Solar Lease vs PPA vs Loan: Which Way to Pay for Solar Makes Sense in 2026?

The choice between a solar lease vs PPA comes down to how you pay: a lease charges a fixed monthly fee to use panels a company owns, while a PPA charges a set price per kWh they produce. Buying with cash or a loan costs more upfront but usually saves the most over 25 years.

This guide compares all four options with real numbers, explains what changed in 2026 when the federal homeowner credit ended, and lists the contract terms that decide whether a deal is good.

How do the four ways to pay for solar work?

There are four main ways to pay for home solar. With cash or a loan you own the panels, keep every dollar of savings and handle repairs. With a lease or PPA, a company owns the panels on your roof, maintains them and bills you monthly for 20 to 25 years.

The U.S. Department of Energy's Homeowner's Guide to Solar Financing (opens in a new tab) describes these same options, and the FTC's guide to solar (opens in a new tab) lists the questions to ask about each.

Loans were the most common route before the law changed. The Consumer Financial Protection Bureau's 2024 solar financing report (opens in a new tab) found loans paid for 58% of residential installations in 2023, cash 19% and third-party ownership (leases and PPAs) 23%. Berkeley Lab's 2026 data update (opens in a new tab) shows third-party ownership rose sharply in 2024 and slightly again in 2025.

What changed for solar financing in 2026?

The biggest change is the federal tax credit. As of October 2026, homeowners who buy solar cannot claim the 30% Residential Clean Energy Credit (Section 25D) for systems whose installation was completed after December 31, 2025. Leasing companies may still claim a separate business credit, which can make leases and PPAs relatively cheaper.

The credit ended under Public Law 119-21, signed July 4, 2025. The IRS FAQ on the changes (opens in a new tab) says an expenditure is treated as made when installation is completed, so paying in 2025 for a system finished in 2026 does not qualify. Systems completed in 2025 are claimed on the 2025 return with Form 5695. Our federal solar tax credit guide covers the details.

A company that owns a leased or PPA system may claim the business clean electricity credit (Section 48E) instead, subject to deadlines: construction begun by July 4, 2026, or the system placed in service by December 31, 2027, plus rules on equipment from foreign entities of concern. The homeowner does not claim it. Whether any of that value reaches you depends on the price the company offers, so compare it against the cash price.

How do lease, PPA, loan and cash compare over 25 years?

In our example, paying cash nets the most, about $35,379 over 25 years, followed by a PPA at $15,033, a 7.99% loan at $14,254 and a lease at $8,879. Ownership wins because you stop paying once the system is paid off, while lease and PPA bills keep rising.

The example uses these inputs in our solar lease vs buy calculator: a 7 kW system producing 1,350 kWh per kW per year, power worth 17.5¢ per kWh rising 3% a year, a $21,000 cash price, a 20-year loan at 7.99%, a $110 monthly lease and a 13¢ PPA rate, both rising 2.9% a year. Over 25 years the solar power is worth about $56,379 in avoided bills.

Computed with our calculator. Your rates, prices and output will differ.

Notice how the escalator works. The lease starts at $1,320 a year, but by year 25 it is about $2,621 a year. The PPA starts at about $1,229 and ends near $2,163. If the same lease and PPA had no escalator, they would net about $23,379 and $27,440, which would put the PPA ahead of the loan.

The assumptions matter even more. If utility prices rise only 1.5% a year instead of 3%, the lease loses about $836 over 25 years, while cash still nets about $25,664. If your utility credits exports at less than retail, set the value-of-solar input below 100%. At 75%, the loan nets only about $159 and the lease loses about $5,215. Owners in net billing states such as California should model this carefully; see our California NEM 3.0 guide.

When does a solar lease or PPA make sense?

A lease or PPA makes sense when you have little cash, do not want to take on debt, prefer that someone else handles repairs and monitoring, or expect to stay in the home for the full contract. It can also make sense in 2026 if the provider passes along part of its business credit through a low rate.

