Solar Lease vs. Buy vs. PPA

The three options

• Cash purchase: highest upfront cost, no interest, you own the system and every dollar of savings from day one.
• Loan: little or no upfront cost, you own the system, but you pay interest and the loan payment eats into your monthly savings until it's paid off.
• Lease or PPA: little or no upfront cost, a company owns the system and either charges you a flat monthly lease payment or a per-kWh PPA rate for what it produces — usually lower than your old utility bill, but you never build equity in the system.

2026 tax credit rules

The 30% federal tax credit for homeowner-purchased solar and battery systems (§25D) does not apply to any system whose installation is completed after December 31, 2025. What matters is when installation finishes, not when you signed the contract or paid the deposit. If your system is installed and operating on or before Dec 31, 2025, you can still claim the credit; if it's finished in 2026 or later, you cannot.

Unlike §25D, the federal credit for business-owned clean electricity property (§48E) was NOT eliminated by the 2025 law, though it now has new sourcing rules and a sunset date. This credit still applies to commercial solar projects and to third-party-owned residential systems (solar leases and PPAs), because in those deals a company — not the homeowner — legally owns the equipment as business property. That means a homeowner who leases solar or signs a PPA in 2026 gets no credit directly on their own tax return, but the leasing/PPA company may still claim up to 30% under §48E and can choose to pass some of that savings through as a lower monthly lease or PPA rate. This pass-through is a business decision by the provider, not an automatic or guaranteed discount, and GoSolarIndex should not claim a specific pass-through percentage without a provider-specific source.

A worked example

Say you're quoted a flat $1,200/year lease payment against California's real average annual utility bill of$1,977 (escalating at 2.9%/year, a common lease-comparison default). This is an illustrative quote, not a market-average lease price we've verified — always compare against your own quote.

The lease payment stays flat while the utility bill escalates, so the gap — your savings — grows every year. Try the solar calculator to compare against buying with your own numbers.