Why Solar Companies Push Leasing (Despite Buying Being Better for Most Owners)
Solar is sold in two basic ways: you buy the system outright or finance it, or you lease the system and pay a monthly lease fee to a third-party owner.
Why do salespeople push leasing? Because the company selling you the lease makes money faster and with less complexity. When you lease, the solar company (or their financing partner) owns the system and collects lease payments from you for 20–25 years. It's a recurring revenue stream with minimal risk to them. The system generates electricity and you pay. They own the tax credits. They own the system output. Your lease payments are locked in—their revenue is predictable.
When you buy, you own the system. You get the tax credits. You own the output. You handle maintenance (though most contracts include it). The company gets paid once, upfront. They have no recurring revenue from your installation. Financially, ownership is better for you but less profitable for them over time.
This misalignment—where the company's financial incentive pulls in the opposite direction from your optimal decision—is what you need to watch for.
The insider perspective: Solar leasing companies print money from recurring revenue. Solar ownership companies want to close the deal and move to the next customer. Guess which one your salesperson represents and which approach they'll emphasize?
The Financial Case for Buying
You Own the System
When you buy solar, you own the panels, inverter, and wiring. You own the electricity it produces. If the system generates $1,200 in electricity this month, that value is yours. With leasing, the owner (third party) gets that value and pays you a fixed lease fee regardless of output.
Tax Credits & Incentives
The federal solar tax credit (Investment Tax Credit, or ITC) currently allows you to deduct 30% of the system cost from your federal income tax. A $30,000 system means a $9,000 tax credit—real money off your taxes. This credit exists through 2032 and phases down after that.
When you lease, the lessor (the company or third party that owns the system) claims the tax credit, not you. You don't get the $9,000 benefit. The lessor gets it and factors it into their pricing. You see a benefit in lower lease payments, but you're not getting the full value of that credit.
Home Value Increase
Studies consistently show that homes with owned solar systems sell for more than comparable homes without solar—typically a 3–4% premium, sometimes higher in strong solar markets. The buyer is acquiring a system that reduces their electricity costs. That's valuable.
When you lease, the system doesn't increase your home's value—it's not your asset. In fact, it can complicate the sale (more on this below).
The Math: 20-Year Savings
Example (rough numbers, actual varies by location):
Buy a $30,000 system:
- Out-of-pocket after tax credit: $21,000 (30% ITC reduces upfront cost)
- Monthly electricity savings: $150 (year 1, increases slightly with inflation)
- 20-year savings: roughly $42,000–$48,000 (accounting for inflation and degradation)
- Net cost: $21,000 upfront, $42,000–$48,000 savings = profit of $21,000–$27,000
Lease the same system:
- Upfront cost: $0
- Monthly lease fee: $140 (locked in or with modest 2–3% annual increases)
- 20-year lease cost: roughly $33,600–$42,000 (depending on escalation)
- Net cost: $33,600–$42,000
Over 20 years, ownership is typically $10,000–$15,000 cheaper than leasing, even after accounting for maintenance, inverter replacement, or repairs. Ownership wins on pure financial grounds.
The catch: you need capital upfront (or access to financing) to buy. If you don't have $20,000–$30,000 and can't finance it, leasing looks attractive because there's no upfront cost.
Bottom line: If you can afford to buy (cash or solar loan), buying is financially superior over 20 years. You own the asset, get the tax credit, and benefit from home value increase. Leasing is essentially paying more for the same system someone else owns.
The Financial Case for Leasing (And When It Makes Sense)
Zero Upfront Cost
Leasing requires no money down. This is its primary appeal. If you don't have capital, leasing lets you access solar's benefits without spending $20,000–$30,000.
No Maintenance Responsibility
The lessor owns and maintains the system. If a panel fails, the inverter dies, or something breaks, they fix it at no cost to you. You pay the lease fee; they handle everything else. This appeals to homeowners who don't want the responsibility of owning a mechanical system.
Simplicity
Leasing is simple: sign the contract, the system is installed, you pay monthly. You don't claim tax credits, don't worry about maintenance, don't deal with any ownership complications.
When Leasing Makes Sense
Leasing is reasonable if:
- You don't have $15,000–$30,000 in available capital and can't qualify for a solar loan.
- You plan to sell your home in the next 5–7 years (less time to recoup the ownership advantage). Note: this gets complicated—see below.
- You're risk-averse and prefer not to own mechanical systems.
- Your credit score is too low to qualify for favorable solar financing (though leasing approval is often easier).
But understand: leasing is a convenience premium. You're paying extra for the privilege of not owning the system. Over 20 years, that premium is $10,000–$15,000.
The Leasing Complication: Selling Your Home
Here's the crucial part salespeople gloss over: when you lease solar, the next homeowner has to assume the lease.
Your home sale works like this: a buyer offers to purchase your home. The solar system is attached to the roof, and there's an active lease agreement (the lessor owns it, you pay monthly). The buyer's mortgage lender does a title search and sees the lease. The mortgage company now has to approve the sale. Some lenders accept solar leases; others don't. Some require the lessor to subordinate the lease (put the mortgage first in the pecking order). This slows down the sale.
Now the buyer has to decide: assume the lease I inherited and pay $140/month for 15 years, or ask you (the seller) to buy out the lease? The buyout can be $8,000–$15,000, depending on the remaining term. The buyer might walk away rather than deal with it, or demand you pay the buyout as part of the sale.
A lease that looked free to you becomes an anchor on your home sale. You wanted to leverage solar's value; instead, the lease complicates the transaction and potentially costs you money.
