Solar Financing: Cash, Loans, Leases & PPAs Compared

I've been helping homeowners navigate solar financing since 2018, and I'll be honest—the 2026 changes have completely reshuffled the deck. How you pay for solar is now almost as important as deciding to go solar in the first place.

The 2026 tax credit changes make this decision even more important. Let's break down each option honestly.

Financing Overview: The 2026 Landscape

Here's how each option stacks up now:

Cash Purchase

Paying cash for solar means you own the system outright from day one. No monthly payments, no interest, no third parties involved.

Pros

• Highest total savings — You keep 100% of the electricity savings
• Fastest payback — No interest eating into your returns
• Full ownership — Increases home value, no complications if you sell
• SRECs are yours — In SREC states, you get all the income
• No monthly payment — Your electric bill just goes to near-zero

Cons

• No federal tax credit — The 25D credit expired; no federal benefit in 2026
• High upfront cost — $15,000-$25,000+ out of pocket
• Opportunity cost — That money could be invested elsewhere

2026 Reality Check

Without the 30% federal credit, cash purchases are less attractive than before—but still make sense if you have the capital and plan to stay in your home long-term. The 7-10 year payback and 25+ year lifespan mean strong returns even without incentives.

Solar Loans

Solar loans let you own the system while spreading the cost over time. You get immediate savings while making monthly payments—ideally, your payment is less than your old electric bill.

Types of Solar Loans

• Secured loans — Use your home as collateral; lower rates (4-7%)
• Unsecured loans — No collateral; higher rates (7-15%)
• HELOC/Home Equity — Borrow against home equity; tax-deductible interest

Pros

• Low/no upfront cost — Spread payments over 10-25 years
• You own the system — Same benefits as cash (home value, SRECs)
• Immediate savings — Often cash-flow positive from month one
• Build equity — Each payment builds your ownership

Cons

• No federal tax credit — 25D expired; no federal benefit in 2026
• Interest adds up — Over 20 years, you may pay $8,000-$15,000 in interest
• Monthly payment obligation — Even if you sell the house
• Credit requirements — Need decent credit to qualify

2026 Loan Math

Without the federal credit, loan economics are tighter. A $21,000 loan at 7% for 20 years costs about $163/month. If your electricity savings are $150/month, you're roughly break-even monthly—but building equity in an asset worth $15,000+ at payoff.

Solar Lease

With a solar lease, a third-party company owns the panels on your roof. You pay them a fixed monthly fee (typically $80-$200) regardless of how much electricity the system produces.

Pros

• $0 upfront — No out-of-pocket cost to go solar
• Predictable payments — Fixed monthly cost, often lower than current bill
• Maintenance included — Company handles repairs and monitoring
• Federal credit benefit — Company's 30% credit = lower payments for you
• Simple — They handle everything; you just pay the bill

Cons

• Lower total savings — You're sharing benefits with the solar company
• No ownership — You don't own the system; no increase in home value
• Long contract — Typically 20-25 years; early termination costly
• Selling complications — Buyer must assume lease or you buy it out
• No SRECs — Company keeps any SREC income
• Escalator clauses — Some leases increase 1-3% per year

Power Purchase Agreement (PPA)

A PPA is similar to a lease, but instead of paying a fixed monthly fee, you pay for the electricity the system produces at a set rate per kWh—typically 10-30% below your utility rate.

Pros

• $0 upfront — No out-of-pocket cost
• Pay only for what's produced — If panels underperform, you pay less
• Immediate savings — PPA rate lower than utility rate from day one
• Federal credit benefit — Company's 30% credit = lower rate for you
• Maintenance included — Company handles repairs

Cons

• Variable payments — Depends on production; higher in summer
• Lower total savings — Sharing benefits with solar company
• No ownership — No home value increase
• Long contract — 20-25 year commitment
• Escalator clauses — Rate may increase 1-3% annually
• Not available everywhere — Some states don't allow PPAs

PPA vs. Lease: Which is Better?

PPAs are generally slightly better because you only pay for electricity produced. If there's a cloudy month, your payment is lower. With a lease, you pay the same regardless.

Side-by-Side Comparison

Which Should You Choose?

Choose Cash If:

• You have $15,000-$25,000 available
• You want maximum long-term savings
• You plan to stay in your home 10+ years
• You're comfortable with a longer payback (no federal credit)

Choose a Loan If:

• You want to own but can't pay cash
• You have good credit (680+)
• Your electricity savings exceed loan payments
• You want to build equity while going solar

Choose Lease/PPA If:

• You want $0 upfront and no maintenance hassle
• You want to benefit from the 30% federal credit (via lower rates)
• You're okay with lower total savings for simplicity
• Your credit isn't strong enough for a good loan rate
• You may move in 5-10 years (easier to transfer than you'd think)