright, however, you will also find a variety of benefits exclusive to this plan. You're still saving a great deal of money on electricity versus what you would be paying to a traditional provider. Savings can be anywhere from 10 to 50 percent depending on the area of the country that you live in.

One of the major cons of leasing, however, has to do with the length of solar panels lease agreements. Most lease agreements are for periods of around 20 years. Though many people likely won't have a problem with this, it essentially removes leasing as a viable option at all if you're planning on selling your home before that agreement has expired.

Another disadvantage to leasing has to do with the fact that you're not treating solar panels as the type of investment they actually are. When you buy solar panels, you're essentially earning a return on your investment that can be as high as 30 percent or more depending on the type of state and federal tax incentives that you qualify for. If you choose to lease your solar panels system and not sign a solar power purchase contract, you're essentially leaving all of that money on the table.

Buying Pros and Cons

The most important factors to consider when making the decision to lease or buy solar panels will essentially vary depending on your situation. Buying solar panels is a much higher upfront cost that can't be ignored, but many financing options are available to help make those costs easier to bear over time. In addition to solar financing, cash rebates, federal and state tax credits and other types of incentives are also available to make buying solar panels much more attractive to buyers.

One of the major differences between solar power lease or buy agreements have to do with maintenance issues. When you lease solar technology, the company that you're leasing that equipment from is responsible for any and all maintenance. When you buy solar panels, on the other hand, you own the system outright, which means that you're completely responsible for any and all maintenance issues that occur.

Solar Power Purchase Agreement (PPA)

In a Solar Power Purchase Agreement (PPA), a customer pays for the solar systems over a period of years instead of making an upfront payment. In many cases, customers can purchase solar power for little or no money down, which means they can enjoy energy savings immediately. Also, in a PPA, customers agree to purchase all the energy from a solar system over a fixed period of time.

Refusing to sign a solar power purchase agreement and instead taking steps to lease a system will still yield positive environmental benefits, even if you don't maximize the types of financial benefits that are available with this type of decision.

How Much Can You Save?

The cost of leasing or buying solar panels is broken into two different categories. If you choose to pursue a lease program, you're paying a significantly smaller amount of money upfront. You can lease a solar system for around $3,000, though many providers will give you a system for no money down at all. Buying and installing your own system, on the other hand, ranges from $15,000 to $30,000 or more - before rebates and tax incentives are taken into consideration.

The flip side of that argument, however, has to do with the amount of money you're paying for electricity. Your cost per watt will significantly decrease if you choose to purchase solar panels rather than lease them once that initial cost is taken into consideration.