What Is a Solar Lease? What Arizona Homeowners Need To Know

If you’ve been researching solar energy for your home, you’ve probably come across the term “solar lease” and wondered whether it’s the right move.

What is a solar lease? A solar panel lease lets you enjoy the benefits of solar energy without paying tens of thousands of dollars upfront for equipment and installation, but like any financial agreement, it comes with trade-offs.

In this guide, we’ll break down exactly how a solar lease works, what it costs, how it compares to buying or financing solar panels, and what Arizona homeowners should consider before signing on the dotted line.

Thinking about going solar? Saguaro Solar Electric provides expert solar installation services across Tucson and the surrounding areas and will be happy to discuss your options. Call (520) 704-6868 to learn more, or request a free estimate today to get started right away.

What Is a Solar Lease?

A solar lease is a financing arrangement where a solar company installs solar panels on your roof, retains ownership of the system, and charges you a fixed monthly payment to use the electricity it generates.

It’s similar to leasing a car: you don’t own the panels, but you get to use the energy they produce for a set monthly fee.

Under a typical solar lease agreement, the solar installer handles everything from system design and permitting to installation and ongoing maintenance.

You simply pay a predictable monthly amount that’s designed to be lower than your current electricity bill, so you start saving from day one.

With most solar lease companies, contracts run for 20 to 25 years. At the end of the contract term, you typically have three options: renew the lease, purchase the system at fair market value, or have the panels removed at no cost.

How Does a Solar Lease Work?

Here’s a step-by-step look at the process:

Consultation and site assessment: A solar company evaluates your roof, energy usage, and sun exposure to determine system size.
System design and permitting: The installer designs a grid-tied solar system tailored to your home and handles all permitting with your local municipality.
Installation: The solar company installs the panels, inverter, and all related equipment on your property. This typically takes one to three days.
Activation: Once the system passes inspection and connects to the grid, it starts generating electricity for your home.
Monthly payments begin: You pay a fixed monthly lease payment to the solar company. Any excess energy your system produces may be credited to your electricity bill through net billing.
Ongoing maintenance: The leasing company handles all operations and maintenance for the life of the contract. If a panel fails or the inverter needs replacing, that’s on them.

The solar company retains ownership of the system throughout the lease, which means they can claim the Federal Investment Tax Credit for commercial installations (expires July 2026) and any Renewable Energy Certificates (RECs) associated with the system.

This is one of the key differences between leasing and buying.

How Much Is a Solar Lease per Month?

Monthly lease payments typically range from $75 to $250 per month, depending on system size, your location, and your energy needs. For Arizona homeowners, costs tend to fall on the lower end of that range thanks to abundant sunshine and strong solar production.

One important detail to watch for is that most solar lease agreements include an escalator clause.

This means your monthly payment increases by a set percentage each year, usually between 1% and 5%. Over a 25-year lease, even a small annual escalation can add up significantly.

For example, a $100 monthly payment with a 3% annual escalator would grow to roughly $197 per month by year 25.

Make sure you compare the escalation rate in your lease to the average annual increase in utility rates (typically around 2% to 3% nationally) to confirm you’ll still be saving money over the full contract term.

Some companies also offer a prepaid solar lease, where you pay the full lease amount upfront in exchange for lower total costs. This can be a smart option if you have the capital.

Solar Lease vs. Buying Solar Panels

This is the big question most homeowners face: is it better to buy or lease solar panels?

When You Buy Solar Panels

When you purchase a solar panel system outright (or finance it with a solar loan), you own the equipment. That means:

You benefit from Arizona’s Residential Solar Energy Tax Credit (up to $1,000), plus the state’s full sales tax exemption and property tax exemption on added home value.
Your long-term savings are significantly higher because you eventually eliminate your monthly payment entirely.
Owned solar panels boost your home resale value. Homes with owned solar systems consistently sell for more than comparable homes without solar.
You’re responsible for maintenance and solar repair services, though modern solar panels require very little upkeep.

When You Lease Solar Panels

A solar panel lease makes more sense in certain situations:

You want to go solar with zero down payment and no upfront cost.
You don’t want to deal with maintenance. The leasing company covers all operations and maintenance for the life of the agreement.
Your tax situation doesn’t allow you to fully benefit from the state tax credits.
You want predictable energy costs without taking on debt through a loan.

The trade-off is that your total savings over the life of the lease will be lower than if you purchased the system.

Most homeowners who lease solar panels save between 10% and 30% on their monthly energy costs, while homeowners who buy can save 50% or more in the long run.

Solar Lease vs. PPA (Power Purchase Agreement)

You’ll often see solar leases and power purchase agreements mentioned together. Both fall under the category of third-party ownership (TPO), meaning that a solar company owns and maintains the system on your property.

The difference comes down to billing:

Solar lease: You pay a fixed monthly amount regardless of how much energy the system produces.
Solar PPA: You pay a per-kilowatt-hour (kWh) rate for the electricity the panels actually generate. Your bill fluctuates based on production, which means higher payments in summer and lower ones in winter.

