Solar Loan vs. Lease vs. PPA: Which Financing Option Makes Sense in 2026?

Short answer: A solar loan means you own the system, keep all future savings, and are the only one of the three structures where you could benefit from any tax credit at all. A lease or PPA hands ownership to the installer in exchange for a lower or no up-front cost and predictable payments, but any tax credit benefit stays with that company, not you, and both come with long-term contract obligations that complicate a home sale.

Choosing between these three structures used to hinge mostly on cash flow. Since the 30% federal tax credit for homeowner-purchased systems ended on January 1, 2026, the decision now also hinges on who, if anyone, still gets a tax credit at all — and that answer is different for each option.

How the three financing structures actually work

Solar loan. You borrow money, usually from a bank, credit union, or the installer’s in-house lender, to buy the system outright. You own the panels from day one, make fixed monthly payments over a term commonly ranging from 10 to 25 years, and are responsible for the system once any workmanship or manufacturer warranty period ends.

Solar lease. A third-party company owns the system and installs it on your roof. You pay a fixed (or scheduled) monthly rent for use of the equipment, similar to leasing a car. You don’t own the panels, and you’re generally not responsible for maintenance on the hardware itself, since the owning company has an interest in keeping its asset functional.

Power purchase agreement (PPA). Structurally similar to a lease — a third party owns and maintains the system — but instead of paying a flat rent, you pay per kilowatt-hour for the electricity the system produces, typically at a rate lower than your utility’s. Your monthly bill varies with how much the system generates and how much electricity you use.

In both a lease and a PPA, the company that owns the equipment — not you — is the one with any potential access to a federal tax credit, and neither structure gives you the equity-building upside of ownership.

Loan vs. lease vs. PPA at a glance

Get multiple written quotes before comparing any specific loan APR, lease payment, or PPA rate — actual terms vary by lender, installer, credit profile, and state, and no generic figure will be accurate for your situation.

Why 2026 changed this calculation more than most homeowners realize

Through 2025, buying a system with cash or a loan came with a 30% federal tax credit (the Section 25D Residential Clean Energy Credit) that homeowners claimed directly on their own tax return. That credit was a major reason loans often out-competed leases and PPAs on total lifetime cost — it effectively cut a fifth to a third off the up-front price, on top of the long-term advantage of ownership.

The One Big Beautiful Bill Act (H.R. 1), signed July 4, 2025, repealed Section 25D outright for any system placed in service on or after January 1, 2026, with no phase-down period. Full details on exactly what changed and who’s affected are in Federal Solar Tax Credit 2026: What Changed.

That repeal narrows the gap between a loan and a lease or PPA — but it doesn’t close it. A loan still transfers full ownership, and ownership is still what generates the majority of long-term savings, since you stop paying anyone (a lender or a leasing company) once the loan is paid off and keep 100% of the electricity value after that point. What’s changed is that the loan no longer comes with a 30% discount to make that ownership cheaper to acquire in year one.

Meanwhile, leases and PPAs never gave the homeowner a direct credit in the first place — the owning company was always the one positioned to claim incentives, including the separate Section 48E commercial credit that still exists for third-party-owned systems. Some companies pass part of that value through as a lower monthly rate, but this was never guaranteed before 2026 and isn’t guaranteed now. If a salesperson implies your lease or PPA payment reflects “the tax credit,” ask them to specify which credit, to whom it applies, and whether it’s already baked into the quoted rate in writing.

Net effect: 2026 makes the up-front cost of a loan look relatively less attractive than it did a year ago, since the 30% discount is gone, while lease and PPA payments are largely unchanged in structure. Whether that shift is enough to favor a lease or PPA for your household depends on your credit-qualification situation, how long you plan to stay in the home, and your local electricity rates — see Is Solar Still Worth It in 2026? for a broader framework on running those numbers.

What happens to the system if you sell your house

This is the part lease and PPA marketing tends to gloss over. Because the installer or financing company still owns the equipment, you can’t simply sell the house and walk away from the contract the way you could with a loan (where the system is just part of the property, like a paid-off furnace).

In most cases, one of two things has to happen before or at closing:

• The buyer assumes the contract. They apply with the leasing/PPA company, usually need to meet a credit threshold, and take over the remaining term and payments. Some buyers are unwilling to take on a 15-20 year obligation on a house they just bought, which can complicate negotiations or reduce the pool of interested buyers.
• You pay it off or buy it out. Many contracts include a buyout option — sometimes at a pre-set schedule, sometimes at fair market value — that lets you pay a lump sum to either transfer clean ownership to the buyer or remove the obligation before selling.

A solar loan doesn’t create this friction. Once you own the panels, they transfer with the house like any other fixture, whether or not the loan itself is paid off (in which case the loan follows you, not the house, just like a normal personal loan).

The risks marketing tends to underplay

A few contract details are worth reading carefully before signing a lease or PPA, since they’re rarely the headline of a sales pitch:

• Escalator clauses. Many lease and PPA contracts increase your payment by a fixed percentage — often in the low single digits — every year. Over a 20-25 year term, this compounds into a materially higher payment than your starting rate, and it’s worth asking for the full year-by-year schedule rather than just the first-year number.
• Contract length. Terms of 20 to 25 years are standard for both leases and PPAs. That’s longer than most mortgages people take out today, and roughly the same length as the equipment’s own expected service life — meaning there’s little room to “outgrow” the contract before it naturally ends.
• End-of-term decisions. At the end of the term, you typically choose between renewing, buying the system at its fair market value, or having it removed. None of these is automatic, and each has cost implications that are easy to overlook when you’re focused on the near-term monthly payment.
• Rate comparisons that assume utility prices only rise. A PPA’s savings pitch usually rests on the assumption that utility rates will keep climbing faster than your PPA’s escalator. That’s been true in many regions, but it’s an assumption, not a contractual guarantee, and it’s reasonable to ask an installer to show their math rather than take the comparison on faith.

None of this means leases or PPAs are a bad option in every case — for someone who can’t get competitive loan terms, doesn’t have the cash for a down payment, or is not planning to stay in the home long enough to benefit from ownership economics, a lease or PPA can still be a rational trade-off of lower savings for lower risk and no maintenance burden. The point is to go in with the actual contract terms, not the sales pitch.

Which option tends to fit which homeowner

• A loan tends to fit homeowners who qualify for reasonable financing terms, plan to stay in the home for most or all of the loan term, and want to capture the full long-term value of the system, including at resale.
• A lease tends to fit homeowners who want predictable, typically lower monthly payments, don’t want any maintenance responsibility, and are less focused on maximizing 20-year savings than on avoiding up-front cost.
• A PPA tends to fit homeowners who want to pay only for what the system actually produces and are comfortable with a payment that varies month to month and rises on a schedule over the contract term.

Whichever direction you lean, get at least two or three competing quotes in each category you’re seriously considering — loan APRs, lease rates, and PPA rates all vary significantly by installer, region, and credit profile, and the only reliable way to know which structure wins for your specific home is to compare real numbers side by side rather than national averages.

Bottom line

Ownership — via cash or a loan — still produces the highest long-term savings of the three structures, because it’s the only option where you keep both the electricity savings and the underlying asset. The end of the Section 25D tax credit in 2026 removed the discount that used to make ownership cheaper up front, which narrows its advantage over a lease or PPA but doesn’t eliminate it. Leases and PPAs remain reasonable choices for homeowners prioritizing low up-front cost and zero maintenance responsibility over maximum savings, as long as you go in aware of escalator clauses, 20-25 year contract terms, and the extra step required to transfer or buy out the agreement when you sell.