The four ways to pay for solar
There are four real options: pay cash, take out a loan, sign a lease, or sign a PPA (power purchase agreement). Each has very different long-term economics, and the right choice depends on your tax situation, cash flow, and how long you plan to own the home.
Option 1: Cash
Paying cash is the cleanest option. No interest, no dealer fees, no escalators, no third-party ownership. You own the system outright on day one. A $25,000 system in 2026 means $25,000 out of pocket (less any state/utility incentives). Cash wins on lifetime savings, but payback is 10–14 years in most states without a federal credit pass-through.
Option 2: Solar loan
A solar loan lets you finance the system and own it. Typical APRs in 2026 range from 6.99% to 9.99%, sometimes higher. Watch for "dealer fees" — many low-APR loans bake a 20–30% fee into the cash price, meaning you're paying for the rate buy-down anyway. Always compare the cash price to the financed price; the difference is the dealer fee.
Watch for re-amortizing loans that require a large principal paydown by month 18 — that structure assumes a federal tax credit refund the homeowner won't actually receive on a 2026 cash/loan purchase. Some lenders are still selling these legacy structures. Read your loan documents carefully and ask about re-amortization triggers.
Option 3: Solar lease
With a lease, a third-party solar company owns the system and you pay them a fixed monthly amount to use the electricity. Because they own the system, they claim the commercial ITC and may pass some of that savings through to you in lower lease payments. This is why leases became more competitive in 2026 — they retained federal incentive access while cash and loans lost it.
Downsides of leases: most include 1.9–3.9% annual escalators (your payment goes up every year), they complicate home sales, and the lease company gets the long-term value of the system. Always demand a 0% escalator if you go this route. See loan vs lease vs PPA for a deeper comparison.
Option 4: PPA (power purchase agreement)
A PPA is similar to a lease, but instead of paying a fixed monthly amount you pay a $/kWh rate for the power the system produces. If production is low (cloudy year), you pay less; if production is high, you pay more. PPAs typically include the same kind of escalator as leases.
2026 comparison table
| Option | Ownership | Federal incentive | Best for |
|---|---|---|---|
| Cash | You | State / utility only | Maximum lifetime savings |
| Loan | You | State / utility only | Spreading cost without losing ownership |
| Lease | Solar company | Commercial ITC (passed through) | $0 down with no tax liability needed |
| PPA | Solar company | Commercial ITC (passed through) | Pay-as-you-produce, lowest upfront |
What to ask any solar lender
Before signing any solar financing, get these in writing: cash price, financed price, dealer fee amount, APR, full amortization schedule, total interest, prepayment penalties, and any re-amortization triggers. If a lender won't put any of those in writing, walk away.
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Analyze My Financing →Frequently asked questions
What federal solar tax credits are available in 2026?
The commercial ITC (Section 48E) applies to third-party-owned systems — leases and PPAs — and installers may pass some of that savings through to you. Cash and loan purchases don't qualify for direct federal credit pass-through in 2026. See our tax credit guide.
Does cash still beat financing?
Yes, on lifetime savings. Cash has no interest, no dealer fees, no escalators. Financing only wins if the alternative is not going solar at all.
Are leases worth it now that they have the only federal incentive?
Sometimes. A lease with 0% escalator and a real pass-through of the commercial ITC can compete with a cash purchase on monthly savings. But you don't own the system, and lifetime value is much lower.
What's the average solar APR in 2026?
6.99–9.99% for prime credit, higher for lower scores. "0.99% APR" offers almost always have a 25%+ dealer fee baked in.