Cash is always the cheapest way to buy solar over the system's life. Loan is second. Lease and PPA — where you don't own the panels and the third party owns the federal tax credit — are dramatically more expensive over 25 years, and almost always the wrong move for a homeowner who plans to stay in the house for a decade. The size of the gap between "good loan" and "bad lease" surprises most homeowners. Here are the real numbers, side by side.
By The Solar Brief Editorial Team · Updated May 2026
The four ways to pay for solar
Residential solar in the US is sold through four financing structures. They are not interchangeable, and the marketing language ("zero down!" "no upfront cost!") obscures genuinely large differences in lifetime cost.
Cash purchase
You pay the installer the full system price upfront, claim the 30% federal tax credit on your next federal return, and own the equipment. No interest. No middleman. Lifetime cost equals install price minus the federal credit minus any state-level credits and rebates.
Solar loan
A third-party lender (Sunlight, GoodLeap, Mosaic, EverBright, your local credit union) pays the installer, you make monthly payments to the lender for 10, 15, 20, or 25 years. You still claim the federal tax credit on your taxes; you still own the equipment. Lifetime cost equals install price plus financing interest, minus the federal credit.
Lease
The leasing company (Sunrun, Sunnova, Tesla in some markets) pays for and owns the system on your roof. You pay them a fixed monthly lease payment for 20 to 25 years. The leasing company claims the federal tax credit, not you. Lifetime cost equals total lease payments over 20+ years.
PPA (power purchase agreement)
Same structure as a lease, except instead of paying a fixed monthly amount, you pay a per-kilowatt-hour rate for whatever the system produces. PPAs typically include an annual escalator clause — your per-kWh rate goes up 1.9% to 2.9% per year for the life of the agreement. The leasing company still owns the equipment and claims the federal credit.
A worked example
Take an 8 kW panels-only system in Phoenix, list price $24,000. Federal credit at 30% = $7,200. Net cash cost = $16,800. Annual production roughly 13,000 kWh, displacing roughly $2,000 of utility electricity at APS rates. We'll model it across all four structures. (Numbers are rounded for clarity; your actual numbers will vary by lender, lease company, escalator, and tax situation.)
| Structure | Year 0 cost | 25-year total cost | Net 25-yr position |
|---|---|---|---|
| Cash | $24,000 (then $7,200 back at tax time) | $16,800 | +$33,200 (vs. $50,000 of utility bills displaced) |
| Loan, 6.99%, 15-year | $0 down | $26,900 (principal + interest) | +$23,100 (vs. $50,000) |
| Loan, 4.99%, 12-year | $0 down | $22,400 | +$27,600 |
| Lease, $95/mo, 2.9% escalator | $0 down | $39,400 (lease payments) | +$10,600 |
| PPA, $0.10/kWh, 2.9% escalator | $0 down | $45,200 (per-kWh charges) | +$4,800 |
Cash beats every other structure by between $5,600 and $28,400 over 25 years. A reasonable loan beats a lease by roughly $12,500 to $17,000. PPA is the highest-cost structure in this example, in part because of the annual escalator — by year 25, your per-kWh rate has climbed from $0.10 to roughly $0.20.
Why the marketing tilts toward leases and PPAs
"Zero down" and "no upfront cost" sell better than "$24,000 today, $7,200 back later." The leasing model is also more profitable for the installer's downstream financing partner — leasing companies underwrite to a target IRR of 7%–10%, which is the homeowner's foregone return. The federal tax credit, which would be the homeowner's $7,200 in a cash or loan deal, becomes the leasing company's revenue.
There are situations where a lease or PPA is the right call: homeowners with no federal tax liability (retirees on Social Security, anyone who already zeroes out their tax bill), homeowners who plan to sell in under 5 years and don't want the hassle, and homeowners who genuinely cannot get loan financing at a reasonable rate. For everyone else, lease and PPA are the wrong default.
When a loan beats cash
Almost never on a lifetime-cost basis. Cash is the cheapest. But if your alternative use of the cash earns more than the loan's interest rate, the loan is the better financial trade — even though the loan costs more total dollars. A homeowner who'd otherwise invest the $24,000 in an S&P 500 index fund expecting 7% real returns may rationally take a 4.99% loan and let the cash grow.
This is a personal-finance question, not a solar question. The honest answer most homeowners get from their financial advisor is "if you have the cash, pay cash." The solar loan industry is built on the people who don't have the cash, who aren't going to invest the cash even if they kept it, or who are advised by their installer that "everyone uses financing now."
What to look for in a loan
Solar loans come in two flavors: secured (the lender has a UCC-1 filing on the equipment, sometimes a HELOC tied to your home) and unsecured (the lender takes only your credit). Secured loans typically have lower interest rates; unsecured are easier to get. HELOC-style solar loans tied to home equity have the lowest rates but turn what would have been an unsecured purchase into a secured one — that's a meaningful trade-off worth understanding.
Key terms to compare:
- APR, not "monthly payment." Two loans with the same monthly payment can have wildly different APRs over different terms.
- Origination fees — sometimes baked into the principal as "dealer fee," typically 15–30% of the loan. This is how installers make money on the financing.
- Prepayment penalty — most reputable solar loans don't have one; some do.
- Re-amortization assumption — many solar loans assume you'll apply your federal tax credit as a principal payment in month 16. If you don't, the monthly payment goes up. Read this clause carefully.
Lease and PPA red flags
If you do go the lease/PPA route — there are situations where it makes sense — these are the lines to watch:
Escalator percentage. Industry standard is 0% to 2.9% annual. Anything above 3% compounds aggressively over 25 years. A 0% escalator (a "fixed lease") is meaningfully better than a 2.9% escalator.
Buyout clause. What does it cost to buy the system out at year 5, 10, 15? If you sell the home and the buyer doesn't want to assume the lease, you'll face this number. A reasonable buyout schedule starts at the depreciated fair-market value; an unreasonable one charges you a premium for the leasing company's lost future revenue.
Transferability. If you sell the home, can the lease transfer to the new buyer with the leasing company's approval? Some can; some can't. Non-transferable leases create real friction at home sale.
Production guarantee. Less critical on a lease/PPA than on a cash deal (you're not paying for production you don't get on a PPA, and the lease payment is fixed regardless of production), but still worth understanding.
The honest summary
If you have the cash and a federal tax bill large enough to absorb the 30% credit, pay cash. If you don't have the cash but have the credit score for a 5–7% solar loan, take the loan and still claim the credit yourself. If you don't have the credit score or the federal tax liability, a 0%-escalator lease is the third-best option. PPA, with its compound escalator and the leasing company keeping the credit, is rarely the right choice for a homeowner who plans to stay put.
The single biggest financial mistake we see homeowners make in solar isn't picking the wrong panel — it's signing a lease or PPA when a loan or cash purchase would have netted them an extra $15K to $25K over 25 years. It's worth the 30 minutes with a calculator before you sign anything.
Five minutes with Marcus, our AI solar advisor, will give you a personalized read on your roof and your bill — and route you to a vetted solar partner only if it makes sense for you.
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