Solar Financing Made Simple: Cash, Loans, Leases, and PPAs Compared

One of the most common questions we hear is: "How should I pay for solar?" The good news is there's a financing option for virtually every situation. Whether you prefer to own your system outright, spread payments over time, or pay nothing upfront, understanding your options helps you make the best choice for your circumstances.

The Four Main Ways to Go Solar

Let's break down each financing option with honest pros and cons:

Option 1: Cash Purchase

Paying cash means buying your solar system outright—just like purchasing a car or home appliance.

How It Works

• Pay full system cost at installation
• Own the system immediately
• Claim federal tax credit on next tax return
• Receive all energy savings directly

Typical Numbers

• System cost: $25,000
• Federal tax credit (30%): -$7,500
• Net cost: $17,500
• Annual savings: $2,000
• 25-year savings: $60,000+
• Net benefit: $42,500+

Pros

• Maximum lifetime savings
• Best return on investment
• Full ownership from day one
• No monthly payments or interest
• Increases home value immediately
• Simplest transaction

Cons

• Large upfront capital required
• Money is tied up in the system
• Must have tax liability to use federal credit

Best For

Homeowners with available savings who want maximum financial return and own their home long-term.

Option 2: Solar Loan

Solar loans let you finance your system purchase, spreading payments over time while still owning the system and capturing tax benefits.

How It Works

• Borrow full system cost from a lender
• Make monthly payments over 10-25 years
• Own the system immediately
• Keep the federal tax credit (can use to pay down loan)
• Receive all energy savings

Typical Numbers (7-year loan at 6%)

• System cost: $25,000
• Monthly payment: $365
• Monthly savings: $170
• Tax credit (year 1): $7,500
• After applying credit to loan: Reduced balance and payments

Pros

• No large upfront payment
• Own the system and build equity
• Keep the federal tax credit
• Often cash flow positive after tax credit applied
• Increases home value
• Fixed payment protects against rate increases

Cons

• Interest costs reduce total savings
• Monthly payment obligation
• Requires credit qualification
• May be cash-flow negative early in loan term

Best For

Homeowners who want ownership benefits without large upfront payment and have good credit.

Option 3: Solar Lease

With a solar lease, a third party owns the system on your roof, and you pay a fixed monthly fee to use the electricity it produces.

How It Works

• Solar company installs and owns the system
• You pay fixed monthly lease payment
• Company handles maintenance and monitoring
• Lease typically runs 20-25 years
• May include purchase option at end

Typical Numbers

• Upfront cost: $0
• Monthly lease payment: $100-150
• Monthly utility savings: $150-200
• Net monthly savings: $50-100
• 25-year savings: $15,000-30,000

Pros

• No upfront cost
• No maintenance responsibility
• Predictable monthly payment
• Immediate savings (if structured correctly)
• No ownership complications

Cons

• You don't own the system
• Tax credit goes to leasing company
• Lower total savings than ownership
• Can complicate home sale
• No home value increase
• Long-term contract commitment
• Escalator clauses may increase payments over time

Best For

Homeowners who want simplicity and can't use tax credits, prioritize avoiding maintenance hassles.

Option 4: Power Purchase Agreement (PPA)

Similar to a lease, but instead of fixed monthly payments, you pay per kilowatt-hour of electricity the system produces.

How It Works

• Solar company installs and owns the system
• You purchase electricity at agreed rate (typically below utility rate)
• Rate may be fixed or include annual escalator
• Company handles all maintenance
• Contract typically 20-25 years

Typical Numbers

• Upfront cost: $0
• PPA rate: $0.12/kWh (vs. $0.18 utility rate)
• Savings per kWh: $0.06
• Annual production: 10,000 kWh
• Annual savings: $600

Pros

• No upfront cost
• Pay only for electricity produced
• Guaranteed lower rate than utility
• No maintenance responsibility
• Simple to understand—just electricity

Cons

• Lowest total savings of all options
• You don't own the system
• No tax credit benefit
• Can complicate home sale
• Escalator clauses may erode savings over time
• Long contract commitment

Best For

Homeowners focused on immediate bill reduction with no upfront cost, who don't prioritize maximum savings.

Side-by-Side Comparison

*After 30% federal tax credit

Which Option Is Right for You?

Choose Cash If:

• You have available savings
• You want maximum return on investment
• You have federal tax liability
• You plan to stay in your home long-term

Choose Loan If:

• You prefer to keep savings liquid
• You have good credit
• You have federal tax liability
• You want ownership benefits without large upfront payment

Choose Lease/PPA If:

• You have limited tax liability
• You want zero upfront cost
• You prefer someone else to handle maintenance
• You're okay with lower total savings

Questions to Ask Any Solar Provider

Before signing anything, get clear answers to:

1. What's the total cost over the life of the agreement?
2. Are there any escalator clauses that increase payments?
3. What happens if I sell my home?
4. What's included in maintenance/warranty?
5. Can I buy out the lease/PPA early? At what cost?
6. What's the equipment quality and warranty?

Find Your Best Option

At Synergic, we work with multiple financing partners to offer options that fit your situation. Our goal is helping you go solar in the way that makes the most sense for you—not pushing a particular financing product. Check out our residential and commercial programs.

Get your free quote or contact us today for a consultation. We'll walk through your options and help you find the perfect fit for your solar journey!