Solar Loan vs Lease vs PPA: Total Cost Against Cash

On the same $24,000 roof, the lease in the worked example below costs $60,454 over 25 years and the cash purchase costs $24,000. Under the slower of two utility-rate histories tested, that lease finishes $2,071 behind simply staying on the utility bill, while the cash buyer finishes $34,382 ahead. Same panels. Same sunshine. The only thing that changed was the contract.

Every lease, loan, and PPA figure in this post is illustrative. None of it is a quote from a real installer, and the point is not that leases are bad. The point is that four contract structures produce four different streams of payments, and they can only be compared once each stream is laid against the same bill savings, over the same years, with the same escalator on the utility side. Proposals rarely do that. They show the one structure being sold.

The line California makes every contract fill in

California is the useful place to start, because its regulators already forced the comparison onto paper. The one-page Solar Energy System Disclosure Document that the Contractors State License Board requires on the front of every residential solar contract has one sentence with a blank in it: "The TOTAL COST for the solar energy system (including financing and energy / power cost if applicable) is: $" (CSLB, Solar Energy System Disclosure Document, the December 2020 file that CSLB's solar page still links, read 22 September 2026).

Including financing. Including energy cost. For a PPA, that blank has to hold every kilowatt-hour you will buy over the term.

Behind the cover page sits a seven-page Supporting Information form, developed by the CSLB and the CPUC under Business and Professions Code section 7169. It makes the seller fill in exactly one of three blocks (CSLB, Solar Energy System Supporting Information, Version 2, read 22 September 2026):

Two details in that form do more work than they look like they do. The cash and loan total is stated before credits, which closes the old trick of printing a "net cost" with 30% already subtracted. And the bill-savings estimate further down the form must be calculated "with an assumption of no rate escalation," with production from PVWatts under CPUC Resolution E-5364. So on the California form, the savings figure is flat while the lease and PPA escalators are not. Keep that asymmetry in mind; it is the whole story of the lease below.

Outside California there is no standard form, but the Federal Trade Commission's consumer page lists the same fields to ask for in writing: the monthly payment (lease) or per-kWh price (PPA), whether payments rise, "who will get the tax credits, other incentives, and any RECs," and the cost of renewing, buying, or removing the system at the end of the term (FTC, Solar Power for Your Home, read 22 September 2026). If a seller in another state won't put those in writing, you cannot run the comparison below, which tells you something too.

Who owns the panels decides who could ever claim a credit

Cash and loan buyers own the system. Lease and PPA customers do not. For most of the last two decades that single fact moved thousands of dollars, and in 2026 it still matters, just differently.

The homeowner's credit is gone. 26 U.S.C. §25D "shall not apply with respect to any expenditures made after December 31, 2025," so a system finished this year gets no federal credit whether it was paid in cash or borrowed. That is the baseline this whole site works from, and it means the cash and loan columns below carry no credit at all.

The owner of a leased or PPA system is a business, and businesses claim under a different section: the clean electricity investment credit, 26 U.S.C. §48E. The 2025 budget law (P.L. 119-21) added §48E(e)(4), which says the section "shall not apply to any qualified property placed in service by the taxpayer after December 31, 2027, which is part of an applicable facility," with solar-electric facilities named as applicable facilities (26 U.S.C. §48E, via Cornell LII, read 22 September 2026). The IRS's beginning-of-construction notice explains the timing: that cutoff applies to facilities "the construction of which begins after July 4, 2026" (IRS Notice 2025-42, read 22 September 2026). Projects begun earlier have a longer runway.

One more clause in the same section is easy to misread. §48E(i) is headed "Denial of credit for expenditures for wind and solar leasing arrangements," but it points only to paragraphs (1) and (4) of §25D(d), which are solar water heating and small wind. Rooftop solar electric is paragraph (2). As the text reads on 22 September 2026, a leased solar-electric array is not caught by that clause. If a lease is being sold to you partly on the strength of the lessor's tax position, double-check the current rule at the IRS rather than taking this paragraph or the salesperson's word for it.

What none of this tells you is whether any of the owner's credit reaches your price. The FTC puts it gently: "Some PPA providers may charge you a lower rate for power because they get the tax credits and incentives." May. Nothing on the California form, or on any disclosure this site has read, shows the lessor's credit or how much of it was passed through. You see a monthly payment and an escalator. Compare those, not the story around them.

Loans have a 2026 wrinkle of their own. The CFPB's August 2024 Issue Spotlight describes solar loans built to "re-amortize at a higher monthly payment amount at the 19th month of the loan term" unless the borrower prepays roughly 30% of principal, "the current size of the federal Investment Tax Credit" (CFPB, Issue Spotlight: Solar Financing, read 22 September 2026). A loan document written that way assumes a refund that no longer exists for a 2026 install. Search the note for "re-amortization," "prepayment," or "month 18/19" before signing.

