Solar Financing: Cash, Loan, Lease, and PPA ??How Each Changes the Math

How you pay for solar is almost as important as whether solar makes sense at all. Ownership, tax credit access, and long-term flexibility depend entirely on financing structure.

Four ways to finance solar, with honest payback comparisons. One structure hands the federal tax credit to the installer. Two require you to stay in your home for the numbers to work.

Key takeaways

Cash purchase gives you full ownership, access to the federal ITC, and the highest long-term return ??but requires capital upfront.

A solar loan offers the same ownership and ITC access with monthly payments, though interest charges reduce net lifetime savings.

A lease or PPA means the installer owns the system: you pay a monthly fee or rate, receive no ITC benefit directly, and face contractual transfer requirements if you sell your home.

Cash purchase gives you full ownership, access to the federal ITC, and the highest long-term return ??but requires capital upfront.

A solar loan offers the same ownership and ITC access with monthly payments, though interest charges reduce net lifetime savings.

A lease or PPA means the installer owns the system: you pay a monthly fee or rate, receive no ITC benefit directly, and face contractual transfer requirements if you sell your home.

Ownership determines who gets the federal tax credit

The 30% federal ITC goes to the system owner. Under a cash purchase or solar loan, you own the system from day one and can claim the credit. Under a lease or PPA, the installer retains ownership and claims the ITC ??which helps them offer lower rates, but means you do not receive the credit directly.

On a $30,000 system, the ITC is worth $9,000. Whether that value flows to you or to the installer's financing model is the single largest dollar difference between ownership and non-ownership structures.

Side-by-side: cash, loan, lease, PPA

Each structure has a different upfront cost, monthly cash flow, long-term return profile, and resale implication.

Solar loans: the most common path to ownership

Solar loans allow homeowners to finance a system with $0 down while retaining ownership and the ability to claim the ITC. The loan is repaid over 10??5 years at rates that vary significantly by lender, credit score, and whether the loan is secured or unsecured.

Many solar loans include a 'dealer fee' that the installer pays to the lender ??this fee is typically 15??5% of the loan amount and is baked into the financed price, not always disclosed explicitly. A $25,000 cash price may become a $29,000??31,000 loan amount. Ask your installer to quote both the cash price and the financed amount separately.

Leases and PPAs: lower risk, lower return

Leases charge a fixed monthly fee for use of the system. PPAs (Power Purchase Agreements) charge a per-kWh rate for power the system produces ??often below your current utility rate at the time of signing, with annual escalators of 1??% per year.

Both structures eliminate maintenance risk (the installer handles panels and inverters) and require no upfront capital. In exchange, you lose direct access to the ITC and gain a contractual obligation that must be managed if you sell your home.

What happens when you sell your home

A paid-off owned system transfers with the home and may add to appraisal value. A solar loan can sometimes be paid off from sale proceeds or transferred to the buyer ??terms vary. A lease or PPA must be either assumed by the buyer (who must qualify) or prepaid by the seller, sometimes at a significant cost.

In competitive real estate markets, a leased or PPA system that cannot be easily transferred can become a negotiating obstacle. This is less common in states where solar is already widespread.