Solar Lease vs Buy vs Loan: The Numbers Every Homeowner Needs to Know

Correction (2026-07-28): This article originally stated that cash and loan-financed purchases receive the 30% federal tax credit. That credit (Section 25D) expired for any system placed in service after December 31, 2025, under the One Big Beautiful Bill Act. The math below has been updated to remove it from 2026 ownership scenarios.

The short answer: buying outright still saves the most money over 25 years, a solar loan is the best option for most homeowners, and a lease makes sense only in a handful of specific situations — but the gap between ownership and leasing is narrower than it used to be, now that owned systems no longer receive a federal tax credit. The decision is still worth getting right; it's just a smaller dollar gap than pre-2026 comparisons showed.

Here's how each option actually works, what the numbers look like, and when each one makes sense for your situation.

The Three Ways to Finance Solar

Every homeowner considering solar will end up choosing one of these paths:

Cash purchase — you pay the full cost upfront
Solar loan — you borrow the money and own the system
Lease or Power Purchase Agreement (PPA) — a third party owns the panels; you pay a monthly fee or per-kWh rate to use the power they produce

The critical distinction between options 1 and 2 versus option 3 is ownership. When you own the system — whether you bought it with cash or a loan — you capture the full financial upside: all the electricity savings and any increase in your home's value. When you lease, someone else captures most of that upside. Note what's no longer part of that upside: the 30% federal tax credit expired for residential ownership after December 31, 2025, so it's not something owners get and lessees give up anymore — neither side gets it.

We'll run the numbers on all three using a realistic baseline: a 9 kW system in a state with average sun exposure, producing about 12,000 kWh per year, with a pre-incentive cost of $25,000 and an electricity rate of $0.16/kWh.

Option 1: Cash Purchase

How it works: You write a check (or wire) for the full system cost — typically $22,000–$32,000 for a whole-home system before incentives.

Who gets the tax credit: Nobody, if you close on the system in 2026. The federal Residential Clean Energy Credit (Section 25D), which used to return 30% of system cost, expired for any system placed in service after December 31, 2025. A $25,000 system now costs $25,000 out of pocket — there's no credit reducing that.

The 25-year math:

System cost: $25,000 (no federal credit)
Annual electricity savings at $0.16/kWh × 12,000 kWh: $1,920/year
Payback period: ~13 years
Total savings over 25 years: $48,000 in electricity minus the $25,000 cost = ~$23,000 net profit

Cash buyers still keep every dollar of savings from year one — but the ceiling is lower than it was before the credit expired, since there's no $7,500 head start on the net cost.

The catch: Most homeowners don't have $25,000 sitting around, and tying up that much capital in a roof-mounted system isn't always the right call even when you do. If your money would earn more invested elsewhere, a loan can actually pencil out better.

Best for: Homeowners with the cash available, a high tax liability to absorb the ITC, and a long horizon (10+ years) at the property.

Option 2: Solar Loan

A solar loan is how the majority of homeowners go solar today. You borrow the installation cost, own the system outright, and pay the loan off over time while the panels produce free electricity.

Types of solar loans:

Dealer-fee loans (most common from installers): Interest rates look low (often 0.99%–3.99%) but the installer charges a "dealer fee" of 15–30% that's baked into the inflated system price. A $25,000 system quoted to you at $29,000 with a 1.99% loan is really a higher-rate loan in disguise.
Home equity loans / HELOCs: Use your home as collateral. Rates are tied to prime but interest may be tax-deductible. Longer repayment terms keep monthly payments low.
Unsecured solar loans: No home equity required. Rates typically run 6%–12% depending on your credit score. Available through solar lenders like Mosaic, Dividend, and GreenSky.

The 25-year math (unsecured loan at 7.99%, 12-year term):

Loan amount: $25,000
Monthly payment: ~$282
No federal tax credit to apply to principal — that credit expired for systems placed in service after December 31, 2025
Annual electricity savings: $1,920
Total interest paid over 12 years: ~$4,800
Net profit over 25 years: ~$18,200

You give up roughly $4,800 in total savings versus a cash purchase (interest cost), but you kept $25,000 of capital free to deploy elsewhere. Before 2026, financing this way and applying the ITC to principal in year one meaningfully changed the payment schedule — that option no longer exists for new systems.

The dealer-fee trap: Always ask the installer for the system price in cash, then separately for the financed price. If they differ by more than 5%, you're seeing the dealer fee. Get competing quotes through a marketplace like EnergySage to see actual cash prices and finance side-by-side.

Affiliate Disclosure: This article may contain affiliate links. If you make a purchase through these links, we may earn a small commission at no extra cost to you. We only recommend products we genuinely believe in. This helps support our work and allows us to continue providing free content.

Best for: Homeowners who want to own their system but don't want to deplete savings. Especially strong if you can use the ITC to pay down principal in year one.

Option 3: Solar Lease or PPA

A lease and a PPA (Power Purchase Agreement) work slightly differently, but the core structure is the same: a solar company installs panels on your roof at no cost to you, owns the equipment, and charges you a monthly fee (lease) or a per-kWh rate (PPA) for the electricity produced.

