Solar Lease vs Buy vs PPA: Which Is Right for You?
The lease-vs-buy-vs-PPA decision has changed dramatically in 2026. With the Section 25D residential tax credit gone, the advantage of owning your system is smaller than it used to be — and the developer tax credit (48E) available for leases and PPAs makes third-party options more competitive than ever. Here's an honest, detailed comparison to help you decide.
The Three Options, Defined
Buy (Cash or Loan)
You purchase the system outright or finance it with a loan. You own the equipment, receive all the electricity it produces, claim any available state incentives, and are responsible for maintenance and warranty claims. With a loan, you make monthly payments but still own the system.
Lease
A solar developer installs a system on your roof at no upfront cost. You pay a fixed monthly amount for 20–25 years. The developer owns the system, claims all tax credits (including the 48E ITC), handles maintenance, and guarantees a minimum production level.
Power Purchase Agreement (PPA)
Similar to a lease, but instead of a fixed monthly payment, you pay per kilowatt-hour produced — typically $0.08–$0.15/kWh. If the system produces more, you pay more. If it produces less, you pay less. The developer owns the system and claims all tax benefits.
Ownership vs Third-Party Ownership
The fundamental distinction is ownership. When you buy (cash or loan), you own the system. When you lease or sign a PPA, a third party owns it and you're essentially renting your roof.
Ownership means:
- The system is your property — it adds value to your home
- You receive all production — every kWh offsets your bill at your utility rate
- You claim state incentives, SRECs, and net metering credits
- You handle maintenance (though equipment is warrantied for 25 years)
- No federal residential tax credit in 2026 (25D expired)
Third-party ownership means:
- The developer owns the system and claims the 48E ITC (30%)
- Some savings may be passed to you through lower payments
- Zero maintenance responsibility
- Zero upfront cost
- The system is not your asset — may complicate home sales
Long-Term Cost Analysis: Real Numbers
Let's compare all three options for a typical 8 kW system on a home with a $150/month electric bill, over a 25-year period.
Scenario Assumptions
- System size: 8 kW
- System cost: $24,000 ($3.00/W)
- Annual production: 10,000 kWh
- Current electric rate: $0.18/kWh ($150/month)
- Utility rate escalation: 3% per year
- State incentives: $2,000 (available for owned systems)
Cash Purchase — 25-Year Total
| Item | Amount |
|---|---|
| System cost | –$24,000 |
| State incentives | +$2,000 |
| Electric bill savings (25 years) | +$45,000–$55,000 |
| Net savings over 25 years | +$23,000–$33,000 |
Solar Loan — 25-Year Total
| Item | Amount |
|---|---|
| System cost + interest (7%, 15 yr) | –$31,000 |
| State incentives | +$2,000 |
| Electric bill savings (25 years) | +$45,000–$55,000 |
| Net savings over 25 years | +$16,000–$26,000 |
Solar Lease — 25-Year Total
| Item | Amount |
|---|---|
| Lease payments (25 years, starting $120/mo, 2.5% escalation) | –$38,000–$42,000 |
| Electric bill savings (reduced bill, 25 years) | +$45,000–$55,000 |
| Net savings over 25 years | +$3,000–$17,000 |
PPA — 25-Year Total
| Item | Amount |
|---|---|
| PPA payments (25 years, starting $0.12/kWh, 2.9% escalation) | –$36,000–$42,000 |
| Electric bill savings (reduced bill, 25 years) | +$45,000–$55,000 |
| Net savings over 25 years | +$3,000–$19,000 |
Impact on Home Value
This is one of the biggest differences between owning and leasing:
- Owned systems (cash or loan) increase home value by roughly $15,000–$25,000, according to a Lawrence Berkeley National Laboratory study. Buyers pay a premium for homes with owned solar systems because they inherit free electricity.
- Leased systems and PPAs have a mixed impact. Some buyers are reluctant to assume a 20-year agreement. A Zillow study found that leased systems either had no impact or slightly reduced the pool of potential buyers. However, if the lease/PPA rate is significantly below utility rates, it can be a selling point.
If you plan to sell your home within 10 years, this matters. Most leases and PPAs include buyout provisions, but the buyout price in early years can be close to the original system cost.
Tax Credit Eligibility in 2026
The 2026 tax credit landscape has changed significantly:
| Financing Type | Federal Tax Credit | Who Claims It |
|---|---|---|
| Cash purchase (residential) | None (25D expired) | N/A |
| Solar loan (residential) | None (25D expired) | N/A |
| Solar lease | 48E ITC (30%) | Developer |
| PPA | 48E ITC (30%) | Developer |
| Cash/loan (commercial/rental) | 48E ITC (30%) | Property owner |
Key point: The developer claims the 48E ITC for leases and PPAs, and may pass some savings through to you via lower payments. But they're also keeping a significant portion to cover their costs and profit. The question is whether the pass-through savings are worth giving up ownership.
Decision Framework
Answer these questions to find your best option:
1. Do you have $20,000–$30,000 in available cash?
- Yes, and you plan to stay 10+ years: Cash purchase. Maximum savings.
- Yes, but you may move within 7 years: Consider a loan for flexibility, or investigate the lease buyout schedule.
- No: Loan, lease, or PPA. Go to question 2.
2. Do you want to own the system?
- Yes: Solar loan (secured loan/HELOC preferred over dealer-fee loans). You build equity and get state incentives.
- Don't care / prefer no maintenance: Lease or PPA. Go to question 3.
3. Do you prefer predictable payments or per-kWh pricing?
- Predictable monthly payment: Lease. You know exactly what you'll pay each month.
- Pay only for what's produced: PPA. Lower risk if production is uncertain, but total cost depends on system output.
4. Is your utility rate high?
- Above $0.20/kWh: All options make sense. Owning has the best ROI but lease/PPA still saves money.
- $0.15–$0.20/kWh: Owning is marginal without state incentives. Lease/PPA may be more attractive because the developer's tax credit reduces the effective cost.
- Below $0.15/kWh: Solar is marginal regardless of financing. Run the numbers carefully with our ROI Calculator.
5. Are you in a state with strong incentives?
- Yes (NY, MA, NJ, MD, CT, RI): Ownership becomes more attractive because state incentives can offset the loss of the federal credit.
- No: Lease/PPA may offer better value because the developer's 48E credit effectively subsidizes your monthly cost.
Common Mistakes to Avoid
- Comparing monthly payments instead of total cost. A $120/month lease and a $250/month loan payment sound very different, but over 25 years the loan saves more because you own the asset.
- Ignoring the escalator. Lease and PPA payments increase 1.5–3.5% per year. A $120/month lease becomes $170–$210/month in year 20. Read the contract carefully.
- Assuming the dealer fee loan is cheaper. Low-rate loans with dealer fees often cost more in total than higher-rate loans without them. Always compare total payments.
- Not checking the buyout terms. If you might sell your home, understand the lease/PPA buyout schedule. Early buyouts can be expensive.
- Forgetting about SRECs. Some states have Solar Renewable Energy Credits worth $50–$400/year. You only get these if you own the system.
For a broader overview of all financing options with pros and cons, see our Solar Financing Options guide.
Calculate your break-even for each option
Our free ROI Calculator shows you the payback period and total savings for cash, loan, and lease scenarios side by side. Input your actual numbers and see which option wins.
Calculate My ROI →Sources: Lawrence Berkeley National Laboratory "Selling into the Sun" study, SEIA U.S. Solar Market Insight Q1 2026, EnergySage Marketplace data, NREL Solar Market Report 2025, IRS Notice 2025-42 (OBBBA implementation), Zillow solar home value study.