Solar PPA vs Lease vs Buying: Which Option Saves You the Most?
Compare solar power purchase agreements, leases, cash purchase, and loans to find the best solar financing for maximum savings
Bottom Line Recommendation
Avoid solar PPAs and leases if at all possible. They save you only 10-20% on electricity, while buying saves 40-70%. You miss out on the $9,000+ federal tax credit, can't add home value, and create complications when selling. Instead, buy with a $0 down solar loan - you'll save 3-4x more money over 25 years.
Only consider PPA/lease if: You can't qualify for a solar loan at any interest rate AND you have high electricity rates ($0.20+/kWh). Even then, exhaust all loan options first (co-signers, credit unions, PACE).
Quick Comparison
- •Solar PPA: Pay per kWh produced ($0.12-0.18/kWh), 10-15% savings, company owns system
- •Solar Lease: Fixed monthly payment ($50-250/mo), 10-20% savings, company owns system
- •Cash Purchase: Pay upfront, 50-70% savings, you own system and keep $9k tax credit
- •Solar Loan: $0 down, 40-60% savings, you own system and keep $9k tax credit
Solar PPAs (Power Purchase Agreements) and solar leases let you get solar panels with $0 down and no upfront cost. The solar company installs panels on your roof, maintains them, and you either pay per kilowatt-hour produced (PPA) or a fixed monthly fee (lease).
Sounds great, right? Not so fast. [VERIFY] Solar PPAs and leases are the worst solar financing options for 90% of homeowners. You'll save only 10-20% on electricity over 20-25 years, while buying (even with a loan) saves 40-70%. You also lose the $9,000+ federal tax credit, can't increase home value, and create major complications when selling your home.
This guide breaks down exactly how PPAs and leases work, compares them side-by-side with buying options, shows you the true 25-year costs, and explains why buying with a $0 down solar loan is almost always the better choice.
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Compare financing optionsWhat is a Solar PPA (Power Purchase Agreement)?
With a solar PPA, you don't buy the solar panels. Instead:
How Solar PPAs Work:
- 1.Solar company installs panels on your roof at no upfront cost to you
- 2.Solar company owns, maintains, and monitors the system
- 3.You pay the solar company per kilowatt-hour (kWh) the panels produce
- 4.PPA rate is typically 10-30% below your current utility rate
- 5.You still pay your utility for any additional power you need
- 6.Contract typically lasts 20-25 years
Typical PPA Rates:
- • Low-rate states: $0.10-0.14/kWh
- • Average states: $0.12-0.16/kWh
- • High-rate states: $0.14-0.18/kWh
- Compare to your current utility rate
Annual Escalator:
- • PPA rate increases 1-3% annually
- • After 10 years: +10-34% higher
- • After 20 years: +22-81% higher
- Your savings shrink every year
Example: Solar PPA
Your utility charges $0.16/kWh. Solar company offers PPA at $0.13/kWh with 2% annual escalator.
10,000 kWh system production per year:
- • Year 1: Pay $1,300 to solar company (vs $1,600 to utility = $300 savings)
- • Year 10: Pay $1,584/year (only $16 savings if utility stays flat)
- • Year 20: Pay $1,929/year (could be paying MORE than utility)
25-year total: ~$41,000 paid to solar company
What is a Solar Lease?
A solar lease is similar to a PPA, but with one key difference: you pay a fixed monthly amount regardless of how much electricity the panels produce.
How Solar Leases Work:
- 1.Solar company installs and owns the panels
- 2.You pay a fixed monthly lease payment (e.g., $150/month)
- 3.Payment is the same whether panels produce a lot or a little
- 4.Solar company maintains the system
- 5.Lease payment typically increases 1-3% annually (escalator)
- 6.20-25 year contract
Typical Lease Payments:
- • Small system (5 kW): $50-100/month
- • Medium system (7 kW): $100-175/month
- • Large system (10 kW): $150-250/month
- Based on system size and utility rates
Solar Lease vs PPA:
- • Lease: Fixed payment, predictable
- • PPA: Variable payment based on production
- • Lease risk: Pay even if panels underperform
- • PPA risk: Less control over costs
Example: Solar Lease
7 kW system, $160/month lease payment, 2.5% annual escalator.