The pitch: $0 down, instant savings on your electric bill.

The reality: You're trading long-term savings for short-term convenience.

Here's why:

Savings are smaller. Most leases and PPAs save you 10–20% versus your utility rate upfront — so maybe $190–$384/year instead of $1,920.
Escalator clauses compound against you. Many leases include 1–3% annual rate escalators. If your utility rates don't rise as fast as projected (or if rates fall), you can end up paying more for solar power than you would for grid power.
Selling your home gets complicated. A lease is a 20–25 year contract. Buyers must qualify to assume it, which can delay or kill sales. Buyout costs at sale time can run $10,000–$20,000.

The 25-year math:

Net savings on PPA at 15% discount vs $0.16/kWh: ~$0.024/kWh = $288/year
Total savings over 25 years: ~$7,200
Versus cash purchase net profit: ~$23,000
Difference: ~$15,800 left on the table

That gap widens if utility rates rise and you have a fixed or slowly escalating PPA rate — and it closes only if you have truly poor credit with no other financing options. It's a smaller gap than it was before 2026: with the federal credit gone for owners too, ownership's advantage over leasing now comes entirely from keeping 100% of electricity savings and home-value upside, not from a tax credit differential.

Best for: Renters (where it applies), homeowners with no federal tax liability to absorb the ITC, or situations where the property owner simply cannot qualify for a loan and wants some reduction in electricity costs.

25-Year Side-by-Side Comparison

|---|---|---|---|

| Upfront cost | $25,000 | $0 | $0 |

| System ownership | You | You | Leasing company |

| Year-1 savings | $1,920 | $1,920 minus payment | $200–$400 |

| 25-year net profit | ~$23,000 | ~$18,200 | ~$7,200 |

| Best credit score | Any | 650+ | 650+ |

When a Lease Actually Makes Sense

To be fair, there are situations where a lease or PPA is a reasonable choice:

Your roof needs replacement in 5 years. If you're planning a major roof overhaul soon, locking into a 25-year panel ownership commitment on an aging roof adds complications. A short-horizon situation makes ownership less attractive.

Credit limitations. If you can't qualify for a reasonable solar loan rate, a lease avoids the high-interest loan trap — though community solar (renting a share of an off-site solar farm) is often a better no-ownership option for these cases.

In all other situations, ownership is the better financial outcome.

Adding Backup Power to Any Setup

Regardless of which financing path you choose, one gap remains the same: a grid-tied solar system without battery backup goes dark when the grid goes down. Your panels produce power during an outage, but grid-tie inverters shut off for safety — meaning your solar investment doesn't protect you during the outages you most need it for.

Two approaches to bridge that gap:

Integrated home batteries (like the Tesla Powerwall 3 or Enphase IQ Battery 5P) are installed alongside your solar system and provide seamless whole-home backup. These cost $10,000–$15,000 installed. Before 2026, batteries paired with solar qualified for the 30% ITC alongside the panels — that no longer applies to residential purchases placed in service after December 31, 2025.

Portable power stations offer a lower-cost entry point for targeted backup — keeping a refrigerator, CPAP machine, phone charging, and lights running through most outages. The EcoFlow DELTA Pro (3.6 kWh, expandable to 25 kWh) bridges the gap between a small generator and a full home battery, with the option to wire directly into a subpanel. For a more portable option, the Jackery Explorer 2000 Pro (2 kWh) handles critical devices through a multi-day outage and recharges entirely from solar panels in about 5.5 hours.

Neither replaces a whole-home battery for whole-house coverage, but both give you meaningful resilience for a fraction of the cost — and they move with you if you relocate.

How to Get the Best Numbers on Any Option

The single biggest variable in your 25-year math isn't which financing type you choose — it's the price you pay for the system itself. A $4,000 difference in system cost swings your payback period by two full years.

The most reliable way to find the real market price in your area is to collect at least three quotes from vetted local installers. EnergySage lets you do this without giving your phone number to a sales rep — you post your project details, licensed installers compete for your business, and you compare real bids in writing including both cash and loan prices.

Once you have competing quotes, revisit the math above with your actual numbers. Plug in your real electricity rate and the loan rate you qualify for — and confirm no quote is still pricing in a federal tax credit that expired January 1, 2026. The decision often becomes obvious in the first pass.

The Bottom Line

If you qualify for a reasonable loan, owning your system — whether through cash or a solar loan — will still put roughly $11,000–$16,000 more in your pocket over 25 years than leasing the same system, even with the federal tax credit gone for everyone. Leases make the solar industry's marketing easier to sell, but they transfer the financial upside from you to the finance company.

Run your actual numbers, collect competitive quotes, and make the decision with real math — not a salesperson's monthly payment calculator, and not a payback estimate that still assumes a 30% credit that expired January 1, 2026.

Last updated: 2026-07-28

Get personalized solar quotes without the sales calls. Join thousands of homeowners who've used our free newsletter to compare real installer bids, understand incentives, and go solar with confidence. Enter your email below.

Join the SolarSimple Newsletter →