Leasing vs Buying Solar Panels: Pros and Cons of Each Option
Wondering if leasing solar panels could be a good option? This guide will cover everything you need to know.
The main points are:
- If you are concerned about the cost of solar panels, there are two main ways to install them for £0 upfront: using a low-interest loan or signing a solar lease.
- A solar lease is just like renting a flat or a car: you pay a monthly fee to use solar panels instead of owning them directly.
- The main advantages of a solar lease are paying £0 upfront, and delegating all operation and maintenance costs to the solar system provider.
- The main advantages of owning solar panels are higher long-term savings, and qualifying for grants and other incentives.
- We only recommend a solar lease if you don’t have the option of a low-interest loan, since lease payments are generally higher than loan payments.
- Loan financing combines the advantages of a cash purchase and a solar lease: you own the panels directly while paying £0 upfront.
What else is in this guide?
There are four main ways to pay for a solar energy system. The terms and conditions change depending on the solar company, and the exact wording used to describe their financing options can also vary. However, solar buying options fall into four main categories:
| Solar Payment Option | Description |
|---|---|
| Cash Purchase | You pay the full cost of the solar energy system upfront, using your own funds. This means that you become the owner right away. |
| Solar Loan | You purchase the solar panel system with loaned capital. You own the system outright, but must pay off the loan plus interest. This option makes sense when you have access to low interest rates, but not with credit card debt or other high-interest loans. |
| Solar Lease | You don’t purchase the solar power system directly. Instead, you pay a monthly fee to use solar panels that are installed on your property but owned by the provider. The system provider is responsible for maintenance, part replacements and fixing any issues during the term of the lease. |
| Solar Power Purchase Agreement (PPA) | A solar PPA is similar to a lease, since the provider owns the system. However, instead of paying a fixed monthly fee, you pay for the amount of electricity generated each month. The solar PPA price is set lower than local electric tariffs, and you save the difference. |
Like in any purchase decision, each option has pros and cons. If you are trying to decide between leasing or owning solar panels, this article will help you compare the options available.
Compare Solar Leasing
Get quotes from local installers
1 fast form = 4 low quotes
Save up to £703 per year
Owning Solar Panels Directly: Cash Purchase or Solar Loan
If you decide to own your solar panels directly, there are three main benefits:
- You benefit from solar panel grants like the Valued-Added Tax (VAT) exemption and the Smart Export Guarantee (SEG).
- Your power bill savings are higher, since you are not bound to lease or PPA payments.
- Your home value increases because solar panels are an asset that generates energy.
Among the two buying options where you own the solar panels, a cash purchase offers higher savings than a loan over time. With a cash purchase you are only paying the price of your photovoltaic (PV) system, while a loan also charges interest. However, a loan also breaks down your solar investment into smaller monthly payments, while a cash purchase requires you to have the funds at hand. Consider that a 4-kW solar system can cost around £8,400.
- Going solar with a loan is viable if you have a high credit score that gives you access to low interest rates. This ensures that your monthly payments will be lower than your power bill savings, and your solar power system can pay for itself.
- Purchasing solar panels with a credit card or other high-interest finance options is not recommended. In this case, your monthly payments are higher than your savings.
What Are the Maintenance Needs of Solar Panels?
If you decide to buy a PV system, keep in mind that you will be responsible for maintenance and part replacements. However, solar panels have simple maintenance needs compared with other power generation systems, since they have no moving parts.
- The most important requirement is keeping your panels clean – accumulated dust and debris block sunlight, making your solar system less productive over time.
- Cleaning requirements vary depending on your location, but many solar brands and installers recommend cleaning your system at least two times per year.
Maintenance becomes much simpler if your solar installation is equipped with an energy monitoring system. You can keep track of electricity production and detect malfunctions, and call the installation company if any issues are detected. Solar inverters from leading brands have a built-in monitoring system and mobile app.
If you choose solar panels and inverters with a solid warranty, any defective parts will be replaced for free. Many solar installation companies also offer a workmanship warranty, which covers the labour associated with warranty claims.
