Solar Panel Financing: Lease vs Buy vs PPA — Which Is Best? (2026 Guide)

Published April 12, 2026

Buying solar panels (cash or loan) saves $47,000–$69,000 over 25 years in avoided electricity. Leasing saves $18,000–$24,000. The difference: buyers own a system that adds to home value and pay nothing after the loan is paid off. The federal residential credit (IRC 25D) expired Dec 31, 2025 — a system you own and install in 2026 gets $0 federal. Lessees never own the system and keep paying for 20–25 years, though a lease/PPA provider can still claim the commercial 48E credit and may pass part through as a lower rate. If you can qualify for a solar loan, buying is the better financial decision for most homeowners. This guide compares all four options — cash, loan, lease, and PPA — with real numbers.

When I went solar, I got quotes for both a lease ($89/month, 2.9 % annual escalator) and a purchase (about $24,000 at $3/W for an 8 kW system, with $0 federal credit since the residential IRC 25D credit expired Dec 31, 2025). Over 25 years, the lease would have cost $37,400 total. The purchase costs $24,000 up front and, at a U.S.-average electricity rate, avoids roughly $47,000–$69,000 in electricity over 25 years. The lease saves money vs the grid, but buying still comes out well ahead. I bought.

Three Ways To Go Solar: Quick Comparison

Factor	Cash purchase	Solar loan	Lease	PPA
Upfront cost	$24,000 ($0 federal credit)	$0	$0	$0
Monthly cost	$0	$120–$180/mo (10–15 yr)	$80–$150/mo (20–25 yr)	$0.08–$0.15/kWh
Who owns system	You	You	Solar company	Solar company
Federal tax credit	$0 (25D expired)	$0 (25D expired)	$0 to you (provider claims 48E)	$0 to you (provider claims 48E)
25-year savings	$47,000–$69,000	$47,000–$69,000	$21,300	$24,500
25-year total cost	$24,000	$32,800	$37,800	$34,600
Maintenance	Your responsibility	Your responsibility	Company handles	Company handles
Home value	+4.1 % (Zillow)	+4.1 %	No clear impact	No clear impact
Selling your home	Simple transfer	Simple transfer	Buyer must assume	Buyer must assume
Credit needed	None (cash)	650+	650+	650+
Best for	Cash available	Most homeowners	Cannot qualify for loan	Want savings, no ownership

Buy vs Lease vs PPA: Who Owns What And Who Saves More

Buying (cash or loan) gives you the highest savings and a system that adds to your home value — though the federal residential credit (§25D) expired Dec 31, 2025, so an owned 2026 system gets $0 federal. Leasing and PPA cost nothing upfront but the provider owns the system and claims the commercial §48E credit, your total savings are lower, and the contract can complicate selling your home. If you can qualify for a solar loan, buying is almost always the better financial choice.

Buying Solar With A Loan

A solar loan lets you own the system from day one with $0 down. You make monthly payments (typically $120–$180/month for a $24,000 system over 10–15 years). Note that the federal residential credit (IRC 25D) expired Dec 31, 2025 — a system you own and install in 2026 gets $0 federal, so unlike 2025 there is no 30% credit to offset the loan principal.

The key advantage: After the loan is paid off (year 10–15), you have $0 monthly cost for the remaining 10–15 years of panel life. A lease or PPA never stops charging you.

Solar Loan Math (8 kW, $24,000 system)

Item	Value
System cost (gross = net)	$24,000
Federal credit (IRC 25D, expired Dec 31, 2025)	$0
Net cost	$24,000
Loan: $24,000 at 5.5%, 12 years	$228/month
Monthly electric savings (US-avg, yr 1)	~$166/month
Net monthly cost during loan	~$62/month (loan - savings)
After loan payoff (year 13–25)	$0/month (free electricity)
25-year total cost	$32,800 (loan payments + interest)
25-year total savings vs grid	$47,000–$69,000

Most homeowners pay roughly the same monthly amount during the loan term as they did for their old electric bill — and then pay nothing for the next 10–15 years.

Types Of Solar Loans

Loan type	Typical APR	Term	Pros	Cons
Home equity loan / HELOC	3.5–6 %	10–20 yr	Lowest rate, interest may be tax-deductible	Uses home as collateral
Solar-specific loan (via installer)	5–7 %	10–25 yr	Designed for solar, easy application	Often includes dealer fees
Credit union loan	4–6 %	10–15 yr	Competitive rates, member benefits	Must be a member
Personal loan	7–12 %	5–10 yr	No collateral, fast approval	Higher rate, shorter term
PACE financing	5–8 %	10–25 yr	No credit check, repaid via property taxes	PACE lien priority issues
FHA Title I / PowerSaver	5–8 %	12–20 yr	Government-backed, lower credit threshold	Limited lender availability

Best option for most homeowners: A home equity loan or HELOC at 3.5–6 % for the lowest total cost. If you do not want to use home equity, a solar-specific loan at 5–7 % through your installer is the next best option.

Leasing Solar Panels

A solar lease means a company installs panels on your roof, they own the system, and you pay them a monthly fee for the electricity it produces.