With ownership, there's no complication: you sell the home with the solar system attached, the buyer buys the system as part of the property, and everyone moves on. No lease assumption, no buyout, no lender complications.
Watch out: Solar leases don't automatically transfer to the next owner—they require explicit assumption. Many home sales are complicated or fall apart because of an inherited solar lease. If you're planning to sell in 7–10 years, leasing is a liability, not an asset.
Power Purchase Agreements (PPAs): Another Lease Option
A PPA is similar to a lease but slightly different in structure. Instead of paying a fixed monthly lease fee, you pay a per-kilowatt-hour rate for the electricity the system produces. If your system produces 1,000 kWh and the PPA rate is $0.12/kWh, you pay $120 that month. If it produces 800 kWh (cloudy month), you pay $96.
PPAs are more favorable if you live in a sunny location with high production variation. They're less favorable if your location is cloudy or your production is inconsistent—you're paying per unit, so low-production months cost less but also mean less savings.
Like solar leases, PPAs are owned by a third party, create the same home-sale complications, and cost you the tax credit and home value increase. The financial math is similar: cheaper upfront, more expensive over 20 years.
Bottom line on PPAs: They're another form of third-party ownership. Same benefits (zero upfront, no maintenance), same drawbacks (no tax credit, home sale complications, higher long-term cost).
California NEM 3.0: A Game-Changer for Solar Economics
If you're in California, net energy metering (NEM) rules are crucial. California recently shifted from NEM 2.0 to NEM 3.0, and this change affects solar's value significantly.
Under NEM 2.0 (the old rules): excess electricity your system produced was credited to your account at the retail rate you'd pay for electricity. If you generated 1,000 kWh more than you used, you got credited at roughly $0.20–$0.25/kWh (your retail rate). That credit rolled over monthly and was valuable.
Under NEM 3.0 (new rules): excess electricity is credited at the avoided cost rate—roughly $0.05–$0.10/kWh, far lower. The shift dramatically reduces solar's financial appeal in California, especially for homes with low daytime electricity use (e.g., you're at work all day; the system generates power you don't use, and the excess is credited at the low avoided cost rate).
This matters for the buy vs. lease decision because it affects total savings. NEM 3.0 homes generate less financial benefit from solar than NEM 2.0 homes. The payback period is longer. Leasing becomes even worse under NEM 3.0 (since the lessor factors in lower returns, they charge higher lease fees to maintain their returns). Ownership becomes more critical because at least you keep all the tax credits and home value benefits.
If you're in California and considering solar, understand your NEM status. If you're on NEM 2.0, you might have a small window to lock in the better rates (some utilities are transitioning customers gradually). If you're on NEM 3.0, solar is still valuable but the math is tighter, and ownership is even more important.
How to Evaluate a Solar Proposal Critically
Ask the Right Questions
- What am I actually buying or leasing? Is this a lease, PPA, or owned system? Who owns the equipment?
- What are the terms? Contract length, escalation rate (how much does the monthly fee increase each year?), what happens at the end of the contract?
- What's included and excluded? Does the company handle maintenance, insurance, replacement inverters? What's your responsibility?
- What tax credits or incentives are included? If I'm not claiming the federal credit, who is? Are utility rebates factored in?
- What happens if I sell my home? Can the next owner assume the lease? Is there a buyout? Can I remove the system?
- What's the expected payback period? How many years until the system pays for itself? (Ownership: 5–8 years typically. Leasing: 10–15 years, if ever.)
- What's the total 20-year cost? Sum all lease payments or calculate the full ownership cost. Compare them.
Get Multiple Quotes
Solar companies are aggressive sales organizations. Get quotes from at least two—one that emphasizes buying, one that emphasizes leasing. Compare the same system (same size, same equipment) financed two ways. See the financial difference. This clarity is worth the time.
Run the Numbers Yourself
Don't rely solely on the company's projections. Their financial models are optimistic and designed to justify their preferred option. Use independent solar calculators (like Google's Project Sunroof or your utility's solar calculator). Compare purchase price to lease cost. Factor in the federal tax credit, your state incentives, and your average electricity rate.
Bottom line: Buying solar is financially superior in most cases. Leasing is appealing because there's no upfront cost, but you pay for that convenience with 20 years of higher costs and potential home sale complications. Unless you genuinely can't afford to buy (or finance), ownership is the better choice.
The Red Flags: When a Solar Deal Is Bad
- High-pressure sales tactics ("We're only here this weekend," "Sign today and get a $5,000 bonus").
- Lease escalation rates above 3% annually (your costs rise every year).
- Vague answers about home sale complications or lease assumptions.
- Salespeople who won't let you take the proposal home and review it carefully.
- Systems sized significantly larger than your actual usage (you're paying for excess capacity you won't benefit from).
- Any suggestion to remove insulation, reinforce roof structures, or do major home work to install panels (legitimate companies assess this upfront).
The Bottom Line
Solar is a solid investment if you own your home and plan to stay for 7+ years. The federal tax credit (30% through 2032), state incentives, and electricity bill reduction add up. Buying is financially superior to leasing.
If you can't afford to buy upfront, a solar loan is better than a lease. You still get the tax credit and home value increase and you own the system. If you don't qualify for a solar loan, leasing is your option—but understand you're paying more over time for the convenience of zero upfront cost.
And if you're in California, understand NEM 3.0's impact on your specific situation. The economics have shifted. Make sure the proposal accounts for that.