Current electric bill: $200/month ($2,400/year)
- • Year 1: $1,920 lease + ~$500 remaining utility = $2,420 total (lose $20)
- • Year 10: $2,455 lease + $500 utility = $2,955 (lose $555/year)
- • Year 20: $3,138 lease + $500 utility = $3,638 (lose $1,238/year)
In this scenario, you could end up paying MORE than without solar!
Solar PPA vs Lease vs Cash vs Loan Comparison
Here's how all solar financing options compare for a typical $30,000 (7 kW) solar system over 25 years:
| Option | Upfront Cost | Monthly Payment | 25-Year Cost | 25-Year Savings | Tax Credit |
|---|---|---|---|---|---|
| Cash Purchase | $21,000* | $0 | $21,000 | $48,000 (70%) | You keep $9k |
| Solar Loan (6% APR) | $0 | $193 | $34,740 | $34,260 (50%) | You keep $9k |
| Solar Lease | $0 | $125-175 | $48,000 | $21,000 (30%) | Company keeps |
| Solar PPA | $0 | Varies | $52,000 | $17,000 (25%) | Company keeps |
| No Solar | $0 | $230 | $69,000 | $0 (0%) | N/A |
*Cash purchase after $9,000 federal tax credit. Assumes $230/month current electric bill, 3% utility inflation, 2% PPA/lease escalator. Actual savings vary by location and usage.
The Shocking Truth
Buying with a solar loan saves you 2x more than a lease or PPA - $34,260 vs $17,000-21,000 over 25 years. That's $13,000-17,000 left on the table!
Even with a 10% APR loan (bad credit), you'd save $28,000 over 25 years - still 40% more than a PPA/lease. The math is clear: ownership beats renting every time.
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PPA vs Lease: Side-by-Side Breakdown
| Feature | Solar PPA | Solar Lease |
|---|---|---|
| Payment Structure | Per kWh produced | Fixed monthly |
| Typical Rate/Payment | $0.12-0.18/kWh | $50-250/month |
| Production Risk | Pay only for what's produced | Pay even if low production |
| Price Predictability | Varies with production | Fixed (plus escalator) |
| Annual Escalator | 1-3% per year | 1-3% per year |
| 25-Year Savings | 10-15% | 10-20% |
| Ownership | Company owns | Company owns |
| Tax Credits | Company keeps | Company keeps |
| Home Sale Complexity | Very high | Very high |
Which is Better: PPA or Lease?
Neither is good, but if you must choose: Solar leases are slightly better for most homeowners because of payment predictability. You know exactly what you'll pay each month (plus annual escalator).
PPAs are better if you're worried about panel performance - you only pay for actual production. But in practice, both options are poor compared to buying.
The Escalator Clause: Your Savings Shrink Every Year
[VERIFY] Nearly all solar PPAs and leases include an annual escalator clause - your rate/payment increases 1-3% every year, even though the solar panels depreciate and produce less over time.
| Year | 1% Escalator | 2% Escalator | 3% Escalator |
|---|---|---|---|
| Year 1 | $0.14/kWh | $0.14/kWh | $0.14/kWh |
| Year 5 | $0.146/kWh | $0.152/kWh | $0.158/kWh |
| Year 10 | $0.154/kWh | $0.171/kWh | $0.188/kWh |
| Year 15 | $0.162/kWh | $0.189/kWh | $0.218/kWh |
| Year 20 | $0.171/kWh | $0.208/kWh | $0.253/kWh |
The Escalator Trap
With a 3% annual escalator, your solar rate increases 81% over 20 years. If your utility rate only increases 60% (2.5% annually), you could end up paying MORE with solar than without it by year 15-20.