Look for these signs of a fair offer:

• Starting price clearly below your utility rate, with a projection you can check against your own bills.
• Low or no escalator. A 0% to 1.5% escalator is far safer than 2.9% or more.
• A production guarantee that pays you if the system underperforms.
• Clear transfer terms if you sell, and fair buyout prices.
• Maintenance, roof-penetration and inverter replacement covered for the full term.

The FTC warns (opens in a new tab) that leases often run around 20 years, that payments may rise over time and that ending a lease early can be difficult and expensive. It also notes that with a PPA you do not automatically get all the power the system generates. Read how unused production and exports are handled.

When does buying with cash or a loan make sense?

Buying makes sense if you plan to stay at least until the system pays for itself, can pay cash or get a fairly priced loan, and want to keep all the savings. Owned systems also avoid escalators and are simpler to sell with a house once paid off.

DOE's Homeowner's Guide to Solar (opens in a new tab) notes that a purchased system generally has a lower total cost than one financed through a loan, lease or PPA. With cash, our default example pays back in about 11.4 years; you can check your own case with the solar payback calculator.

A loan sits between cash and a lease. You own the panels from day one, but interest adds to the cost. In this example, interest on a $21,000, 20-year loan at 7.99% totals $21,125, nearly doubling the price. Shorter terms cut interest sharply: the same loan over 10 years costs $254.68 a month and $9,561 in interest. Our guide to how solar loans work explains dealer fees, liens and payment resets.

What happens to each option when you sell your home?

An owned, paid-off system simply transfers with the house. A loan must usually be paid off at closing or assumed by the buyer if the lender allows it. A lease or PPA normally passes to the buyer after a credit check, or you buy out the remaining contract.

The CFPB report (opens in a new tab) notes that when a homeowner sells before a solar loan is repaid, the buyer either assumes the loan, if the lender permits, or the seller pays off the balance. It adds that lenders commonly file a lien on the panels, which can cloud the title and may need to be released before a sale or refinance.

For leases and PPAs, the FTC suggests asking before you sign:

1. Can the system move to a new home, and what does that cost?
2. Can the contract transfer to a buyer, and must you give written notice?
3. Does the buyer need to meet credit requirements or pay transfer fees?
4. What is the buyout price at each point in the term?
5. What happens at the end of the term: renewal, purchase or free removal?

DOE also notes that studies showing solar increases home value focus mostly on owned systems, so a leased system may not add the same value at sale.

What about PACE, home equity and other financing?

Besides solar-specific loans, homeowners can use a home equity loan or line of credit, a personal loan or, in some states, PACE financing repaid through property taxes. Each has different costs and risks, so compare the APR, fees, lien and term of every option.

The FTC lists questions for any financing: the APR, how payments are calculated, whether they can change, whether there is a balloon payment, whether a lien goes on your home, and your right to cancel. PACE carries extra risk. The FTC warns a PACE lien can take priority over your mortgage, and missed property tax payments can lead to foreclosure.

A CFPB rule (opens in a new tab) published in January 2025 applies Truth in Lending ability-to-repay requirements to PACE loans, effective March 1, 2026. That means PACE lenders must now check whether you can afford the payments, similar to mortgage lenders.

How do you choose the right option for your home?

Choose by answering three questions: Can you pay cash or get a fair loan? How long will you stay? How much risk do you want to carry for repairs and rate changes? Then compare every option on 25-year net savings using the same assumptions.

1. Get the cash price and at least two other quotes; our how to choose a solar installer guide explains what to compare.
2. Model all four options with your rate, output and escalators in the lease vs buy calculator.
3. Stress-test the assumptions with slower utility price growth and lower export credits.
4. Read the contract for escalators, production guarantees, transfer and buyout terms, and liens.
5. Never sign the same day. The FTC Cooling-Off Rule (opens in a new tab) gives three business days to cancel most sales made at your home, and many states add more.