Short answer: since the federal homeowner tax credit ended, the best way to pay for solar depends mostly on whether your state and utility offer incentives for owning. Cash gives the best long-term savings, a loan lets you own with little or nothing down, and a lease or PPA can give the biggest immediate savings because the company still gets a federal credit. Last reviewed: October 17, 2026.
The four ways to pay
| Cash | Loan | Lease | PPA | |
|---|---|---|---|---|
| Who owns the system | You | You | The company | The company |
| Upfront cost | Full price | Often $0 down | Often $0 down | Often $0 down |
| What you pay each month | Nothing for the system | Loan payment plus interest | A fixed monthly lease payment | A set price per kWh the system produces |
| Federal tax credit in 2026 | No | No | Company claims it and may pass value on | Company claims it and may pass value on |
| State and local incentives | You may claim them | You may claim them | Often go to the company (check the contract) | Often go to the company (check the contract) |
| Maintenance | You | You | Usually the company | Usually the company |
| Long-term savings | Highest | High, minus interest | Lower | Lower |
The table summarizes how EnergySage and Solar.com describe these options. Terms differ between providers, so always read the contract.
Paying with cash
Paying upfront avoids interest and usually gives the best long-term savings. You own the system from day one and can claim any state or local incentives. The downside is the large upfront cost, around $31,000 for a typical 12 kW system (see solar panel costs), and the money is tied up for years.
Paying with a solar loan
A loan lets you own the system without paying the full price upfront, and some loans require no money down. Because you own the system, you can claim available state and local incentives. Interest reduces your total savings compared with paying cash. Ask for the interest rate, the term, whether there is a fee built into the price, and whether you can pay early without a penalty. Compare loan offers from your bank or credit union with the one the installer offers.
Leasing solar panels
In a lease, a company owns the system on your roof and you pay a monthly fee, with little or nothing down. The company claims the federal business credit (Section 48E), which is available for residential leases and PPAs through 2027, and a competitive provider may pass part of that value to you through lower payments. Solar.com reports that, where there are no strong local incentives for owning, many homeowners see bigger day-one savings from a lease or PPA than from a loan. The trade-off is that your total savings over the system’s life are usually lower than with ownership.
Power purchase agreements (PPAs)
A PPA works like a lease, but you pay for the electricity the system produces, at a set price per kWh, rather than a fixed monthly amount. If the system produces less than expected, you pay less, and if it produces more, you pay more. Check whether the price per kWh rises each year and by how much.
Prepaid leases and PPAs
A prepaid lease or PPA means you pay for most of the system’s output upfront. Solar.com says this product can reflect the business credit as an upfront discount and may include a buyout option after about five years at market value. These products are newer, so read the terms carefully and compare them with a plain purchase.
Which one fits you?
- Choose cash if you have the money, plan to stay in the home for many years, and want the lowest long-term cost.
- Choose a loan if you want to own and capture local incentives but prefer not to pay everything upfront. Compare rates.
- Consider a lease or PPA if your state offers little for owners, you want little or no upfront cost, or you prefer that the company handle maintenance. Check the annual price increase.
- Be careful if you may sell the home soon. Ownership is simpler to explain to a buyer, while a lease or PPA must usually be transferred or bought out.
Questions to ask before you sign
- What is the total I will pay over the whole term, not just the monthly payment?
- Does the payment or price per kWh increase each year? By how much?
- What happens if I sell the home? Is the contract transferable? Is there a buyout price?
- Who is responsible for repairs, monitoring and insurance?
- Does the company place a lien or a fixture filing on my property?
- What happens to my contract if the company goes out of business?
- For a loan: what are the rate, the term, any fees and the prepayment rules?
- What yearly production does the company guarantee, if any?
Run the numbers
Compare the options with your own electricity price in our solar savings calculator. For the effect of the missing federal credit on ownership, read is solar worth it without the federal tax credit, and for the tax rules, does the solar tax credit still exist.
Every home is different. Use our free calculator to estimate system size, cost after incentives and payback for your own electric bill.
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This article is for general information and is not financial, tax or legal advice. Sources: EnergySage, Solar.com.