Meanwhile, if you bought the system with a loan, your payment is fixed and drops to $0 after 12-20 years. No escalators, no surprises.
Home Sale Complications with PPA/Lease
One of the biggest problems with solar PPAs and leases: they make selling your home significantly harder.
Three Options When You Sell:
1. Transfer to Buyer (Most Common)
The buyer assumes your PPA/lease contract for the remaining term (often 15-20 years left).
Problems:
- • Buyer must qualify with solar company (credit check)
- • Many buyers refuse homes with solar leases/PPAs
- • Reduces pool of potential buyers by 30-50%
- • You may have to lower asking price $5,000-15,000
- • Deal can fall through during escrow if buyer backs out
2. Buy Out the Contract
Pay the solar company to cancel the remaining lease/PPA (typically the remaining payments discounted).
Cost:
- • Buyout = ~85-95% of remaining contract value
- • Example: 15 years left at $150/mo = $27,000 buyout
- • You pay this upfront, wiping out your "savings"
3. Prepay and Transfer Ownership
Similar to buyout, but you keep the system (it becomes an owned system that transfers with the home).
Better than buyout:
- • Adds ~$15,000-25,000 to home value (owned solar premium)
- • Makes home easier to sell
- • But still costs $20,000-30,000 to prepay
With an Owned System (Bought or Financed):
If you bought your solar system (cash or loan), selling is simple:
- • Solar panels increase home value by $15,000-25,000 (4% premium)
- • No buyer credit checks or contract transfers
- • Buyers see it as an attractive feature, not a liability
- • Your loan (if any) is paid off from home sale proceeds
- • Zero complications during escrow
Solar PPA/Lease Pros & Cons
Pros
- $0 upfront cost - no money down required
- Solar company handles all maintenance and repairs
- System monitoring included
- Easier to qualify than loans (less stringent credit requirements)
- Immediate electricity bill reduction (10-30% typically)
Cons
- Only save 10-20% over 25 years (vs 40-70% buying)
- Lose $9,000+ federal tax credit (company keeps it)
- Annual escalator reduces savings every year (1-3%)
- Makes selling your home difficult (30-50% fewer buyers)
- No equity or home value increase ($0 vs $15k-25k buying)
- Cannot add battery storage or expand system easily
- 20-25 year contract locks you in
- Buyout costs $20,000-30,000 if you want out
- Total cost often higher than buying with a loan
Verdict
The cons dramatically outweigh the pros. The only meaningful advantage - $0 upfront cost - is also available with $0 down solar loans, which give you ownership, tax credits, and 2-3x more savings. There is virtually no scenario where PPA/lease makes financial sense if you can qualify for a loan.
Our Recommendation: Buy with a $0 Down Loan
Why Buying is Better (Even with Bad Credit)
A solar loan with $0 down gives you all the benefits of PPA/lease (no upfront cost, immediate savings) PLUS:
- ✓Keep $9,000 federal tax credit - This alone covers years of interest
- ✓Save 2-3x more money - $34,000 vs $17,000 over 25 years
- ✓Own the system - No escalators, no contract, it's yours
- ✓Increase home value - Add $15,000-25,000 to sale price
- ✓Easy home sale - No contract transfers or buyer credit checks
- ✓Payment ends - Free electricity after 12-20 years (vs 25-year PPA/lease)
If You Have Good Credit (660+):
Get a solar loan at 6-9% APR from Mosaic, GoodLeap, or Dividend. With $0 down and $193/month payment (for $30k system), you'll save $34,000+ over 25 years and keep the $9,000 tax credit.
Best lenders: Mosaic, GoodLeap, Dividend, or your local credit union. See our solar loan rates guide.