For maintenance purposes, consider that high-quality solar panels have a guaranteed lifespan of 25-40 years, but other components have shorter lifespans. This means you must consider a budget for eventual replacements:
- Traditional solar inverters normally last for around 10-15 years.
- If you choose microinverters, which are designed to be installed on each panel, some brands such as Enphase and BENY offer 25-year warranty coverage.
- If you add a battery bank to your solar panels, its typical lifespan is 10-15 years.
Quick Summary: Pros and Cons of Owning Solar Panels Directly
| Pros | Cons |
|---|---|
| You get solar incentives such as the VAT exemption, SEG tariffs and local grants. Your power bill savings are higher in the long run. Solar panels increase your home value. £0 upfront cost if you use loan financing. | From a financial standpoint, owning solar panels is only viable if you can pay upfront or if you have access to low-interest loans. Purchasing solar panels with high-interest finance options is not recommended. You are responsible for maintenance and part replacements. However, solar panels have simple maintenance needs and long warranties. |
Leasing Solar Panels: Traditional Lease or Solar PPA
A solar lease or PPA offers two main advantages:
- Most solar leases and PPAs are not limited by your credit score, which is the main limitation for low-interest loans.
- Also, the solar system provider is responsible for maintenance and part replacements.
The main disadvantage of solar panel leasing is having to share your savings with the provider. Our solar experts only recommend a lease or PPA when you don’t have access to a low-interest loan or the funds for an upfront cash purchase. You will achieve much higher savings in the long run by owning your solar panels directly, and you can also claim financial incentives such as tax credits and rebates. When leasing solar panels, the system provider keeps all the incentives.
Electricity prices tend to rise each year, and this also means that the dollar savings achieved by solar panels increase over time. According to the Department of Energy Security and Net Zero, UK electricity costs were up by 55% between the financial years 2021/22 and 2022/23.
- If electric tariffs increase when you already own solar panels, your power bill savings increase in the same proportion.
- On the other hand, solar leases and PPAs often have a price escalator. This means you also share the savings resulting from rising electric tariffs.
Solar leases and PPAs also offer free maintenance, but keep in mind that solar systems have simple maintenance needs. Also note that the best solar panels have 25-40 year warranties, which means you don’t have to worry about early malfunctions even when owning them directly.
If you have the option of a cash purchase or solar loan, and you choose a lease or PPA for free maintenance, you are giving up a large portion of your savings. Solar panels yield higher savings if you own them directly, even when maintenance costs are factored in.
Quick Summary: Pros and Cons of Leasing Solar Panels
| Pros | Cons |
|---|---|
| £0 upfront cost. The solar PV system provider is responsible for financing, installation, maintenance and part replacements. In general, solar leases and PPAs are much less demanding than solar loans with respect to your credit score. | Your power bill savings are much lower in the long run, since they are essentially being shared with the PV system provider. You cannot claim solar grants and other incentives. Leased solar panels don’t increase home value, since you don’t own them directly. Solar leases and PPAs have an early termination fee, which tends to be high. Solar leases and PPAs often have a price escalator clause, which means that your monthly payments increase over time. |
Leasing vs Buying Solar Panels: Final Recommendations
If you want to achieve maximum savings with solar panels, you should own them directly. However, this means you must assume their upfront cost or finance them through a loan. Purchasing solar panels with a loan is viable when you have access to low interest rates, since this ensures that your monthly payments will be lower than your savings.
Leasing solar panels is recommended when you don’t have the option of a cash payment or low-interest finance.
- The PV system remains under the provider’s ownership, and they are responsible for operation and maintenance during the entire term of the lease.
- However, you share a large portion of your monthly savings in exchange for this service.
If you have the option of a cash purchase or low-interest loan, choosing a solar lease or PPA only for free maintenance is not a lucrative trade-off. Solar panel systems have simple maintenance requirements, which means the extra cost of a lease or PPA tends to outweigh your maintenance savings by far.
Written By
Reviewed By
