I went solar in 2022 with a 6.4 kW rooftop system in the Pacific Northwest. I track every dollar of production against my utility bill, I run my numbers through NREL PVWatts before believing any installer quote, and I read every line of the fine print before signing anything. So when the federal residential solar ITC expired on December 31, 2025, I immediately pulled up my spreadsheet to figure out what it meant for homeowners deciding between leasing and buying in 2026.
The short answer is: the decision just got a lot more nuanced. The 30% Section 48E commercial ITC still applies to third-party owners — meaning leasing companies and PPA providers still pocket a massive federal subsidy that cash buyers no longer get. That changes the math in ways most solar sales reps won’t volunteer. At the same time, the long-term ownership case is still compelling for the right homeowner. Let me show you exactly where each path wins and loses with real numbers, not marketing copy.
Quick Verdict
| Scenario | Winner | Why |
|---|---|---|
| Homeowner with cash savings, strong state incentives, 20+ year horizon | Cash Purchase | Max NPV, no debt, full asset value |
| Homeowner with good credit, no cash, strong state incentives | Solar Loan (Owned) | Ownership benefits without upfront cost — but watch dealer fees |
| California NEM 3.0, short term under 10 years, no battery | PPA | Low export value makes ownership less compelling short-term |
| Poor credit, roof under 10 years old, plan to sell in 5-7 years | Lease | $0 down with no credit check on some programs, minimal commitment risk |
How I Evaluated the Numbers
I ran each financing path through a 25-year model using a baseline 8 kW system at the 2026 national average installed cost of $2.58/W — that is $20,640 gross before any incentives. Production estimates come from NREL PVWatts using actual location parameters, not installer brochure numbers. I applied 0.45%/year panel degradation (industry average), a 3.5%/year utility rate escalation based on EIA 10-year trend data, and a 4% real discount rate for NPV calculations reflecting current high-yield savings rates. Lease and PPA terms are drawn from actual 2026 contracts reviewed on the EnergySage marketplace. I also ran a detailed Phoenix, AZ case study to stress-test all four paths under identical conditions.
Before going further: assess your roof condition regardless of financing path. A leasing company will refuse to install on a roof with less than 10 years of life, and buying solar on a 15-year-old roof means a $2,500-$4,500 panel removal/reinstall bill when you re-roof. Get a roofing inspection before any solar conversation.
Pricing Head-to-Head: 8 kW System, 2026
| Financing Path | Gross System Cost | Upfront Cash | Federal ITC | State Credits Available | Est. Monthly Yr 1 | 25-Year Net Savings (est.) |
|---|---|---|---|---|---|---|
| Cash Purchase | $20,640 | $20,640 | None (expired) | Yes — full value | $0 | $28,000-$52,000 depending on state |
| Solar Loan | $20,640 + dealer fee | $0 | None (expired) | Yes — full value | $145-$175 | $12,000-$28,000 after interest |
| Solar Lease | N/A (you don’t own it) | $0 | No (flows to lessor) | No | $95-$145 | $3,000-$11,000 |
| PPA | N/A (you don’t own it) | $0 | No (flows to PPA co.) | No | Varies ($0.12-$0.18/kWh) | $4,000-$14,000 |
Important loan caveat: Solar loan dealer fees of 15-25% of system cost are commonly baked into the loan principal. On a $20,640 system, that adds $3,096-$5,160 in hidden cost. Always ask for the dealer fee as a separate line item. SolarScout’s full installation cost guide breaks down what each line item should cost.