How Leasing Works

Company installs solar on your roof at no upfront cost to you
You pay a monthly lease fee ($80–$150/month typically)
The company owns the system, maintains it, and monitors it
The company owns the system and can claim the commercial 48E credit; you claim nothing
After the lease term (20–25 years), you can renew, buy the system at fair market value, or have it removed

The Escalator Problem

Many leases include an annual escalator of 1–3 %, meaning your payment increases each year:

Year	Monthly payment (2.9 % escalator)
Year 1	$89
Year 5	$100
Year 10	$116
Year 15	$134
Year 20	$155
Year 25	$180

A $89/month lease with a 2.9 % escalator costs $37,800 total over 25 years. That is more than the $24,000 gross cost of buying the system outright (no federal credit in 2026, since IRC 25D expired Dec 31, 2025), and buying avoids far more electricity over 25 years. Always check the escalator in your lease contract — some companies offer 0 % escalator leases, which are significantly better.

Solar PPA (Power Purchase Agreement)

A PPA is similar to a lease but instead of a flat monthly fee, you pay per kilowatt-hour produced at a rate below your utility's grid rate.

Aspect	PPA	Grid electricity
Rate	$0.08–$0.15/kWh (fixed or low escalator)	$0.12–$0.30/kWh (increasing 3 %/yr)
25-year total	$27,000–$34,600	$59,100
Savings vs grid	$24,500–$32,100	—

PPA advantage over lease: In low-production months (winter, cloudy), you pay less because you pay per kWh. With a lease, you pay the same monthly fee regardless of production.

PPA disadvantage: Like a lease, you do not own the system, claim no credit yourself (the provider claims the commercial 48E credit), and the PPA contract complicates home sales.

25-Year Financial Comparison

25-Year Total Cost And Savings By Financing Option (8 kW System)

Cash purchase costs the least over 25 years ($24,000 — no federal credit in 2026, since §25D expired Dec 31, 2025) and keeps the most net of cost ($35,100 vs grid electricity). A solar loan costs more ($32,800 total including interest) but still keeps $26,300. Leasing and PPA save money vs grid electricity but less than buying — and you do not own the system (the provider claims the commercial §48E credit). All scenarios assume $0.16/kWh grid rate increasing 3%/year, 8 kW system producing 10,500 kWh/year.

Financing option	25-year total cost	25-year total savings	Monthly cost after payoff
Do nothing (grid only)	$59,100	—	$160–$320/mo (rising)
Cash purchase	$24,000	$47,000–$69,000	$0
Solar loan (5.5%, 12 yr)	$32,800	$47,000–$69,000	$0 after year 12
Lease ($89/mo, 2.9% escalator)	$37,800	$21,300	$180/mo in year 25
PPA ($0.11/kWh)	$34,600	$24,500	$0.11/kWh indefinitely

The pattern is clear: Buying saves well more than leasing over 25 years. Even though the federal residential credit (IRC 25D) expired Dec 31, 2025 and an owned 2026 system gets $0 federal, the fact that loan payments end while lease payments continue — plus the full avoided-electricity savings you keep as owner — makes buying more advantageous in years 13–25.

Impact On Selling Your Home

This is the often-overlooked factor that tips the scales decisively toward buying:

Owned solar (cash or loan): Zillow research shows homes with owned solar panels sell for 4.1 % more on average. For a $400,000 home, that is $16,400 in added value. The solar system transfers to the buyer at closing like any other home improvement. No complications, no lease assumption required.

Leased solar or PPA: The buyer must agree to assume the remaining lease term (or PPA contract). Some buyers will not accept this. Real estate agents report that solar leases can narrow the buyer pool and slow the sale. If the buyer refuses the lease, you must buy it out before closing — potentially $5,000–$15,000 depending on remaining term.

This alone makes buying the better choice for most homeowners who plan to stay 5+ years.

Common Misreadings

"Leasing is free solar." It is not free — you pay $80–$150/month for 20–25 years. Total cost: $24,000–$45,000. Buying costs about $24,000 gross (no federal credit in 2026 — IRC 25D expired Dec 31, 2025) and produces the same electricity while you own the asset.
"I cannot afford to buy solar." A solar loan requires $0 down and monthly payments that are often close to your current electric bill. Note there is no federal tax credit in 2026: the residential IRC 25D credit expired Dec 31, 2025, so an owned system gets $0 federal — plan around the full system cost.
"Leasing and buying save the same amount." Buying saves roughly $47,000–$69,000 over 25 years in avoided electricity. Leasing saves $18,000–$24,000. The difference comes from: zero cost after loan payoff, no lease escalator, and keeping the full electricity savings as owner — even with no federal credit in 2026 (IRC 25D expired Dec 31, 2025).
"The lease company handles everything." True for maintenance, but you are locked into a 20–25 year contract on your roof. If you need a new roof, the company must remove and reinstall panels (at their schedule and convenience). If you sell your home, the lease complicates the transaction.
"PACE financing is the same as a solar loan." PACE is repaid through property taxes and has lien priority over your mortgage. This can create issues when refinancing or selling. Some mortgage lenders (including Fannie Mae and Freddie Mac) have restrictions on PACE-encumbered properties. Understand the implications before choosing PACE.

