Solar Lease vs PPA vs Buying: Which Is Best in 2026?

Last updated: February 2026

When you decide to go solar, you're actually making two separate decisions: whether to go solar, and how to pay for it. The "how to pay" question shapes your finances for the next 20–25 years — and choosing poorly can be the difference between solar that genuinely builds wealth and solar that delivers minimal financial benefit.

In 2026, you have three primary pathways: buy your system outright (cash or loan), sign a solar lease, or enter into a power purchase agreement (PPA). Each has a fundamentally different financial structure and suits different homeowner profiles.

Here's an honest, numbers-based comparison of all three.

The Three Options: How They Work

Option 1: Purchasing Outright (Cash)

You pay the full installed cost upfront. You own the system, take all the production, and owe nothing going forward except occasional maintenance. You capture the full economic value of the system.

Typical scenario: $30,000 installed 10 kW system, net of any state incentives. System produces 13,000 kWh/year, saving approximately $1,885/year at 14.5¢/kWh national average. Payback period: approximately 16 years. 25-year net return: ~$17,000.

In high-rate states, the economics are dramatically better: at 24¢/kWh (Massachusetts), the same system saves $3,120/year, achieving payback in under 10 years and generating a 25-year net return of $45,000+.

Option 2: Solar Loan

You borrow money to buy the system — either through a dedicated solar loan from companies like Mosaic, GoodLeap, or Dividend Finance, or through a home equity loan/HELOC. You own the system from day one and capture all the financial benefits of ownership, but make monthly loan payments.

Typical scenario: $30,000 system, $0 down, 10-year solar loan at 6.99% APR. Monthly payment: approximately $348/month. Monthly electricity savings: ~$157 (at 14.5¢/kWh). Net monthly cost during loan period: ~$191/month. After loan payoff at year 10: pure savings of ~$157+/month (increasing as rates rise).

Solar loans at 6.99% APR are widely available in 2026, with some promotional rates as low as 4.99% for qualified borrowers. However, watch for origination fees and "dealer fees" on solar-specific loans — some effectively add $3,000–6,000 to the loan principal through embedded fee structures. Always calculate the all-in effective rate, not just the stated APR.

Option 3: Solar Lease

You pay a fixed monthly amount to a third-party company (SunPower, Sunrun, Vivint Solar, etc.) to use their solar panels installed on your roof. You pay a predictable monthly bill — typically $80–$150 for a residential system — in exchange for the electricity the panels produce.

You don't own the system. The solar company owns it, maintains it, and keeps any solar incentives or SRECs. At the end of the lease term (typically 20–25 years), you can renew, buy the system at fair market value, or have the panels removed.

Typical scenario: $105/month lease payment on a 10 kW system. If your electricity bill drops from $180/month to $45/month (because you're using lease solar + some grid power), net savings: $30/month. After 20 years of $105 payments totaling $25,200, you own nothing.

Option 4: Power Purchase Agreement (PPA)

Rather than a fixed monthly payment, a PPA charges you per kWh the solar panels produce — typically at a rate 10–20% below your current utility rate. The rate usually escalates 2–3% per year under contract.

Typical scenario: 12¢/kWh PPA rate versus 14.5¢/kWh utility rate. System produces 13,000 kWh/year = PPA payment of $1,560/year. Electricity savings (vs. paying full utility rate for that energy): $370/year. As the utility rate escalates to 16¢ in year 5, the PPA escalator brings the PPA rate to ~13.2¢ — the savings spread remains modest.

Side-by-Side Financial Comparison

This comparison assumes a 10 kW system producing 13,000 kWh/year, a 14.5¢/kWh starting electricity rate escalating 2.5%/year, and a California scenario at 28¢/kWh for illustration:

*Assumes $180/month utility bill drops to $45/month on lease; lease payment $105/month; net $30/month savings. Varies significantly by system size and electricity rate.

Section 48E: Verify Eligibility Instead of Assuming It

Section 48E is a business investment credit, not a homeowner credit and not a blanket subsidy for third-party-owned residential systems.