The worked roof and its inputs

This is the same system the site uses in its escalator and degradation walkthrough, so the numbers can be checked against each other.

System            8.0 kW DC, cash price $24,000 ($3.00/W)
Year-one output   11,200 kWh
Value per kWh     $0.18        placeholder - use your own marginal rate
Degradation       0.5% / yr    NREL 2012 literature median
Horizon           25 years

Utility escalator, two settings (EIA Table 5.3, U.S. residential average):
  3.63% / yr   2016 -> 2025
  1.71% / yr   2016 -> 2021

Bill savings in year t = 11,200 x 0.995^(t-1) x 0.18 x (1+e)^(t-1)

The $0.18 is not a national average and should not survive contact with your own bill; the second of the four numbers on your electric bill is what replaces it. The four contracts, all assumed terms rather than quotes:

Cash    $24,000 on day one. Owner carries repairs after warranties.
Loan    $24,000 at 7.99%, 240 months, no dealer fee.
        Payment = 24,000 x r / (1 - (1+r)^-240), r = 0.0799/12
                = $200.60 / month, $48,143 over 20 years
Lease   $140 / month in year one, 2.9% escalator, 25-year term
        Year t payment = 1,680 x 1.029^(t-1) per year
PPA     $0.135 / kWh in year one, 2.9% escalator, 25-year term,
        charged on every kWh the array produces
        Year t payment = 11,200 x 0.995^(t-1) x 0.135 x 1.029^(t-1)

The 2.9% escalator sits inside the 1% to 3% range the CPUC's guide calls typical ("Be cautious of entering into a contract with an escalator higher than that," CPUC, Solar Consumer Protection Guide, read 22 September 2026). The CFPB reports PPA escalators from 1% to 5%, so 2.9% is not an extreme setting. The 7.99% loan rate is the same assumption the dealer-fee post uses for a no-fee loan. The lease and PPA starting prices were chosen to sit below the year-one bill savings of $2,016, the way a real offer would be pitched: the lease starts at $1,680 a year and the PPA at $1,512.

Four totals on one page

Sum 25 years of payments for each contract, sum 25 years of bill savings, and subtract. Nothing is discounted yet.

Read the columns, not just the rows. Cash wins both, and the order of the other three holds: loan, then PPA, then lease. What moves is the size of the gaps. Slow the utility rise from 3.63% to 1.71% and every contract loses $16,209 of savings, which leaves cash still well ahead and pushes the lease below zero.

The loan's total also hides a shape. Payments stop after year 20, so years 21 through 25 are pure savings, $13,111 of them in the 1.71% case. Pay off early and the interest falls; the CFPB notes that solar loans are "typically repaid in 7 to 9 years due to prepayments." Finance the same $24,000 through a loan carrying a 19.32% dealer fee at 2.99% instead, and the principal becomes $24,000 / (1 − 0.1932) = $29,747, the payment $164.83, and the 20-year total $39,559. Lower than the no-fee loan over a full term, higher if you pay it off early. That trade has its own post.

Where the 2.9% escalator overtakes the savings

The lease column is negative for one reason: two escalators racing. Your bill savings grow at the utility's pace minus degradation. The lease payment grows at 2.9% no matter what the utility does.

In year 12 the lease payment passes the savings it was buying, and from then on the customer pays more for the arrangement than the arrangement saves. The cumulative lead peaks in year 11 at about $2,151 and is gone by year 25. At a 3.63% utility rise the savings stay ahead of the lease throughout, which is why the same contract shows +$14,137 in the other column.

The PPA escapes that crossing within 25 years because it started lower. Its per-kWh price still climbs faster than the utility rate: $0.135 becomes about $0.268 by year 25, against $0.18 × 1.0171^24 ≈ $0.270 for the utility. Run the term a year or two longer and it crosses as well.

This is why the California form's flat-rate savings estimate matters. Set it next to an escalating lease payment and you are seeing the lease's worst case, which is honest. Other savings estimates are allowed to escalate. The CPUC's guide page says providers may assume at most 10% a year "as of 2025," while the signature page of its 2026 guide PDF describes the ceiling as the CPUC's own calculated average escalation rate; the two pages do not state the same cap, so ask which one your seller applied. The FTC warns that a company "may estimate how much electricity rates will rise annually" to show you paying less. An escalator on the payment side and a generous escalator on the savings side cancel each other on paper, and the reader never sees the race.

A PPA bills every kWh, including the ones you export

A lease charges for the equipment. A PPA charges for output, and it charges the same rate whether that kilowatt-hour ran your air conditioner or went out to the grid.

