Solar Lease vs. Buy: Cash, Loan, Lease and PPA Compared
There are four ways to pay for solar, and the monthly payment is the least useful way to compare them. Here's what each one really costs over the life of the system.
If you can pay cash or get a fair loan, owning usually costs far less over 25 years. Leases and PPAs need no money upfront but usually cost more in total, especially with an annual escalator. Compare every option by its total cost and cost per kWh over the full term.
The four ways to pay
| Cash | Loan | Lease | PPA | |
|---|---|---|---|---|
| Who owns it | You | You | Solar company | Solar company |
| Upfront cost | Full price | Often $0 | Usually $0 | Usually $0 |
| What you pay | Nothing after install | Fixed loan payment | Monthly rent for the system | A rate per kWh it produces |
| Annual increase | - | None | Often 0–3.9% | Often 0–3.9% |
| Maintenance | You (warranties cover most) | You (warranties cover most) | Company | Company |
| Selling your home | Simple | Pay off or transfer the loan | Buyer takes over the lease, or you buy it out | Buyer takes over the contract, or you buy it out |
Lease or PPA isn't always your choice. Whether a PPA can be offered depends on where you live: some states don't allow a third party to sell electricity to a homeowner, so installers there offer leases only. In other areas both are available. Either way, the question is the same (is the offer you were given a good deal?), and the comparison below works for both.
What each option costs over 25 years
Here's the same 8 kW system paid for four ways. It produces about 11,700 kWh in its first year, losing about 0.5% a year as the panels age, roughly 275,000 kWh over 25 years.
| How you pay | 25-year cost | Cost per kWh |
|---|---|---|
| Cash: $24,000 ($3.00/W) | $24,000 | 8.7¢ |
| Loan: 2.99% on $30,000 (includes a $6,000 dealer fee) | $42,632 | 15.5¢ |
| Loan: 6.99% on $24,000, no dealer fee | $50,842 | 18.5¢ |
| Lease: $150/month, rising 2.9% a year | $64,772 | 23.5¢ |
| PPA: 20¢/kWh, rising 2.9% a year | $78,620 | 28.6¢ |
Cost per kWh is the fairest yardstick: put it next to what you pay your utility today. Where power is expensive (35–45¢ per kWh in parts of California), even a lease or PPA can save money. Ownership just saves a lot more.
To be fair to the other side: cash has an opportunity cost. That $24,000 could stay invested instead. But at these numbers, a loan or cash purchase still comes out well ahead of a lease or PPA for most homeowners.
What changed in 2026
The 30% federal tax credit for homeowner-owned systems (Section 25D) ended for systems installed after December 31, 2025. Owners no longer get 30% back.
Leases and PPAs are different: the solar company owns the system, so it may still be able to claim business tax credits, currently scheduled to phase out for most new systems by the end of 2027. That's a big reason you'll hear leases and PPAs pitched hard right now. Some of that benefit may show up as a lower price, so don't assume either way: compare the totals.
When a lease or PPA can make sense
- You can't get reasonable financing and don't have cash to spare.
- The escalator is 0% (or very low) and the rate is well below your utility rate.
- You want someone else responsible for monitoring, repairs and insurance on the system.
Questions to ask before signing a lease or PPA
- What is the annual escalator, and is it in writing? (See what escalators really cost.)
- What happens when I sell my home? What does a buyer need to qualify, and what is the buyout price each year?
- Who pays to remove and reinstall the panels if the roof needs work?
- Is production guaranteed? If the system underperforms, how am I compensated?
- What are my options at the end of the term: renew, buy, or have it removed for free?
Red flags
- Only a year-1 comparison: “your payment is less than your bill today.”
- Savings that assume utility rates rise 5% or more every year.
- An escalator that isn't stated clearly on the first page.
- No written buyout schedule or home-sale transfer terms.