Cash vs Solar Loan vs Lease vs PPA

The four paths at a glance

No path is universally best. The right one depends on your cash position, tax situation, how long you’ll stay in the home, and your appetite for complexity.

Cash

You pay the gross price minus verified incentives ($0 federal in 2026). You own the system outright: every kWh of production is yours, and payback is a simple math problem (net cost ÷ annual savings). Cash also removes the dealer fee entirely — your price is the cash price, not a financed principal. The downside is the opportunity cost of tying up $20k–$35k.

Solar loans — and the dealer fee you must understand

Here is the single most misunderstood number in residential solar. A $25,000 cash system offered as a “5.99% APR solar loan” is often financed at a principal of ~$33,000. Why? The lender charges a dealer fee — commonly 15–30% of the financed amount — which the installer rolls into the principal to buy down the APR.

The formula: financed principal = cash price ÷ (1 − dealer fee). With a 25% fee on $25,000: $25,000 ÷ 0.75 = $33,333. You pay interest on $33,333, not $25,000.

A dealer fee is not fraud — it is how low-APR solar loans are priced — but it must be disclosed. If a lender won’t state the fee and the cash price, that’s a red flag. Run the financing calculator and compare total paid over the term against the cash price. Also note: in 2026 there is no federal credit to fold into the loan; a “you keep the credit, we lower your payment” pitch is stale math.

Lease

$0 down, fixed monthly payment, often with a 2–3% annual escalator. The company owns the system and typically handles monitoring and maintenance. You don’t own the equipment, you can’t claim any credit (neither can you — §25D is expired anyway; the company may benefit from §48E and price part of it into your rate), and the contract usually transfers to a new owner if you sell the home. Total payments over 25 years at $120/mo + 2.9% escalator ≈ $40k+ — often more than the cash price plus interest on a loan. Leases make sense when you want zero upfront cost, no maintenance responsibility, and predictable payments — not when you want the best total cost.

PPA (power purchase agreement)

You pay a rate per kWh generated (e.g., 13–17¢/kWh, often with an escalator). Your savings = your retail rate minus the PPA rate, applied to production. If your retail rate is 20¢ and the PPA is 15¢, you save ~25% on the solar-generated portion. If your retail rate is below the PPA rate, the deal can lose money — always compare against your rate, not the sales sheet. PPAs also carry the same transfer/escalator fine print as leases.

A worked example (2026, no federal credit)

*paid over 20 yrs, then owned free. **depends on production and rate. These are illustrative — run your own numbers in the financing calculator.

Notice the loan’s total looks scary — but you own the system and keep producing after year 20. The lease/PPA totals keep paying regardless. This is exactly why comparing totals without ownership context misleads. Model net position, not sticker totals.

Decision guide

• Cash available and you’ll stay 5+ years: cash almost always wins on total cost.
• Want ownership without the upfront: a loan, but only after seeing the dealer fee and cash price.
• Zero upfront, no maintenance, short-ish horizon: lease or PPA — accept higher total cost as the price of simplicity.
• You may sell in 3–5 years: understand the transfer terms before signing anything.

Never sign a solar financing contract without knowing three numbers: the cash price, the dealer fee %, and the total cost over the full term.