Under full retail net metering those two kWh are worth the same to you, so the distinction barely matters. Under net billing it matters a great deal, because exported kWh are credited at an export rate that can be a fraction of retail. Take the worked roof, assume 40% of its output is exported, and use a placeholder export credit of $0.05:

Blended value per solar kWh = 0.60 x 0.18 + 0.40 x 0.05 = $0.128
PPA price per solar kWh     = $0.135

Year one:  value to you   11,200 x 0.128 = $1,434
           PPA bill       11,200 x 0.135 = $1,512
           difference                      -$78

The customer loses money in the first year on a PPA priced 25% below the $0.18 retail placeholder. The export share and credit are placeholders; your own interval data and your utility's export rate set the real ones. The test is the same either way. Compare the PPA's per-kWh price against the value of a solar kWh on your tariff, weighted by how much you will export. Comparing it against the retail rate on your bill answers a different question.

The same blended value hurts cash and loan buyers too. It just does not flip the sign as easily, because their cost per kWh falls every year the panels keep working and a PPA's rises.

Money today versus money in year 20

The totals above treat a dollar in 2050 the same as a dollar now. They are not the same, and the cash buyer is the one who gives up the most money up front. Discount each year's flow at a rate i and the comparison tightens:

Present value = sum over t of  flow(t) / (1 + i)^t

With i set to 4% (a placeholder; use what your cash would otherwise earn, or the rate on debt you would otherwise pay down):

Cash still leads, by a narrower margin, and the PPA now beats the loan in both columns. The lease sits at roughly zero in the 1.71% case: 25 years of contract to break even on the bill.

Push the rate higher and the order breaks. In the 1.71% case at 6%, cash nets +$4,818 against the PPA's +$4,558. At 7%, the PPA passes it: +$4,251 against +$2,133 for cash. That is the honest argument for a third-party contract. If spending $24,000 today means not paying down a 7% debt, the arithmetic really does change, and a proposal that ignores the cost of your money is as incomplete as one that ignores the escalator.

What the four totals leave out

Everything above is payments against savings. Several real costs and protections sit outside that frame, and they pull in different directions.

Repairs and inverter replacement. Cash and loan owners pay for anything outside the manufacturer and workmanship warranties. The CPUC guide notes that lease and PPA providers are generally responsible for "monitoring, maintenance, and repairs." Instead of guessing a repair bill, turn it into a threshold. In the 1.71% undiscounted case, cash leads the lease by $34,382 + $2,071 = $36,453, and the loan leads it by $12,310. That is how much out-of-warranty repair spending the owned system could absorb over 25 years before the lease catches up. Set those figures beside a written inverter-replacement quote for your own system. The loan-versus-lease margin is the thinner one to test.

Production guarantees. Many leases and PPAs guarantee a minimum output; cash systems usually don't. A guarantee is only worth what its shortfall clause pays, and those clauses vary. Read the payment formula, not the headline percentage.

Selling the house. The CPUC guide lists the paths: the buyer assumes the lease or PPA, you keep paying, or you buy out the remaining value, "which could be thousands of dollars." The FTC adds the question of whether the buyer must pass a credit check or pay a transfer fee. The CFPB notes a loan-side version: lenders commonly file UCC liens on the panels, which "can muddy the title." A 25-year total is meaningless if you expect to move in eight. Find the buyout formula in the contract and run it for the year you might sell.

End of term. The CFPB describes the lessor as responsible for removal at the end of a lease; the FTC suggests asking what renewal, purchase, or removal would cost. A lease that ends with a purchase at "fair market value" has an unpriced payment at year 25. Ask for the method, not an estimate.

Roof work mid-term. If the roof needs replacing before the contract ends, somebody has to remove and reinstall the array. Owned systems pay for it themselves. Lease and PPA contracts say who pays, or they don't. Check which.

Copying your own comparison onto one sheet

Every number in the tables came from ten inputs. Nine of them are on your paperwork or your bill:

1. Cash price of the identical system, same equipment list, in writing.
2. Loan: amount financed, rate, term, monthly payment, and any re-amortization clause.
3. Lease: first-year monthly payment, escalator, term.
4. PPA: first-year $/kWh, escalator, term, any upfront payment.
5. First-year production from the proposal, checked against PVWatts.
6. Your marginal rate per kWh and, under net billing, your export credit.
7. The share of output you will export, from interval data if you can get it.
8. Buyout or transfer terms if you sell in year 5, 10, or 15.
9. End-of-term options and their pricing method.

The tenth is the utility escalator. It is the one number nobody can give you, so run the comparison twice, at 1.71% and at 3.63% or whatever range your utility's rate history supports. The structure that stays acceptable in both runs is the one whose total you can live with. Put the four streams into the two formulas above, one row per year, and the table this post printed for a hypothetical roof becomes the table for yours.