Over a full year, the total cost for both options is usually comparable. The lease gives you more predictable monthly budgeting, while the PPA ties your cost directly to production.

Solar Lease vs. Loan

A solar loan lets you own the system while spreading payments over time. With a loan:

You claim all state incentives yourself.
You build equity in the system from day one.
Your monthly payment is usually higher than a lease payment, but once the loan is paid off, your electricity is essentially free.
You’re responsible for solar panel maintenance (though this is typically minimal).

If you can qualify for favorable financing terms, a solar loan almost always delivers better long-term value than a lease, but if you want the simplest, lowest-risk path to solar energy savings, a lease removes much of the complexity.

Selling a Home With a Solar Panel Lease

One of the most common concerns about solar leasing is what happens when you sell your home. If you’re selling a house with a solar panel lease still active, you have two main options:

Transfer the lease to the new homeowner. The buyer must agree to assume the lease payments and meet the leasing company’s credit requirements. Some buyers see this as a benefit (lower energy bills with no upfront cost), while others may view it as a complication.
Buy out the lease. You can purchase the system at its current fair market value and transfer full ownership to the buyer. This eliminates the lease obligation and can make your home more attractive on the market.

Owned solar panels generally add more to your home’s resale value than leased panels. If you’re planning to sell your home within the next several years, this is worth factoring into your decision.

How To Get Out of a Solar Lease Early

Life happens, and sometimes you may need to exit a solar lease before it expires. Most contracts include an early termination option, but it typically comes with a buyout fee. This fee is usually based on the remaining value of the lease payments.

Before signing any solar lease agreement, make sure you understand:

The specific terms for early termination.
How the buyout price is calculated.
Whether there are any transfer restrictions.
What happens to the equipment if you terminate.

Reading the fine print carefully before you sign can save you from surprises down the road. If something feels off, trust your instincts and consider getting a second opinion. Check out our guide on how to pick a solar company for tips on finding a trustworthy installer.

Solar Lease Red Flags To Watch For

Unfortunately, not every solar lease is a good deal. Here are some warning signs:

Escalation rates above 3% annually. At higher rates, your lease payment could eventually exceed your utility bill, eliminating your savings entirely.
High-pressure sales tactics. Any company pushing you to sign immediately without giving you time to review the contract is a red flag.
Vague performance guarantees. A reputable solar installer will include a clear performance guarantee in your lease and commit to compensating you if the system underproduces.
No clear end-of-lease terms. Make sure you understand exactly what happens at the end of your contract, including removal costs, buyout pricing, and renewal terms.
Unrealistic savings projections. If the numbers seem too good to be true, they probably are. Get multiple quotes and compare them carefully.

Arizona-Specific Considerations for Solar Leases

Arizona is one of the best states in the country for solar energy with over 300 days of sunshine per year. Here’s what Arizona homeowners should know:

Arizona Solar Incentives

Arizona Residential Solar Energy Tax Credit: Homeowners who purchase solar panels can claim a state income tax credit worth 25% of the system cost, up to $1,000. This credit is only available to system owners, not lessees.
Sales Tax Exemption: Arizona provides a full sales tax exemption on the purchase of qualifying solar equipment, which saves you roughly 5.6% on the total cost.
Property Tax Exemption: The added value solar panels bring to your home is exempt from property taxes in Arizona, so your tax bill won’t increase.

If you lease, the solar company claims the federal ITC, and these incentives pass through indirectly as lower lease payments. However, you won’t get the direct financial benefit that homeownership provides.

Arizona Net Billing

Arizona utilities offer net billing programs that credit you for excess solar energy your system sends back to the grid.

Whether you lease or buy, net billing helps maximize your solar energy savings by reducing your electricity bill even further during months when your system overproduces.

Who Should Consider a Solar Lease?

A solar lease can be a great fit if you:

Want to reduce your electricity bill with no upfront investment.
Prefer a hands-off experience with no maintenance responsibility.
Plan to stay in your home for at least 10 to 15 years.
Want to lock in predictable energy costs for the long term.

On the other hand, if you can afford the upfront cost of installing solar panels (or qualify for a solar loan), buying your system will almost always provide better financial returns over time.

Leasing Solar Panels: The Bottom Line

A solar lease is a legitimate, low-risk way to start generating clean energy and saving money on your electricity bill without a large upfront investment.

The trade-off is that you won’t own the system, you’ll miss out on tax credits, and your long-term savings will be lower than if you purchased outright.

For Arizona homeowners considering solar, the decision between leasing and buying comes down to your financial situation and how long you plan to stay in your home.

Either way, going solar in a state with as much sunshine as Arizona is one of the smartest energy decisions you can make.

Ready to explore your options? Whether you’re interested in a solar panel lease or want to learn more about our solar services, Saguaro Solar can help you find the right solution.

Schedule a free consultation and personalized solar estimate today, or call (520) 704-6868 with any questions you have about going solar.