Current IRS Form 3468 guidance denies the credit for certain residential solar property rented or leased to a third party for tax years beginning after July 4, 2025. Other eligibility conditions can include construction and placed-in-service timing, labor standards, and prohibited-foreign-entity rules. A PPA may have different legal characteristics from an equipment lease, but the customer should not decide tax eligibility from the marketing label alone. Under IRS Notice 2025-42, solar facilities that begin construction after July 4, 2026 must be placed in service by December 31, 2027, and projects are subject to prohibited-foreign-entity (FEOC) sourcing rules — the provider bears these requirements.

In practice, compare the quoted payment stream without adding a tax benefit that does not appear in the contract. If a provider says federal incentives lower the price, request the applicable code section and a written explanation of project eligibility.

Contract prices can differ for many reasons, including financing, equipment, production guarantees, service obligations, escalators, and risk allocation. A price difference does not prove that a tax credit was passed through.

Who Should Buy vs. Lease vs. PPA?

Buy (Cash or Loan) If:

• You have the cash reserves or access to home equity financing at favorable rates
• You plan to stay in your home for 10+ years
• Your state has meaningful additional incentives (SRECs, state tax credits) that require ownership to capture
• You want to increase your home's resale value (owned solar adds ~$15,000–20,000 to home value; leased solar often complicates sales)
• Your electricity rate is high (18¢+/kWh) — the economic case is clearest

The math favors buying in almost all cases where the homeowner has a 10+ year horizon and access to reasonable financing. The 25-year wealth differential between buying and leasing is typically $35,000–50,000.

Lease If:

• You have limited credit access and can't qualify for a solar loan
• Your HOA or local ordinance restricts solar ownership but allows leases through certain providers
• You're in a state with low electricity rates (under 11¢/kWh) where ownership economics are marginal anyway
• You specifically want zero maintenance responsibility — the leasing company handles all system upkeep
• You're planning to move within 5 years (though lease transfer at home sale is possible, it's complicated)

PPA If:

• You're in a high-rate state (California, Massachusetts, Connecticut, New York) where even a discounted PPA rate delivers meaningful savings
• You're not eligible for a solar loan and have no suitable home equity
• You're a renter who has negotiated a PPA with your landlord (community solar or certain PPA structures can work for renters)
• You prefer variable payments tied to actual production rather than a fixed lease payment

The Home Sale Complication

The clearest disadvantage of leased solar is what happens when you sell your home.

With owned solar, the system transfers to the new buyer and adds to the sale price. Lawrence Berkeley National Laboratory research found that owned solar systems add an average of $15,000 in resale value for a typical residential system — approximately $4/watt.

With a leased system or PPA, the new buyer either needs to assume the remaining contract (which means qualifying with the solar company and agreeing to the payment structure) or you pay a buy-out fee to terminate the contract before closing. The buy-out calculation at year 8 or 10 of a 20-year lease can produce a surprisingly large number — often $10,000–$20,000 — that complicates or kills home sales.

Real estate agents consistently report that leased solar is a more difficult selling proposition than owned solar. Some buyers won't consider purchasing homes with leased solar at all.

The Maintenance Reality

One often-cited advantage of leases and PPAs is that "the company handles all maintenance." This is true — and it matters in a limited way.

Modern solar systems require very little maintenance. The panels need cleaning once or twice a year (often done by rain). String inverters may need replacement around year 12–15. Microinverters last the panel lifetime. The total expected maintenance cost for an owned residential solar system over 25 years is approximately $1,500–$3,000 — modest relative to the ownership financial advantage.

The "free maintenance" benefit of a lease is real but not as valuable as solar marketing materials imply.

Making the Decision

Run the numbers for your specific situation using the calculators below. But as a general framework:

If you can buy, compare ownership carefully. Model the cash price or loan, maintenance, incentives you are actually eligible to use, and your expected ownership period.

If you prefer a PPA, evaluate the contract carefully. Compare the full term, rate escalator, production guarantee, utility-rate assumptions, transfer provisions, and buyout schedule. Treat any Section 48E benefit as unverified until the project owner documents eligibility.

Avoid leases unless you have no other option. The fixed payment structure provides less flexibility than a PPA in high-production months, and the long-term financial outcome is typically worse than a PPA even with similar monthly payments.

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Policy sources reviewed September 2026: IRS Instructions for Form 3468 and IRS Notice 2025-42. Cost and production assumptions must be checked against current, project-specific proposals.