Solar Lease vs Buy Calculator
Compare the true 20-year cost of leasing solar panels versus buying them outright with tax credits. Use this calculator before signing a lease agreement to see which option saves more money.
About this calculator
Buying a solar system means paying the purchase price upfront, then reducing that cost by a federal (or state) tax credit. The net purchase cost is: Net Purchase Cost = purchasePrice × (1 − taxCredit / 100). Leasing involves a down payment plus a stream of monthly payments that typically escalate each year. The total lease cost over the analysis period uses a geometric series: Total Lease Cost = downPayment + monthlyLease × 12 × [(1 − (1 + r)^years) / r], where r = annualEscalator / 100. When r = 0 the series collapses to downPayment + monthlyLease × 12 × years. The calculator returns (Net Purchase Cost) − (Total Lease Cost): a positive number means buying costs more; a negative number means leasing costs more over the chosen horizon.
How to use
Assume a system costs $20,000, a 30% federal tax credit applies, the lease requires $0 down and $120/month with a 2% annual escalator over 20 years. Net purchase cost = $20,000 × (1 − 0.30) = $14,000. Total lease cost = $0 + $120 × 12 × [(1 − (1.02)^20) / 0.02] = $1,440 × 16.35 ≈ $23,544. Difference = $14,000 − $23,544 = −$9,544, meaning leasing costs roughly $9,544 more over 20 years — buying wins in this scenario. Remember to also factor in ownership benefits like increased home value and no escalating payments.
Frequently asked questions
How does the federal solar tax credit affect the buy-versus-lease decision?
The federal Investment Tax Credit (ITC) currently allows you to deduct 30% of the system's installed cost directly from your federal tax liability when you purchase a solar system. This single benefit can reduce a $20,000 system to an effective cost of $14,000, dramatically improving the economics of buying. When you lease, the leasing company owns the panels and claims the tax credit itself, passing only a portion of the savings back through lower monthly payments. If you have sufficient tax liability to use the full credit, buying almost always beats leasing on a purely financial basis.
What is a lease escalator and how does it affect total solar lease cost?
A lease escalator is an annual percentage increase built into your solar lease contract, typically ranging from 0% to 3%. It is designed to mirror expected utility rate inflation so that your lease payment stays competitive over time. However, if utility rates rise more slowly than the escalator — or if you move before the lease term ends — the escalator can make leasing significantly more expensive than projected. A 2% escalator on a $120/month lease turns into roughly $178/month by year 20, and the compounding effect inflates total payments considerably compared to a fixed-payment lease.
When does leasing solar panels make more financial sense than buying?
Leasing is worth considering when you lack the upfront capital or sufficient federal tax liability to capture the ITC, since buying without the credit removes its biggest financial advantage. It can also be attractive if the lease includes free maintenance, monitoring, and performance guarantees that would otherwise cost money. Homeowners who plan to move within five to seven years may also prefer a lease, though lease transfers during home sales can complicate negotiations. In most other scenarios, purchasing — especially with a solar loan — tends to generate greater lifetime savings than leasing.