Buy, loan, lease or PPA: how to pay for solar

By the Simple.solar editorial team. Reviewed October 2026. 7-minute read. How we research.

The way you pay for solar can matter as much as the panels you pick. The same system can save you $40,000 or $20,000 over 25 years, depending on whether you buy it, borrow for it, lease it or sign a power purchase agreement.

The rules shifted in 2026. The 30% federal homeowner tax credit, known as 25D, ended for systems installed after Dec 31, 2025. That changed which options look best. This guide explains each one in plain English and runs the numbers on one system so you can compare.

What are the four ways to pay for solar?

• Cash: You pay the full price and own the system from day one.
• Loan: A lender pays the installer. You own the system and make monthly payments.
• Lease: A solar company owns the panels on your roof. You pay a fixed monthly fee to use them.
• PPA (power purchase agreement): A solar company owns the panels. You pay for each kWh they make, at a set rate.

With cash or a loan, you are the owner. With a lease or PPA, a third party is the owner, and you are a customer.

Should you pay cash?

If you can pay cash without draining your emergency fund, it is usually the cheapest path over the life of the system. You pay no interest, no fees and no escalators. Every kWh the panels make is yours.

The trade-off is the upfront cost and the risk you carry. You pay for repairs once the warranty work stops, and you will likely replace an inverter at least once. Budget about $1,500 to $3,000 for that over 25 years. To see what your system might cost, use our solar cost guide.

How do solar loans work, and what should you watch for?

A solar loan lets you own the system with little or no money down. Your monthly payment replaces part of your power bill. If the payment is lower than your bill savings, you come out ahead from month one.

Look past the APR to the dealer fee

Many installers advertise loans at 1.99% or 2.99% APR. Those rates are rarely free. The lender charges the installer a dealer fee, often 15% to 30% of the loan, and the installer raises your price to cover it.

Here is how that works. Say the cash price is $24,000. With a 25% dealer fee built in, the loan amount becomes $24,000 ÷ 0.75 = $32,000. You pay 1.99% on $32,000, not on $24,000. Over 25 years, that works out to the same as paying about 4.65% on the true cash price.

The re-amortization trap

Many solar loans used to assume you would pay down 30% of the balance with your tax credit within about 18 months. If you did not, the payment jumped. Since the 25D credit ended for systems installed after Dec 31, 2025, a 2026 homeowner install has no federal credit to make that payment with.

If a salesperson quotes you a payment "after your tax credit," treat it as a red flag. Ask for the payment you will owe if you never make a lump-sum paydown. That is your real number.

How do leases and PPAs work?

With a lease or PPA, a solar company installs and owns the system. You get cheaper power without buying anything. The company handles monitoring and most repairs.

Why they often look cheaper in 2026

Homeowners lost the 25D credit, but businesses that own solar systems can still claim the 48E clean electricity credit. A leasing company is a business, so it can claim the credit on the system on your roof and pass some of the savings to you as a lower rate. That is why many 2026 lease and PPA offers come in below a typical loan payment in the early years.

The fine print that matters

• Escalators: Most contracts raise your payment or rate each year, often by 0% to 3.9%. A 2.9% escalator raises a $0.12 rate to about $0.24 by year 25.
• Term: Contracts usually run 20 to 25 years.
• Home sale: If you sell, the buyer usually has to qualify for and take over the contract, or you may need to buy it out. Read our guide to selling a home with solar.
• End of term: Find out if you can renew, buy the system or have it removed for free.

A lease or PPA with a 0% to 1.9% escalator is usually safer than one at 2.9% to 3.9%, since utility rates do not always rise that fast.

What about PACE financing?

PACE (property assessed clean energy) loans are paid through your property tax bill. They can be easy to get because approval leans on your home's value, not your credit.

Be careful. A PACE assessment is a lien on your home that usually comes ahead of your mortgage. That can make it harder to sell or refinance, and some lenders will not approve a mortgage until it is paid off. Rates and fees are often higher than a bank loan, and some states have seen high-pressure sales tactics. If you consider PACE, read every page and compare it with a regular loan first.

How do the options compare over 25 years?

Here is one worked example. You install an 8 kW system at $3.00 per watt, so the cash price is 8,000 × $3.00 = $24,000. It makes about 11,000 kWh a year. Power costs $0.17 per kWh in year one and rises 3% a year.

Value of the power over 25 years: 11,000 × $0.17 = $1,870 in year one. With 3% yearly increases, that adds up to about $68,200. To keep it simple, this ignores panel wear and net metering limits.

A few things stand out:

• Cash wins by about $16,000 to $21,000, but only if you have $24,000 to spare.
• The "low APR" loan beats the 6.99% bank loan here, mostly because its payment is spread over 25 years. Still, the dealer fee adds $8,000 to what you owe.
• The lease and PPA save you money with nothing down, but the escalators eat into the gap over time. In year 25, the PPA rate is about $0.24 per kWh against a utility rate of about $0.34.

Your numbers will differ with your sun, your rates and your quotes. Run your own with our solar savings calculator.

Which option should you choose?

• Choose cash if you have the savings and plan to stay in the home for 10 years or more.
• Choose a loan if you want to own the system but not pay up front. Shop the cash price and compare a credit union loan to the installer's offer.
• Choose a lease or PPA if you want savings with no money down, do not want to handle repairs, or may not benefit from owning. Insist on a low escalator.
• Avoid PACE unless you have compared it with every other option and understand the lien.

Whatever you pick, get at least three quotes and compare them line by line. Our solar quote checklist shows what to ask, and you can check current incentives in our incentives guide.

Frequently asked questions

Watch: a short explainer

Keep reading

• How much do solar panels cost in 2026?See 2026 solar prices per watt, total costs for 4 to 12 kW systems, where your money goes, battery prices and what pushes a quote up or down.5 min
• Solar incentives in 2026: what's left and whereThe US 30% homeowner credit is gone, but state credits, rebates, lease rules and programs in Canada, the UK, Australia and India still help.7 min
• Net metering explained: how you get paid for extra solarSee how net metering, net billing and buy-all/sell-all work, how time-of-use rates and true-ups change your bill, and when a battery pays off.6 min