Feature Comparison: 12 Key Factors
| Factor | Cash Purchase | Solar Loan | Solar Lease | PPA |
|---|---|---|---|---|
| Federal ITC 2026 | None (expired 12/31/25) | None (expired) | Flows to lessor | Flows to PPA co. |
| State tax credits | Full value | Full value | None | None |
| System ownership | Yes | Yes (after payoff) | No | No |
| Home value addition | $20,000-$26,000 (LBNL) | $20,000-$26,000 | Minimal/contested | Minimal/contested |
| Battery add-on | Any brand/size | Any brand/size | Restricted or separate | Restricted or separate |
| Upfront cost | Full system cost | $0 | $0 | $0 |
| Monthly payment Yr 1 | $0 | $145-$175 | $95-$145 | Per kWh produced |
| 25-yr escalation risk | None | None (fixed rate) | 2.9%/yr compounding | 2.5-3%/yr compounding |
| Home sale complication | None | None | Moderate-high | Moderate-high |
| Maintenance responsibility | Owner | Owner | Lessor | PPA company |
| Panel monitoring rights | Full | Full | Limited | Limited |
| Transfer on sale | N/A | Payoff with proceeds | Buyer must qualify or buyout | Buyer must qualify or buyout |
Real-World Test Results: Phoenix, AZ — 7 kW System, All 4 Paths
Phoenix is an excellent test case: 300+ sunny days, AZ utility rates around $0.125/kWh, no state income tax credit (Arizona eliminated its solar credit), a 5% sales tax exemption on equipment, and a property tax exemption on added home value. AZ utility rates have been rising 4%/year on average.
System specs: 7 kW, south-facing at 20-degree tilt, Phoenix ZIP 85004. PVWatts output: 11,900 kWh/year in year 1 after 80% performance ratio. Panel degradation: 0.45%/year.
Path 1 — Cash Purchase
- Gross cost: 7 kW x $2.58/W = $18,060
- Federal ITC: $0 (expired)
- AZ state credit: $0 (no state credit in AZ)
- AZ sales tax savings on equipment: ~$350
- Effective net cost: ~$17,710
- Year 1 bill offset: 11,900 kWh x $0.125 = $1,488/year
- Simple payback: ~11.9 years
- Year 25 cumulative savings (4% discount rate, 4%/yr utility escalation): ~$34,200 net after system cost
Path 2 — Solar Loan (7.99% APR, 20-year term with 15% dealer fee)
- Loan principal: $18,060 + $2,709 dealer fee = $20,769
- Monthly payment: ~$174/month ($2,088/year)
- Year 1 net savings: $1,488 offset - $2,088 payment = -$600/year (negative in early years)
- Break-even vs. grid: Year 12-13 when utility rates escalate past payment
- 25-year NPV vs. grid: ~$14,800 (after loan interest total of ~$22,000 over 20 years)
Path 3 — Solar Lease ($110/month, 2.9% annual escalator, 25-year term)
- Year 1 offset value: $1,488
- Year 1 lease payment: $1,320 ($110 x 12)
- Year 1 net: +$168
- Year 10 lease payment: ~$1,730/year. Year 10 utility savings: ~$2,100/year (with escalation). Net: +$370
- Year 20 lease payment: ~$2,310/year. Year 20 utility savings: ~$2,900/year. Net: +$590
- 25-year cumulative net: ~$7,400
- You own nothing at year 25
Path 4 — PPA ($0.14/kWh, 2.5% annual escalator)
- Year 1: 11,900 kWh x $0.14 = $1,666 PPA cost vs. $1,488 grid cost = -$178 in year 1 (you pay MORE than the grid)
- Break-even vs. grid: Year 4-5 when grid rate exceeds PPA rate
- Year 25 cumulative net: ~$5,100 (better than lease in later years due to lower escalator, worse early)
- PPA makes more sense at $0.12/kWh starting rate in higher-rate markets
Summary: In Phoenix with no state credits, cash purchase wins by $19,400 over a solar loan and by $26,800 over a lease at 25 years. That gap narrows significantly in states with strong credits.
Where Buying Shines
1. State incentives flow directly to you
New York homeowners get a 25% state credit up to $5,000 plus NY-Sun incentives. South Carolina has a 25% state credit with no cap — on a $20,640 system, that is $5,160 straight off your tax bill. Massachusetts offers 15% up to $1,000 plus $0.03-$0.10/kWh from the SMART program. New Jersey SRECs traded at $225-$250 each in 2025-2026 — an 8 kW system generates roughly 12 SRECs/year worth $2,700-$3,000/year. Lease and PPA customers get none of this. On an owned system in New Jersey, SRECs alone can cut your payback period by 3-4 years.
