Solar Lease vs Purchase: How the Math Changes Over 25 Years

The solar installation decision isn't just about whether to go solar—it's whether to own or lease the system. This choice dramatically impacts lifetime value.

A lease costs $0 upfront and $100-$150/month forever. A purchase costs $15,000-$30,000 upfront but eventually becomes free. Over 25 years, the difference in total cost can exceed $50,000.

Yet many homeowners choose leases without understanding the long-term math, falling for the "zero down" pitch without analyzing the 25-year commitment.

Understanding the Two Models

Solar Lease (Power Purchase Agreement - PPA):

Installer owns the system

You lease the system or buy power at a fixed rate

Typical cost: $100-$180/month (or fixed cents/kWh)

No upfront cost

System maintained by installer

No tax credits or incentives (installer claims them)

Locked in for 20-25 years

Solar Purchase (Ownership):

You own the system outright

Upfront cost: $15,000-$30,000

You claim 30% federal tax credit (2025)

Monthly cost: Financing payments or zero if paid cash

You maintain the system

You claim all incentives and tax benefits

Freedom to move, upgrade, or remove

The 25-Year Cost Comparison

The cumulative cost difference over 25 years is substantial:

Scenario: $20,000 system with $150/month lease cost

Lease path:

Upfront cost: $0

Monthly cost: $150 × 300 months = $45,000

Maintenance: Included (installer covers)

Tax credits: Zero (installer gets them)

Total 25-year cost: $45,000

Monthly savings vs. utility: ~$2,000 (kept by installer as profit)

Purchase path:

Upfront cost: $20,000

Federal tax credit (30%): -$6,000

Net upfront investment: $14,000

Financing: $14,000 at 5% over 10 years = $147/month for 120 months

Total financing cost: $17,640

Maintenance (minimal): $1,000 over 25 years

Tax credits/incentives claimed: $6,000

Monthly savings vs. utility: ~$2,500 (you keep it)

Total 25-year cost: $14,000 + $1,000 - $6,000 = $9,000

Total 25-year savings: $60,000+ vs. utility grid

Difference: Ownership saves $36,000 vs. lease over 25 years

Why the Lease is So Expensive in the Long Run

Leases appear cheap ($0 down!) but disguise the true cost:

You don't capture tax credits - The 30% federal credit goes to the installer, not you. You lose $5,000-$9,000 in value

You don't capture incentives - State rebates, utility incentives, and performance bonuses all go to the installer

You pay for installer profit - Lease payments include installer's margin (typically 4-8% annually on the system cost)

Lease rates escalate - Many leases include 2-3% annual rate increases. Your $150/month becomes $190/month by year 10

You can't access savings directly - The lease provider banks all the savings from time-of-use pricing, demand response, and dynamic pricing that emerges in the future

When Solar Lease Makes Sense (Rare Cases)

Case #1: You can't afford the upfront cost and can't finance

If you have zero access to capital and no financing options, a lease beats staying on the grid:

Lease cost: $150/month

Utility cost without solar: $300/month

Savings: $150/month vs. no upfront cost

This works only if you can't borrow $15,000-$25,000 at reasonable rates

Case #2: You're moving soon (less than 10 years)

If you plan to move in 5 years, purchasing and financing doesn't make sense. A lease transfers with the home or ends:

5-year lease cost: $150 × 60 = $9,000

5-year purchase cost: $14,000 upfront + 5 years financing + sale complications

Lease is simpler

But even here, ownership with a 10-year financing term might still win.

Case #3: Weak credit/inability to finance

If your credit won't support a solar loan (7-9% rates), compare lease payments to alternative financing:

Lease: $150/month, approved easily

HELOC financing: $200/month at better rates is better than lease

Credit cards: Much worse than lease

Cash savings: Best option (only works if you have cash)

When Solar Purchase is Clearly Better (Most Cases)

Case #1: You plan to stay 10+ years

The longer you stay, the more the purchase advantage grows:

10 years: Purchase saves $15,000-$20,000 vs. lease

15 years: Purchase saves $25,000-$35,000 vs. lease

20+ years: Purchase saves $40,000-$60,000+ vs. lease

If you're confident about 10+ years in the home, purchase is almost always superior.

Case #2: You can access favorable financing

If you can finance at 4-6% (home equity line, solar loan, or refinance), purchase ROI is strong:

5% financing cost: $100-$125/month

Lease alternative: $150/month

Purchase saves $25-50/month

Over 25 years, that $25-50/month advantage adds up.

Case #3: You plan to upgrade or expand

Ownership allows you to add batteries, expand capacity, or modify the system.

Leases typically lock you into the installed configuration. If your needs change, you're stuck.

The Hidden Complication: Home Sale and System Transfer

Leases create complications when you sell:

Seller's perspective:

Lease transfers to the new owner at the lease rate

This might reduce home appealability (new owner inherits $150/month obligation)

Some buyers won't assume the lease

Home selling price might be reduced by lease value ($10,000-$15,000 discount)

Buyer's perspective:

Would you want to inherit someone else's lease?

You'd prefer the seller to have paid off the system (owned it) and gotten credit for the value

Owned systems transfer perfectly—the buyer assumes a paid-off or nearly-paid-off system. Leased systems complicate the sale.

Real estate agents increasingly report that leased solar creates friction in sales.

Actionable Decision Framework

Choose LEASE if:

You plan to move in less than 10 years

You genuinely can't access financing

You can't/won't take on upfront capital expenditure

You strongly value "zero down" simplicity

Choose PURCHASE if:

You plan to stay 10+ years

You can finance at less than 6%

You want maximum long-term value

You value system ownership and customization

You want to capture all tax credits and incentives

Verify before deciding:

Can you get approved for financing? (Most homeowners can via HELOC or solar loans)

What's the actual lease escalation rate? (Annual increases compound)

How does the home sale complicate the lease?

What's the true total cost over your expected hold period?

The Bottom Line: Ownership is Nearly Always Superior

Leases cost roughly 5x more over 25 years compared to ownership ($45,000 vs. $9,000).

This is justified if you need the zero-down entry point and can't finance. But for the majority of homeowners who can secure reasonable financing, ownership is dramatically superior.

The lease industry works because "zero down" has psychological appeal and most homeowners don't run the 25-year numbers.

Run the full calculation, and ownership almost always wins.

Category: Construction & Architecture → Energy & HVAC