More than 600,000 homes in America are outfitted with solar panels — and that number is expected to rise each year. It's a new way to save money on utility costs while also reducing the carbon footprint of your home.

But if you want to install solar panels on your home, there is one big question you'll have to answer: do I buy or do I lease? The answer will depend on your financial goals.

Pros and Cons of Buying Solar Panels

Buying solar panels will save you money in the long run — between 40 and 70 percent on electricity costs over the lifetime of your system (which will last around 25 to 30 years). But the biggest downside of buying solar panels is the price that you'll have to pay in the short run.

For example, an average-size home that requires 600 kilowatt-hours per month would need a 5-kilowatt solar panel system. An outright purchase for that system could cost — on the cheap end — $15,000. And on the expensive end, the right system could cost as much as $30,000.

The high initial cost of buying a solar panel can be offset somewhat with the right accounting. With the federal solar panel tax credit, you can deduct up to 30% of the costs of purchasing and installing a solar energy system. And depending on your state, you might also benefit from local rebates and incentives.

When you buy instead of lease, you'll also be responsible for maintaining the solar panels — if something breaks, you're on the hook for fixing it or calling someone who can. But for people who love tinkering, this may be considered a benefit rather than a drawback.

Pros and Cons of Leasing Solar Panels

Leasing is primarily cheaper in the short run and more expensive in the long run. The down payment is either very small or non-existent. And if you do decide to lease, you'll be in good company: more than 70% of those who installed solar panels in 2014 did so through leasing or another form of third-party arrangement.

With leasing, you will benefit from the same reduced utility costs as if you had bought the panels. However, you will not benefit from any state rebates or incentives or the federal solar panel tax credit. You'll also save less in the long run because you will never own your panels, and will always need to pay the lease, unlike with financing or an outright purchase. You can optimize your savings by leasing the right size of solar panels for your home. Maximizing the capacity of your solar panels can save you more each month, which is especially important when you lease.

Leasing terms are also typically longer than loan-to-own or financing terms. With solar panels, you shouldn't really think of leasing as temporary — it's a 20 to 30-year commitment. And if you decide that solar panels aren't worth the hassle, breaking the lease won't be easy.

There is one advantage that leasing has over buying: when you lease, you are not responsible for the maintenance of the solar panels. If something breaks, you don't need to know how to fix it — but you will have to be happy waiting for the company that owns the panels to come out and make the necessary repairs.

So: Buy or Lease?

In most situations, buying will be a better financial decision than leasing. However, the large down payment and long-term nature of financing that purchase may make some homeowners nervous. Outfitting a home with solar panels is a huge investment, and there are a number of other factors — like maintenance, or renovations to create a suitable surface for the panels — that could raise that cost. For homeowners that want to save money but don't want to deal with the large down payment, leasing may be a better option.

The content & opinions in this article are the author’s and do not necessarily represent the views of AltEnergyMag

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