The Four Ways to Go Solar
When you "go solar," you have four main options:
- Cash purchase: Pay upfront, own everything
- Solar loan: Finance the system, own it once paid off
- Solar lease: Rent the system, pay fixed monthly amount
- PPA (Power Purchase Agreement): Pay for the electricity, not the system
2026 Tax Credit Update
The 30% residential tax credit (25D) ended December 31, 2025. If you buy solar in 2026, there's no federal credit. PPAs and leases still get the 30% benefit through 2027 (48E)— the solar company claims it and passes savings to you. This changes the math significantly. (Source: IRS guidelines and DSIRE Database)
[Editor's Note, Jan 2026]:Updated with current pricing, policy changes, and incentive information for 2026.
Side-by-Side Comparison
| Factor | Cash | Loan | Lease | PPA |
|---|---|---|---|---|
| Upfront cost | $18,000-$35,000 | $0-$5,000 | $0 | $0 |
| Own the system | Yes | Yes (after payoff) | No | No |
| Federal tax credit | No (ended 2025) | No (ended 2025) | Yes (company gets it) | Yes (company gets it) |
| Total savings (25 yr) | Highest | High | Moderate | Moderate |
| Monthly savings | 100% | 50-80% | 10-30% | 10-30% |
| Maintenance | Your responsibility | Your responsibility | Included | Included |
| Home sale impact | Increases value | Transfer or pay off | Transfer or buyout | Transfer or buyout |
PPAs (Power Purchase Agreements)
How PPAs Work
- Solar company installs and owns the panels on your roof
- You buy the electricity the panels produce at a fixed rate
- Rate is typically lower than utility rate
- Contract length: 20-25 years
- Company handles all maintenance and monitoring
PPA Pros
- No upfront cost: $0 to start
- Immediate savings: Day 1 your bill goes down
- Still gets tax credit: Company claims 30% (through 2027), passes savings to you
- No maintenance worries: Company handles everything
- Predictable costs: Know your rate for years ahead
PPA Cons
- Lower total savings: Company keeps most of the benefit
- Price escalators: Many PPAs increase 1-3% annually
- Long contract: 20-25 years is a commitment
- Complicates home sale: Buyer must assume PPA or you buy it out
- No ownership: At end of contract, panels may be removed
2026 PPA Advantage
With the residential 25D credit gone, PPAs are more competitive than before. The 30% 48E credit they can claim means they offer lower rates than they could otherwise. For homeowners who couldn't use the tax credit anyway, PPAs make more sense in 2026. (Source: IRS guidelines and DSIRE Database)
Solar Leases
How Leases Work
- You pay a fixed monthly amount to "rent" the solar system
- Payment is same regardless of how much the panels produce
- Solar company owns and maintains the system
- Contract length: 20-25 years
Lease vs. PPA
Lease: Fixed monthly payment regardless of production
PPA: Pay based on kWh produced
In sunny years, PPAs cost more. In cloudy years, leases cost more. Over 25 years, they usually work out similarly.
Lease Considerations
- Same pros/cons as PPAs mostly
- Fixed payment can be easier to budget
- Less common than PPAs now
- Same home sale complications
Solar Loans
How Solar Loans Work
- Finance the system purchase like a car or home improvement
- You own the system from day 1
- Monthly loan payments for 10-25 years
- Interest rates: 4-9% depending on credit and loan type
Types of Solar Loans
| Loan Type | Rates | Pros | Cons |
|---|---|---|---|
| Solar-specific loan | 5-8% | Designed for solar, easy process | May have dealer fees built in |
| HELOC/Home equity | 6-9% | Interest may be deductible | Uses home as collateral |
| Personal loan | 7-15% | No home collateral | Higher rates |
Loan Pros
- Own the system: Builds equity, adds home value
- Higher total savings: Than lease/PPA over system life
- No escalators: Loan payment is fixed (if fixed rate)
- Easier home sale: Just transfer ownership with house
Loan Cons
- No federal tax credit: Can't claim 30% in 2026+
- Interest costs: Adds to total system cost
- Monthly payment may exceed savings: Initially cash flow negative
- Maintenance responsibility: You handle repairs (usually minimal)
Cash Purchase
When Cash Makes Sense
- You have the funds available
- You plan to stay 10+ years
- You want maximum long-term savings
- You're comfortable with the "investment" mindset
Cash Pros
- Maximum savings: No interest, no fees, no payments
- Full ownership: Immediate equity, simple home sale
- No credit check: Anyone can pay cash
- Best long-term ROI: Typically 6-10% annual return
Cash Cons
- Large upfront cost: $20,000-$35,000
- No tax credit: Can't claim 30% in 2026+
- Opportunity cost: Could invest money elsewhere
- Long payback: 10-14 years to recoup (no credit)
Which Should You Choose?
Choose PPA or Lease If:
- You have no money for upfront or down payment
- You may move in 5-10 years
- You want zero risk and zero maintenance
- You're okay with smaller savings for simplicity
- You want to benefit from the 30% credit without tax liability
Choose Loan If:
- You want to own the system and build equity
- You plan to stay 10+ years
- You want higher total savings than lease/PPA
- You have good credit for favorable rates
Choose Cash If:
- You have the funds and want best ROI
- You plan to stay 15+ years
- You want maximum savings and simplest ownership
- You're okay with longer payback period
The 2026 Reality
Without the 25D tax credit, PPAs and leases are more competitive with ownership than before. The 48E credit they can claim helps offset the cost. For many homeowners, especially those who couldn't use the tax credit anyway, third-party ownership makes more sense in 2026. (Source: IRS guidelines and DSIRE Database)
Not Sure Which Option is Right?
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