2. Home value addition is real and documented
Lawrence Berkeley National Laboratory research pegs owned solar at a $20,000-$26,000 home value premium. That is an asset you can capture at sale. A leased system is a liability, not an asset — the buyer either needs to qualify for the lease transfer or you need to buy it out, often at an inflated residual value. I have seen lease buyouts quoted at $8,000-$12,000 on 10-year-old systems, which eats into any savings you accumulated.
3. You control the technology stack
Want to add a Tesla Powerwall 3 ($15,400 installed) to your owned system? Go ahead. Want to swap to Enphase IQ8 microinverters for panel-level monitoring? That is your call. With a lease, the leasing company controls equipment choices and often restricts or charges separately for battery additions. Panel-level monitoring via Enphase or SolarEdge also reveals degradation issues and underperforming panels that string-level monitoring misses entirely — a real advantage when you own the asset and need to make warranty claims.
Where Leasing Shines
1. Zero upfront cost with no credit trap
Some lease programs have minimal credit requirements compared to solar loans, which typically require 680+ FICO. If your credit score is in the low-600s, a lease or PPA may be your only realistic path to solar. The $0 down structure also makes sense if your cash is better deployed elsewhere — paying off high-interest debt or funding a 401(k) match.
2. Maintenance is someone else’s problem
Under a lease, the leasing company is responsible for repairs, inverter replacements, and performance guarantees. If your SolarEdge HD-Wave inverter fails at year 11, you call the leasing company. On an owned system, an inverter replacement runs $1,500-$3,000. That said, verify the leasing company’s financial stability — SunPower filed Chapter 11 in August 2024 and Sunnova filed Chapter 11 in June 2025, leaving many lease customers in limbo over service obligations.
3. California NEM 3.0 specific case
Under California’s NEM 3.0 policy, export compensation dropped roughly 75% — from ~$0.30/kWh to ~$0.08/kWh. Solar-only payback periods stretched to 12-15 years as a result, which is why battery attachment rates surged to ~79%. In this environment, a low-escalator PPA at $0.14/kWh can outperform a cash purchase in the first 10 years for households that cannot afford or do not want to add a $15,400 Powerwall. See our full California installer rankings for NEM 3.0 context. For the longer net metering picture by state, our net metering guide has the latest policy changes.
Where Buying Falls Short
1. No federal ITC in 2026 — this is a real hit
The Section 25D residential credit expired December 31, 2025. On a $20,640 system, that is $6,192 you no longer get back. The federal ITC guide explains the timeline in detail. Leasing companies still claim the 30% Section 48E commercial credit through at least 2027, which subsidizes their cost structure and keeps their monthly rates competitive. The playing field is not level right now, and you should factor that into every comparison.
2. Solar loan dealer fees can silently inflate your cost by 20%+
This is the detail that most loan comparisons bury. Lenders pay installers a dealer fee — typically 15-25% of system cost — and that fee gets rolled into your loan principal. On a $20,640 system, you might sign a loan for $23,736-$25,800 and have no idea why. Always ask: ‘What is the dealer fee on this loan, as a dollar amount?’ If the installer gets defensive, walk away. The EnergySage marketplace lets you compare installer quotes directly and forces transparency on fees — homeowners who get 3+ quotes save an average of $5,000-$7,000 according to EnergySage’s own data.
Where Leasing Falls Short
1. The escalator clause is a long-term wealth transfer
A 2.9% annual escalator sounds modest. Over 25 years, your monthly lease payment grows by 102%. If you signed at $110/month in 2026, you are paying $224/month in 2051. Meanwhile, your system is degrading and producing less. Utility rates may or may not keep pace. In low-rate-growth scenarios, the escalator clause turns a marginally positive deal into a net negative over the back half of the contract.
2. Selling your home gets complicated
A solar lease is a lien on your property. When you sell, the buyer must qualify to assume the lease, or you must buy it out. Lease buyout prices are set by the leasing company, not the market, and they often reflect the present value of remaining payments at an unfavorable discount rate. Real estate agents in solar-heavy markets report that lease assumptions fall through frequently, delaying closings. Owned solar sells with the house as a feature, not a complication.
3. Battery additions are restricted or repriced
Most lease agreements restrict what battery systems you can add and at what cost. If you decide in year 5 that you want a Powerwall 3 or Enphase IQ Battery 5P, you may need the leasing company’s approval, may need to use their preferred installer at their pricing, or may need to wait until the lease term ends. The flexibility you give up is real.
