Leasing vs buying solar panel systems - a guide to the differences, advantages and disadvantages

Saving money on energy bills in the short and long term, reducing electricity costs with solar energy, and helping to protect the environment – these are compelling reasons to consider investing in a solar panel system. But when it comes to deciding how to pay for solar panels, you might wonder: is it better to lease or to or buy solar panels? 

Each has its own advantages, disadvantages, and associated costs, so understanding the differences is crucial. Let's explore them in today's article:

• Key differences between buying and leasing a PV installation;
• Benefits and drawbacks of each option;
• Factors to consider when making your decision;
• Other available financing options for solar panel installations.

What is the difference between buying and leasing a photovoltaic system?

Leasing a photovoltaic system offers an alternative to outright purchase, requiring no initial investment. Homeowners provide their roofs for the installation of a PV system and can use or sell any surplus energy generated. They pay a monthly fee covering installation and maintenance.

On the other hand, when buying a solar system directly, the buyer gains immediate ownership and assumes full responsibility. Moreover, buyers often qualify for subsidies and can enhance their property's value with the PV system.

Other differences to consider

Let's examine the key differences between buying solar panels outright and leasing them, focusing on three main factors:r: 

• Initial costs
• Ownership of the PV system
• Maintenance costs and responsibilities

Initial costs

💡Leasing: Choosing to lease a PV system means you don't need to pay a large sum of money upfront, making it easier on your finances. Instead of having to invest around £7000-8000 upfront, leasing saves you a significant amount of money at the beginning.

This also means you don't have to borrow money to cover these costs. Additionally, the monthly payments for your solar panel system are steady and simple to plan for, even if electricity prices go up in the long run.

💰Direct purchase: Conversely, buying a PV system outright requires a much larger upfront payment compared to leasing, as there's no option to split the initial cost.

Ownership of a photovoltaic system

💡Leasing: With a leasing arrangement, you are not the owner of the entire PV system, just the energy it generates. And the possibility of a buyout or to return the solar panels will entirely depend on the agreement between you and the solar company of your choice.

💰Direct purchase: Opting to buy a PV system means immediate ownership. You assume full responsibility for your solar system, including potential costs for repairs or component replacements.

Maintenance comparison for photovoltaic systems

💡Leasing: Routine maintenance for your PV system is normally included in the leasing price. As a tenant, you can enjoy your PV system hassle-free, with maximum convenience.

💰Direct purchase: With a purchased PV system, you're responsible for maintenance and repair costs. These typically range between £100 and £200 per year.

Leasing solar panels: pros and cons

These are the pros of choosing a leasing agreement for your solar panel installation: 

• Avoid high initial investment costs;
• Hassle-free installation and maintenance;
• Enjoy stable fixed costs;
• Repairs are covered;
• Option to take over or to remove the system at the end of the term depending on your agreement with the leasing company of your choice.

Regarding the possible drawbacks: you might be concerned that because of interest rates in the long run you might pay more than in case of a direct purchase. It is true, however, knowing that you can have your solar panels installed with no money upfront, leasing is still a good option in terms of short and long term savings.

Buying solar panels: pros and cons

On the other hand, purchasing a photovoltaic system grants you full control over your energy supply and comes with its own set of advantages:

• Immediate ownership;
• Enhances property value if you wish to sell your home;
• Freedom to select modules and components;
• No contractual obligations;
• Flexibility for system upgrades;
• Access to subsidies;
• Typically, the investment pays off within 7-8 years depending on the characteristics of your solar panel installation, your location, etc.

When it comes to the possible drawbacks: the main one is the initial cost of purchasing solar panels right away that depending on each case might be considerable. Here however, you should also have in mind that energy savings generated by solar panels are also a strong argument regarding the return on investment.

What to choose?

Deciding whether to lease or buy a solar power system depends on each household's situation and factors like provider prices, system size, and how much energy you use versus feeding into the grid. To simplify the options:

If you have enough money saved up, qualify for subsidies, and use a lot of your own solar power thanks to battery storage, buying a PV system is probably better financially.

But for those who can't afford to buy or don't want to, leasing is a good alternative. The main benefit of leasing is you don't have to pay a big lump sum upfront or for ongoing costs, just a monthly fee. It's a good choice if you don't have enough money to buy outright or don't want to take out a loan.

It's a good idea to add up all the lease payments over the whole lease period and compare them with the cost of buying a PV system. This will give you an idea of which option might be cheaper in the long run.

General aspects to consider

Whether you opt to purchase or lease a PV system, the initial step is to determine the configuration that suits your needs independently on how you decide to finance it. For this reason you should answer the following questions:

• Is my roof suitable for the installation?
• How many solar panels do I need?
• Which provider offers the best price-performance ratio?
• Is a battery storage system necessary?
• What power capacity should the system possess?
• What size should the system be?

Additionally, the installation process is crucial. We recommend choosing a provider that employs skilled professionals for PV system installation. Expertise is vital when installing solar panels or batteries.

Reputable companies also provide warranties and support for their systems. Ensure your provider offers guarantees for the solar modules and inverter throughout the contract duration. For batteries, a standard market practice is a warranty period of 5 to 10 years.

Is leasing vs buying the only available option?

There are different ways to finance your solar panel installation. Besides solar lease or direct purchase you can also obtain a personal solar loan, consider adding the cost of a PV installation to your mortgage or opt for a solar panel subscription.

The latter option is part of our offer.  At Otovo, if you choose to subscribe to solar panels with us, you benefit from the expertise of an international company, guiding you through every stage of using your solar system—from configuration and installation to feed-in and maintenance.

We collaborate with certified local partners for installation, utilising high-quality solar modules. All photovoltaic components are backed by comprehensive warranties: 20 years for the solar modules and inverter, and 10 years for the battery storage system. This entails replacing defective parts throughout the rental period, irrespective of the manufacturer's warranty, which is typically shorter. We also undertake all necessary system maintenance to ensure your PV system functions optimally. 

Note:  at Otovo we offer only a subscription option, we do not offer solar panel leasing. Otovo is a credit broker, not a lender. Our lending entity EDEA Limited** offers a Hire Purchase product, which is not the same as leasing. Finance subject to status. 

Conclusion

Both leasing and buying a photovoltaic system have certain advantages. Buying allows full ownership of the solar panel installation. Leasing a solar system, on the other hand, is a great option, especially for those who can't afford to buy a PV system outright.

Basically, however, it doesn't matter whether you decide to lease or buy a solar system - either way, you save money by drawing less electricity from the public grid and protect the environment by using renewable green electricity. So one thing is certain: both leasing and buying a photovoltaic system are worthwhile!

Disclaimer: Otovo Limited is an appointed representative of Product Partnerships Limited which is authorised and regulated by the Financial Conduct Authority.Product Partnerships Limited's FCA registration number is 626349 and its address is Suite D2 Joseph’s Well, Hanover Walk, Leeds LS3 1AB. Product Partnerships Limited’s permitted business is to act as a Principal for a network of Appointed Representatives who arrange regulated credit facilities for customers who are purchasing goods from them.

Otovo Limited acts as a credit broker not a lender. We will introduce you to a small panel of lenders who may be able to offer you finance facilities for your purchase. We do not receive any commission for introducing customers to any lenders. You may be able to obtain finance for your purchase from other lenders and you are encouraged to seek alternative quotations. If you would like to know how we handle complaints, please ask for a copy of our complaints handling process. You can also find information about referring a complaint to the Financial Ombudsman Service (FOS) at financial-ombudsman.org.uk