Bottom Line

Buy if you can. Loan if you need to. Lease only if you cannot do either.

For most homeowners with a credit score above 650, a solar loan provides $0 down, monthly payments similar to your old electric bill, and $47,000+ in 25-year avoided-electricity savings. Note the federal residential credit (IRC 25D) expired Dec 31, 2025, so an owned 2026 system gets $0 federal. After the loan is paid off, your electricity is free for the remaining panel life.

Leasing and PPA are legitimate options for people who cannot qualify for a loan or want a hands-off, no-upfront-cost arrangement (the provider can still claim the commercial 48E credit and may pass part through as a lower rate). They save money vs the grid — just not as much as owning. If you go the lease route, negotiate: demand a 0 % escalator and understand the buyout terms before signing.

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Frequently Asked Questions

Is it better to lease or buy solar panels?

Buy, for most homeowners. The federal residential credit (IRC 25D) expired Dec 31, 2025, so an owned 2026 system gets $0 federal — but buying still gives the highest 25-year savings ($47,000–$69,000 in avoided electricity vs $18,000–$24,000 for a lease) and adds value to your home. A lease/PPA provider can still claim the commercial 48E credit and may pass part through as a lower rate. Leasing makes sense mainly if you cannot qualify for a loan or plan to move within 5 years.

What is the difference between a solar lease and PPA?

A lease charges a flat monthly fee ($80–$150/month) regardless of how much electricity the panels produce. A PPA charges per kilowatt-hour produced ($0.08–$0.15/kWh). In both cases, the solar company owns the system and claims any credit (the commercial 48E credit); you as the homeowner claim nothing. A PPA is slightly better in low-production months (you pay less when panels produce less) while a lease gives more predictable monthly costs.

Can I get a solar loan with bad credit?

Standard solar loans typically require a credit score of 650+. If your credit is below 650, options include: PACE financing (no credit check, repaid through property taxes), FHA Title I loans (lower credit requirements), or a co-signer on a standard solar loan. PACE is available in about 20 states and finances the full system cost with repayment through your property tax bill.

What is the best solar loan rate in 2026?

Solar loan rates in 2026 range from 3.5% to 8% APR depending on credit score, loan term, and lender. The best rates (3.5–5%) are available through home equity loans/HELOCs and credit unions for borrowers with 720+ credit scores. Solar-specific loans through installers typically run 5–7%. Personal loans are 7–12%. A lower rate significantly reduces the total cost over the loan term.

Is a solar lease tax deductible?

No. Solar lease payments are not tax deductible for residential customers. The federal residential solar credit (IRC 25D) expired Dec 31, 2025, so a homeowner who owns a 2026 system gets $0 federal — and a lessee claims nothing either. The leasing company owns the system and can still claim the commercial 48E credit, which it may pass through as a lower rate. For commercial properties, lease payments may be deductible as a business expense — consult a tax professional.

Can I buy out my solar lease?

Yes. Most solar leases include a buyout option, typically available after year 5–7. The buyout price is usually the fair market value of the system or a predetermined schedule in the contract. Buying out early can be worthwhile if you plan to stay in the home long-term — you start receiving the full electricity savings instead of paying the lease fee.

What is a prepaid solar lease?

A prepaid lease is a lump-sum upfront payment for the entire lease term instead of monthly payments. The amount is typically 10–20% less than the total of monthly payments. However, you still do not own the system and claim no credit (the provider claims the commercial 48E credit). If you have the cash for a prepaid lease, buying the system outright is almost always a better financial decision because you own the asset outright, keep the full electricity savings, and add resale value — even though the federal residential credit (IRC 25D) expired Dec 31, 2025 and an owned 2026 system gets $0 federal.

Do solar leases increase each year?

Many solar leases include an annual escalator of 1–3%, meaning your monthly payment increases each year. Over a 25-year lease, a 2.9% escalator doubles your monthly payment. Some leases offer fixed rates with no escalator — always check the contract. If the escalator exceeds your utility rate increase, the lease savings shrink over time.

What happens to a solar lease when I sell my house?

The buyer must either assume the remaining lease (take over your payments) or you must buy out the lease before closing. Some buyers refuse homes with solar leases because they do not want the obligation. This can narrow your buyer pool and slow the sale. Zillow research shows owned solar panels increase home value by 4.1%, but leased panels have no clear value impact.

What is PACE financing for solar?

PACE (Property Assessed Clean Energy) is a financing program where the solar system cost is repaid through your property tax bill over 10–25 years. PACE does not require a credit check (the property secures the loan, not your credit). The PACE assessment stays with the property if you sell. PACE is available in about 20 states. Interest rates are typically 5–8%. The main risk: PACE liens have priority over your mortgage, which some mortgage lenders object to.

Sources

Marko Visic

Physicist and solar energy enthusiast. After installing solar panels on my own house, I built TheGreenWatt to share what I learned. All calculators use NREL PVWatts v8 data and peer-reviewed formulas.