Money Talk

Solar Financing and Leasing Considerations

For people who want to make the change to renewable forms of energy in order to vastly reduce their carbon footprint, but who do not have the economic means to pay outright for a complete solar panel system, there are vast arrays of financing and leasing options that will help you to do your part to combat global warming. Below, we look at the pros and cons of leasing and financing a photovoltaic system for your home.

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By Tobias Roberts, Rise Writer

Feb 19, 2025 · 5 min read

Assess Your Energy Needs

Before making a decision between financing and leasing your solar panel system, it is important to know what it might cost you to install a PV system. It is important to state from the outset that the most effective way of reducing the cost of a complete solar system is by reducing your energy needs. The average home in the United States consumes near 1000 kWh per month. With this in mind, most homeowners could cut their energy needs to under 500 kWh hours per month. This reduction in energy use can be achieved by switching to more energy-efficient appliances, lighting fixtures, and making your home more energy efficient for heating and cooling. If you are considering building a new home, opting for a smaller home will also vastly limit the electricity needed to power your home.

How Much Do Solar Panels Cost?

The average solar panel system for American homes is five kWh (5,000 watts). The cost of solar has decreased significantly (around 20%) in the past five years. Now, the average cost per installed watt comes out to be between $2 and $4, in both the United States and Canada. This cost includes both the cost of the panels themselves, other electrical equipment, and the installation. Before subsidies, this means that you would be paying between $10,000 and $20,000.

With government and municipal subsidies, however, you should be able to reduce that cost by up to 50%, bringing the total cost to as low as $5,000. If you save around $1,300 per year on your electricity bill, the solar panel system will pay for itself in between four and ten years. This solar power calculator will help you determine what type of system is best for you and how much you could save.

How Residential Solar Leasing Works

Pros of Leasing Solar Panels

Leasing a solar panel system enables you to get access to renewable energy with zero down at the time of installation. For people without a large amount of cash savings, this is often the best way to start producing renewable energy. While you will be making a monthly payment for the long term (most solar leases are between 15 and 20 years), in some cases, your monthly repayments might actually be lower than what you are saving on your utility bill. Thus, by leasing, you might be able to get renewable energy without any upfront cost while saving on your monthly bill. There are not many opportunities in our world to make a profit without any upfront investment!

If you produce more energy than you consume, you might be able to sell the excess power back to the grid. Over 40 States and all Canadian Provinces allow for net metering. This essentially means that your electricity meter will run backward during the day when your panels are producing energy. Then, at nighttime, it will reverse when you are pulling power from the grid. If you generate more than you take from the grid, then you receive credits. Your local utility company will pay you for giving back to the grid, usually at the current price of energy. This is yet another way to offset the monthly cost of leasing solar panels.

Cons of Leasing Solar Panels

On the downside, by tying yourself into a long-term lease, you might not be able to take advantage of cheaper solar energy in the future. Solar panels are becoming less expensive, and new technological developments in the near future might make solar panels more affordable for you and your family. Also, leasing solar panels can present a challenge if you decide to sell your home.

Solar leasing is ideal for people with limited cash, and who plan on staying in place for the long-term. It presents a unique opportunity to jump in and begin to make the transition to renewable energy. Remember to make sure that your lease contract has a buyout clause at the end of the lease.

How Residential Solar Financing Works

Pros of Financing Solar Panels

If you purchase your solar panels outright, this is an investment opportunity that will yield monthly earnings for decades. You will be the sole owner of your panels and will have the freedom to do whatever you wish with the panels. Leasing companies do make money off the monthly repayments they charge you, and they also will pocket any incentives that come with those panels.

Cons of Financing Solar Panels

The disadvantages of financing solar panels are that you will have to come up with the money to pay for them. You will also pay for any maintenance if the system breaks down (with leasing, the owners are generally responsible for any maintenance cost). Fortunately, most banks and lending institutions will allow you to apply for a home equity line of credit (HELOC) to finance your solar panels. HELOCs allow you to secure credit through the equity in your home and thus receive a much lower interest rate. Often, the monthly payments on this type of loan might be equal or even lower than the monthly repayments on a lease.

Thus, financing your own solar panel system is usually a good option for homeowners that have good credit and a valuable home that allows them to apply for a home equity line of credit.

Ottawa Renewable Energy Co-op Project. Photo Credit: Ottawa Renewable Energy Project

Community Solar Options

For people who do not own property where they can install solar panels, you might want to consider investing in a community-owned solar project. Through this mechanism, you help to finance a small solar farm that is grid-connected. In this scenario, your home does not directly receive the energy produced by these solar panels. But, you would receive virtual net credits that get applied to your domestic energy bill. These credits offset the cost of utility-provided electricity and might even allow you to make money if the community solar farm produced more than what you consume. Before investing in this type of project, you will need to make sure that your state and local utility company allow for virtual net metering.

Rise Writer

Expert. Practical. Sustainable.

Article by

Tobias Roberts

Tobias runs an agroecology farm and a natural building collective in the mountains of El Salvador. He specializes in earthen construction methods and uses permaculture design methods to integrate structures into the sustainability of the landscape.

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Solar Financing and Leasing Considerations

Assess Your Energy Needs

How Much Do Solar Panels Cost?

How Residential Solar Leasing Works

Pros of Leasing Solar Panels

Cons of Leasing Solar Panels

How Residential Solar Financing Works

Pros of Financing Solar Panels

Cons of Financing Solar Panels

Community Solar Options

Tobias Roberts

Assess Your Energy Needs

How Much Do Solar Panels Cost?

How Residential Solar Leasing Works

Pros of Leasing Solar Panels

Cons of Leasing Solar Panels