Financing

Buying vs leasing solar (and PPAs)

Two homeowners can install the identical system and end up thousands of dollars apart — purely because of how they paid for it. Cash, loan, lease, and PPA each shift ownership, risk, and savings in different directions. Here's how to compare them without getting lost in monthly-payment marketing.

8 min read · Updated June 30, 2026

The four ways to pay

Cash: you own the system outright and keep 100% of the savings. Highest lifetime return, highest upfront cost.
Loan: you own the system but finance it. You keep the savings minus interest; a good loan preserves most of the cash-purchase benefit.
Lease: a company owns the system on your roof and you pay a fixed monthly rent, usually with an annual escalator.
PPA (power purchase agreement): a company owns the system and you buy its output at a set per-kWh rate, typically with an escalator.

Who benefits from incentives

With a lease or PPA, the third-party owner — not you — claims any tax benefits and owns the equipment. Historically they'd pass some of that value along as a lower rate. With the federal residential credit gone for new systems, that dynamic is weaker, so scrutinize what a lease or PPA is really giving you in 2026.

When you buy (cash or loan), you own the system and any savings and incentives flow to you directly. You also take on maintenance and repairs, though panels are generally low-maintenance and inverters are the main mid-life item.

The escalator trap

Most leases and PPAs include an annual escalator — often around 2.9% — that raises your payment every year. If your utility's rates rise more slowly than the escalator, your 'savings' can shrink or even reverse in later years.

Worth knowing

Always ask for the escalator rate and model the payment in year 20, not just year one. A low first-year payment with a steep escalator can cost more over time than a slightly higher fixed option.

How to compare them fairly

Use the same system size and production estimate for every option.
Project each option's cost and savings over the full 25 years, not just the monthly payment.
For loans, include the interest; for leases/PPAs, include the escalator.
Compare the 25-year net position side by side.

In most cases, cash produces the best lifetime return, a well-structured loan comes close, and leases/PPAs trade a lower hassle factor for a lower total benefit. But the ranking can shift with a bad loan rate or an unusually good lease — which is why you model your own numbers rather than trust a rule of thumb.

Questions to ask before signing

Who owns the system, and who is responsible for repairs and monitoring?
What is the escalator, and what does the payment look like in year 20?
What happens if I sell the house — does the contract transfer?
What production is guaranteed, and what happens if the system underproduces?
What is the total 25-year cost, not just the monthly payment?

All figures on this site are estimates, not tax or financial advice. Verify current incentives and confirm tax questions with a qualified professional before making a decision.

Frequently asked

Is it better to buy or lease solar panels?

Buying (with cash or a good loan) almost always produces the highest lifetime savings because you own the system and keep all the benefits. Leases and PPAs lower your upfront cost and hassle but usually deliver a smaller total benefit, especially with an annual escalator. Compare all four over 25 years.

What's the difference between a solar lease and a PPA?

With a lease you pay a fixed monthly rent for the system regardless of how much it produces. With a PPA you pay a per-kilowatt-hour rate for the energy the system actually generates. Both are third-party owned and typically include an annual escalator.