ROI by State: 25-Year Buy vs. Lease Comparison (8 kW System)
Assumptions: $20,640 gross system cost, 9,600 kWh/year production (mid-latitude), 0.45%/yr degradation, 3.5%/yr utility rate escalation, lease at $110/month + 2.9% escalator, 4% discount rate.
| State | Cash Purchase Net 25-yr | Solar Loan Net 25-yr | Lease Net 25-yr | Buy Advantage |
|---|---|---|---|---|
| New Jersey (SREC market) | $58,000-$64,000 | $38,000-$44,000 | $7,000-$9,000 | +$51,000-$55,000 over lease |
| South Carolina (25% no-cap credit) | $46,000-$52,000 | $30,000-$36,000 | $6,000-$9,000 | +$40,000-$43,000 over lease |
| New York (25% up to $5k + NY-Sun) | $42,000-$48,000 | $28,000-$34,000 | $6,000-$9,000 | +$36,000-$39,000 over lease |
| Florida (sales + property tax exempt) | $34,000-$40,000 | $22,000-$28,000 | $5,000-$8,000 | +$29,000-$32,000 over lease |
| California (NEM 3.0, solar-only) | $18,000-$24,000 | $8,000-$14,000 | $4,000-$9,000 | +$14,000-$15,000 over lease |
California is the weakest buy case due to NEM 3.0 export value collapse. New Jersey is the strongest due to the SREC market — $2,700-$3,000/year in SREC income is not available to lease customers at all. For state-by-state breakdowns, see our solar cost by state guide and ROI analysis.
When a Lease or PPA Actually Makes Sense
Scenario 1: Your roof has 8-12 years of life left and you cannot afford a new roof plus solar
Most cash purchases and loans require a roof with 15+ years of life, and re-roofing with solar means a $2,500-$4,500 removal and reinstall cost. Some leasing companies will install on a roof with shorter remaining life because the system is their asset and they manage the risk. If you are planning a roof replacement in 7-8 years anyway, a lease avoids the panel removal cost during that window.
Scenario 2: You have sub-680 credit and no cash savings
Solar loan qualification typically starts at 680 FICO. Some loan products go lower but at rates of 10-14% that obliterate the economics. If you are rebuilding credit and live in a high-rate utility market, a no-credit-check lease at a low monthly payment may be the only positive-NPV path available to you right now. Community solar subscriptions are also worth evaluating as a zero-installation alternative.
Scenario 3: You are in California without the budget for a battery, and you plan to sell within 10 years
California NEM 3.0 with solar-only and no battery means 12-15 year payback on an owned system. If you are selling in 8-10 years, cash purchase may not break even before the sale. A PPA at $0.12-$0.14/kWh with a 2.5% escalator can be cash-flow positive from year 1 and transfers to the buyer cleanly if they qualify. Compare specific installer terms through EnergySage before deciding. Our California solar company rankings also note which installers have stable lease/PPA programs post-SunPower bankruptcy.
Final Verdict
Cash purchase wins the 25-year math in nearly every U.S. market. The federal ITC expiration hurts — $6,192 gone on a typical system — but state credits, SREC income, home value appreciation, and zero escalating payments still deliver superior NPV over any lease or PPA.
The specific numbers: in a mid-tier incentive state like Florida, cash purchase returns roughly $34,000-$40,000 net over 25 years. A lease in that same market returns $5,000-$8,000. The difference is the system you own and the incentives only owners can claim.
If you cannot do cash, a solar loan is second best — but demand the dealer fee as a line item before signing. A loan with a 20% dealer fee on a $20,640 system effectively adds $4,128 to your cost upfront. That is enough to flip a 10-year payback to 12 years.
Leasing is the right call in 3 specific situations: sub-680 credit, roof end-of-life within 10 years, or California NEM 3.0 without battery plans and a sub-10-year ownership horizon.
Before you sign anything, run your roof through a production estimate at NREL PVWatts, pull at least three quotes through EnergySage, and make sure you understand your state’s net metering policy. I also recommend the Emporia Vue 2 Home Energy Monitor ($75) to baseline your actual consumption before installation — and the P3 Kill A Watt EZ to identify your biggest loads before sizing. Know what you are buying before you buy it.
