Lease, Loan, or Cash: What’s the Best Way to Go Solar?
1. First, the Basics: What Are the Options?
When it comes to going solar, you’ve got three main ways to pay for it:
Cash Purchase – You pay for the system upfront.
Solar Loan – You finance the system and own it.
Lease or PPA (Power Purchase Agreement) – A third party owns the system. You just pay for the power it produces.
Let’s break these down, with pros, cons, and the latest updates you need to know.
2. Lease vs. PPA: What’s the Difference?
In practice, not much. Both are what the industry calls third-party ownership (TPO). That means a solar company installs panels on your roof, but they own the system. You just pay for the power it produces—often at a lower rate than your utility.
Here’s the small distinction:
Lease: You pay a fixed monthly amount to “rent” the system.
PPA: You pay based on how much electricity the system generates—usually cents per kilowatt-hour.
But in everyday terms, they work almost the same. People often use “lease” and “PPA” interchangeably. The key idea is: you don’t own the panels—the solar company does.
3. Why Third-Party Ownership (TPO) Is Becoming More Attractive
Here’s the big news:
Under the federal Inflation Reduction Act (IRA), solar systems qualify for a 30% tax credit.
But there’s a catch: **if you buy the system (cash or loan), that tax credit starts phasing out after December 31, 2025.
If you lease or sign a PPA, the credit stays in place until mid-2027 and possibly beyond.
Why? Because the government wants to keep solar affordable, especially for lower-income households. So they extended incentives longer for third-party-owned systems.
That means starting in 2026, TPO systems will be the only ones still getting that full 30% discount.
In plain terms:
If you want solar after 2025 and want to save as much as possible, a PPA or lease may be your best bet.
4. Pros and Cons of Each Option
✅ Option 1: Power Purchase Agreement (PPA) / Lease
Pros:
No upfront cost
Maintenance, monitoring, and repairs are all included
Fixed monthly payments or fixed energy rate (often cheaper than your utility)
Easy to transfer if you sell your home (usually just a one-page form)
30% tax credit still applies past 2025—big savings continue longer
Cons:
You don’t own the system (so you don’t get the direct tax credit yourself)
Long-term savings are usually less than owning
Some buyers prefer full ownership when purchasing a home, though transfers are now easy
Best for:
People who want simplicity, lower monthly bills, and no maintenance or upfront cost. Especially smart in 2026 and beyond, when loans no longer qualify for tax credits.
✅ Option 2: Loan (You Own the System)
Pros:
You own the system, so all the long-term savings are yours
Increases home value
If you stay 10–15+ years, it’s often the most economical over the long term
You still qualify for the 30% tax credit—until the end of 2025
Cons:
Requires good credit and a loan approval process
You’re responsible for maintenance (though many systems come with warranties)
The 30% federal credit ends for loans after 2025, which could raise your total cost
Best for:
Homeowners planning to stay put for a long time, who want full control and long-term payoff—and can take advantage of the tax credit before it ends.
✅ Option 3: Cash Purchase
Pros:
Full ownership, no interest payments
No monthly solar bills
Maximum long-term savings
Gets the full 30% tax credit—before the end of 2025
Cons:
Big upfront cost (often $20k–$40k)
Ties up cash that could be used elsewhere
Like loans, won’t get the tax credit after 2025
Best for:
Homeowners with plenty of available cash, planning to stay 15+ years, who want to maximize savings and energy independence.
5. What If You Change Your Mind Later?
If you go with a lease or PPA, many programs let you buy out the system later. That gives you flexibility:
Start with no upfront cost
Lock in your savings
Buy the system later if your situation changes
And if you move? Most TPO systems now use a simple, one-page transfer agreement. It’s easier than refinancing a loan or asking a buyer to take over your solar loan balance.
6. The Timing Matters—A Lot
Let’s make this simple:
If it’s before the end of 2025 and you plan to stay long-term, owning (via cash or loan) could save you the most.
If it’s 2026 or later, leases and PPAs will have the upper hand—because they’ll still get the 30% credit and ownership systems won’t.
So your timing should play a big role in your decision.
7. Final Thought: There’s No One-Size-Fits-All
Going solar is about more than panels—it’s about your goals.
Want the biggest long-term savings? Consider ownership—but move before 2025 ends.
Want simplicity, flexibility, and low risk? Consider a lease or PPA, especially in 2026 and beyond.
The good news is: there’s a solid option for every situation. The key is knowing how each works and which one matches your plans.
No hype. No sales pitch. Just the facts to help you make a smart move.
