Solar Loan vs Lease vs PPA in 2026: Which Saves You More Now?

The solar financing landscape shifted dramatically at the start of 2026. The federal residential clean energy credit under Section 25D — the one that handed homeowners a 30% tax credit on purchased solar systems — expired on December 31, 2025. It was repealed outright by the One Big Beautiful Bill Act with no phase-down period.

That single change reshuffled the entire financing playbook. If you are shopping for solar panels in 2026, the math on loans, leases, and power purchase agreements (PPAs) looks different than it did even six months ago. Here is what you need to know.

The Three Ways to Go Solar in 2026

Before diving into the numbers, a quick refresher on how each option works.

Solar loans let you buy and own the system using borrowed money. You make monthly payments — usually over 10 to 25 years — and own the panels outright once the loan is paid off. Because you own the equipment, any financial incentives flow directly to you. The catch in 2026: the 30% federal credit no longer applies to homeowner-owned residential systems, so your out-of-pocket cost just got significantly higher.

Solar leases are rental agreements. A third-party company owns the panels on your roof, and you pay a fixed monthly fee for the duration of the contract (typically 20 to 25 years). You do not own the equipment or receive any tax benefits directly. The leasing company claims available commercial credits and passes some of those savings through to you as a lower monthly rate.

Power purchase agreements (PPAs) work similarly to leases, but instead of a flat monthly payment you pay a set price per kilowatt-hour of electricity the system generates. If the panels produce more, you pay a bit more that month; if they produce less, you pay less. PPA rates are typically set 10 to 30 percent below your local utility rate.

Why the Tax Credit Sunset Changes Everything

Under the old rules, buying solar with a loan was usually the clear winner for long-term savings. You would spend around $30,000 on a 10 kW system, claim roughly $9,000 back through the 30% federal credit, and own an asset that generated free electricity for 25-plus years.

In 2026, that $9,000 credit is gone for homeowner purchases. The full system cost now sits on your shoulders, which pushes the payback period on a cash or loan purchase from around 6 to 8 years out to 9 to 13 years in most states.

Meanwhile, lease and PPA companies can still claim the 30% commercial investment tax credit under Section 48E of the tax code for systems that begin construction before July 2026 or are placed in service by January 2028. That means the third-party owner still gets the tax benefit — and they pass a portion of those savings along to you through reduced monthly rates or lower per-kWh pricing.

The bottom line: the gap between owning and renting solar has narrowed considerably.

The Numbers Side by Side

Here is how a typical 10 kW residential system might look across all three options in 2026.

Solar Loan (Ownership)

• System cost: $28,000–$32,000
• Federal credit: $0 (expired for homeowner purchases)
• Monthly payment: $180–$250 (depending on APR and term)
• Typical APR: 4.5%–8.0%
• You own the system and all electricity it produces
• Payback period: 9–13 years
• 25-year savings: $35,000–$55,000 (after loan payoff)

Solar Lease

• Upfront cost: $0
• Monthly payment: $100–$170 fixed
• Annual escalator: 0%–2.99% per year
• You do not own the system
• 25-year savings: $15,000–$30,000

Solar PPA

• Upfront cost: $0
• Rate: $0.08–$0.14 per kWh (varies by state and utility)
• Annual escalator: 0%–2.99% per year
• You do not own the system
• 25-year savings: $15,000–$35,000

Ownership still wins on raw 25-year savings, but the advantage has shrunk. And if you are planning to sell your home within the next 10 years, a lease or PPA may actually deliver better real-world returns because you never have to recoup that upfront investment.

When a Loan Still Makes Sense

Solar loans remain the strongest choice if you plan to stay in your home for 12-plus years and want maximum long-term savings. Even without the federal credit, owning a solar system still generates the highest return over the full lifespan of the panels.

You should also consider a loan if your state offers its own solar incentives. Programs like the Massachusetts SMART program, New Jersey SRECs, or the Illinois Adjustable Block Program can significantly offset the loss of the federal credit. Use the Energy Scout incentive finder to see what is available in your area.

Look for loan terms with no dealer fees (which can inflate the effective interest rate by 4 to 8 percentage points), and compare at least three installer quotes. The Energy Scout solar calculator can help you estimate your system size and projected savings.

When a Lease or PPA Is the Smarter Play

Leases and PPAs are more attractive in 2026 than they have been in years. Here is when they make the most sense:

You cannot use the tax credit anyway. Even when the credit existed, you needed enough federal tax liability to claim it. Retirees, low-income households, and anyone with a low effective tax rate often could not fully benefit. Leases and PPAs sidestep this entirely.

You want zero out-of-pocket cost. Both leases and PPAs require no money down. You start saving from month one without taking on a five-figure loan.

You plan to sell within 10 years. The lease transfers to the new owner (most contracts include a transfer clause) or the leasing company removes the system at no cost. You avoid the headache of negotiating solar panel value into your home sale price.

You are in a high-electricity-cost state. In states like California, Connecticut, Massachusetts, or New York, PPA rates often come in well below utility prices, which means meaningful savings from day one.

Watch out for escalator clauses. A PPA that starts at $0.10 per kWh with a 2.99% annual escalator will cost $0.21 per kWh by year 25. Choose a contract with a 0% or low escalator whenever possible — it may start slightly higher, but it protects you long-term.

What About Battery Storage?

Here is one area where the federal incentive picture is muddier. Standalone battery storage installed as a retrofit may still qualify for the commercial ITC through lease or PPA structures. If you are considering adding a home battery for backup or time-of-use savings, bundling it into a lease or PPA could be the most cost-effective path in 2026.

Check the Energy Scout battery advisor to see which battery products fit your home and how financing affects the payback calculation.

Your Next Step

The right financing choice depends on your timeline, your state incentives, and your appetite for upfront investment. Start by running your address through the Energy Scout solar calculator to get a personalized savings estimate. Then use the incentive finder to see what state and local programs can fill the gap left by the federal credit.

Solar still saves money in 2026 — the math just works differently now. Whether you buy, lease, or sign a PPA, the key is making the choice that fits your financial situation.