If You Have Fair Credit (620-660):
You can still get solar loans at 10-15% APR from Sunlight Financial or local credit unions. Even at 12% APR, you'll save $28,000 over 25 years - still far better than PPA/lease.
Alternative: Improve your credit score 40-60 points (3-6 months) to qualify for better rates. Pay down credit cards, dispute errors, wait 3 months and reapply.
If You Have Bad Credit (<620):
Try these before considering PPA/lease:
- • PACE loan: Property-based (no credit requirement), available in 38 states
- • Co-signer: Add family member with good credit to your loan application
- • Credit union: More flexible underwriting, relationship-based lending
- • Improve credit first: Wait 6-12 months, boost score 50-100 points, then get loan
See our guide: Solar Financing with Bad Credit.
Only Consider PPA/Lease If:
You've exhausted every other option AND you meet these criteria:
- • Can't qualify for solar loan at ANY rate (even 20%+ APR)
- • Can't get PACE loan (not available in your state)
- • No co-signer available
- • Current electricity rate is high ($0.20+/kWh)
- • Plan to stay in home for full 20-25 year contract
- • Understand you'll save 50% less than buying
Even then, it may be worth waiting 12 months to improve your credit and qualify for a loan. The extra savings are substantial.
Frequently Asked Questions
What's the difference between a solar PPA and lease?
Solar PPA: You pay per kilowatt-hour (kWh) the panels produce (e.g., $0.14/kWh). Your bill varies based on production. Solar Lease: You pay a fixed monthly amount (e.g., $150/month) regardless of production. Both involve $0 down, company ownership, 20-25 year contracts, and annual escalators (1-3%). PPAs are more common and slightly better because you only pay for actual production, but both are poor options compared to buying with a loan.
Can I cancel a solar PPA or lease early?
Yes, but it's expensive. Options to exit:
- • Buyout: Pay 85-95% of remaining contract value (often $20,000-30,000)
- • Transfer to new homeowner: When you sell (they must qualify)
- • Move fee: Some allow transferring system to new home for $500-1,500
Early termination fees are typically very high - read your contract carefully. Most homeowners feel trapped by these agreements.
Do solar PPAs or leases include battery storage?
Rarely. Most solar PPAs and leases are panels-only. Adding battery storage requires a separate agreement and additional monthly cost ($40-100/month). You also don't own the battery and face the same transfer/buyout issues when selling. If you want solar + battery, buying is the only realistic option - you can finance both together and keep all federal tax credits (30% for solar + 30% for battery, up to $11,000+ total).
What happens at the end of a solar PPA or lease term?
After 20-25 years, you typically have three options:
- • Renew contract: Extend for another 5-10 years (company may raise rates)
- • Purchase system: Buy it at "fair market value" (often $5,000-10,000 for 20-year-old panels)
- • System removal: Company removes panels at no cost (you're back to utility power)
Compare this to buying: After 20 years, you own the system outright and enjoy free electricity. Panels still produce 85-90% of original output and can last 35-40 years.
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Related Resources
Solar Loan Rates Guide
Compare APR rates from top solar lenders (4.99-20% depending on credit)
Bad Credit Solar Financing
Options for credit scores below 650: PACE, co-signers, credit unions
Solar Panel Cost Guide
Average prices by system size and how to avoid overpaying
30% Federal Solar Tax Credit
How to claim $9,000+ in tax credits when you buy solar
Sources & Methodology:
- PPA/lease rates from Sunrun, Vivint Solar, Tesla, and regional solar companies (2024-2025)
- Solar loan data from EnergySage, National Renewable Energy Laboratory (NREL)
- Home value impacts from Zillow and Lawrence Berkeley National Laboratory solar home studies
- Cost savings calculations assume $0.16/kWh utility rate, 3% utility inflation, 2% PPA/lease escalator
- Federal tax credit information from IRS.gov and Form 5695 instructions
- Contract terms from actual PPA/lease agreements (Sunrun, Vivint, SunPower)