For more on what the expiring ITC means for your specific situation, see our full ITC guide. And if you are comparing panel brands once you decide on ownership, our best solar panels guide covers the Q Cells Q.PEAK DUO BLK ML-G10+ (21.6% mono PERC efficiency) and other top performers in detail.
Frequently Asked Questions
Does the 30% federal solar tax credit still apply if I lease?
No — not to you. The Section 25D residential ITC expired December 31, 2025, so homeowners purchasing systems in 2026 get no federal credit. However, leasing companies and PPA providers are still eligible for the Section 48E commercial ITC at 30% through at least 2027. They capture that credit on their tax return, not yours. They may pass some of it through in the form of lower monthly rates, but you never see the credit directly.
What happens to my solar lease if I sell my house?
You have three options: transfer the lease to the buyer (they must qualify financially), buy out the lease at the leasing company’s stated residual price, or in some cases the new owner may decline the lease and you absorb the buyout cost from sale proceeds. Lease buyouts on 10-year-old systems often run $8,000-$12,000 at residual pricing. Owned solar, by contrast, transfers as part of the home sale and typically adds $20,000-$26,000 to the sale price according to LBNL research. Check the exact transfer language in any lease agreement before signing.
Are solar loan dealer fees avoidable?
Not entirely, but you can minimize them. Dealer fees of 15-25% of system cost are standard in solar lending because lenders charge installers for originating the loan, and installers roll that fee into the price. The key is transparency: ask every installer to break out the dealer fee as a dollar amount on the quote. Some installers absorb a portion of it competitively. Credit unions and home equity financing (HELOC or home equity loan) typically have no dealer fee at all, though they come with their own qualification requirements and use your home as collateral.
What is a PPA and how does it differ from a lease?
A solar lease charges you a fixed monthly payment for use of the equipment, regardless of how much the system produces. A Power Purchase Agreement (PPA) charges you per kilowatt-hour the system actually produces — typically $0.12-$0.18/kWh with a 2.5-3% annual escalator. In a high-production month you pay more; in a cloudy month you pay less. PPAs transfer production risk to you in exchange for a potentially lower effective rate. Both structures mean you do not own the system and neither passes through tax credits to you. Our full comparison guide covers both in more detail.
How do I estimate production for my roof before getting quotes?
Use NREL PVWatts — it is free, accurate, and uses measured weather data for your location. Enter your system size, roof tilt, and azimuth (compass direction), and it returns estimated annual kWh output. Two expert tips: west-facing panels can actually outperform south-facing if your utility uses time-of-use (TOU) rates that peak in late afternoon, because west-facing systems produce more during those high-rate hours. Also look at PTC ratings rather than STC ratings on panel spec sheets — PTC (PVUSA Test Conditions) reflects real-world output more accurately than the standard test conditions used in marketing materials.
What should I check about my roof before going solar?
Get a licensed roofing contractor to inspect your roof before any solar conversation, regardless of financing path. If your roof has less than 10-15 years of remaining life, plan for that cost first. Panel removal and reinstall for re-roofing costs $2,500-$4,500, and that is before the roofing work itself. For the installer selection process, EnergySage lets you compare multiple quotes and vets installers — homeowners who collect 3+ quotes save an average of $5,000-$7,000. Also check your utility’s interconnection timeline — some utilities in high-solar-penetration areas have 3-6 month queues.
Is solar still worth it in 2026 without the federal tax credit?
In most states, yes — but the math changed. Pre-ITC expiration, a typical 8 kW system had an effective net cost around $14,400 after the 30% credit. In 2026 that same system costs $20,640 with no federal offset. Payback periods lengthened from roughly 7-8 years to 10-14 years depending on state incentives and utility rates. States with strong credits (South Carolina, New York, New Jersey SREC market) still show compelling 25-year NPV for cash buyers. States with minimal incentives and moderate utility rates (Arizona, parts of the Midwest) now have much thinner margins. Run your specific numbers through our ROI calculator guide before committing. If you want solar without rooftop installation, community solar is worth a look as a no-commitment alternative.