Solar Lease vs Purchase: Which Is Better in 2025?

TLDR: Purchasing solar (cash or financed) captures the 30% federal tax credit and maximizes lifetime savings. Leasing has zero upfront cost but you don't own the system or get the tax credit. Over 25 years, purchasing saves $30,000-$60,000 more than leasing. Leasing makes sense only if you can't use the tax credit.

The Three Options Explained

Before diving into the numbers, let's understand what each option actually means for you as a homeowner.

Cash Purchase

• Pay full cost upfront ($15,000-$35,000 depending on system size)
• Claim 30% federal tax credit on your next tax return
• Own the system outright from day one
• Maximum lifetime savings—every kilowatt-hour is free after payback
• Adds $15,000-$20,000 to home value according to Zillow research

Sandra in Denver paid cash for her 9.5 kW system in 2023. "The total was $28,500. After the 30% federal credit and Colorado's state incentives, my actual cost was $18,200. My electric bill dropped from $175 to about $12 monthly—just the connection fee. At that savings rate, I'll break even in 9.3 years. Everything after that is pure profit. I'm 58, so I'll enjoy free electricity through retirement."

Solar Loan

• Finance over 10-25 years with $0 down
• Claim 30% tax credit (use toward loan principal or pocket the cash)
• Own the system from day one
• Slightly lower lifetime savings due to interest, but still dramatically better than leasing
• Often "cash-flow positive" from month one—loan payment is less than electricity savings

Marcus and Elena in Sacramento financed their 8.2 kW system through a credit union loan. "We put $0 down. Our loan payment is $142/month for 15 years at 6.8% APR. Our electric bill dropped from $195 to $15. So we're actually saving $38/month from day one while building equity in the system. When we got the $7,200 tax credit, we applied it to the loan principal, dropping our remaining balance significantly. By year 7, the loan will be paid off, and we'll have free electricity for 18+ more years."

Solar Lease/PPA

• No upfront cost—sounds great, but read on
• Monthly payments to leasing company (typically $80-$150)
• Company owns the system on YOUR roof
• No tax credit for you—the leasing company claims it
• Lower total savings over 25 years
• Potential complications when selling your home

The leasing company essentially keeps the best parts of going solar—the tax credit and the long-term value—while you get modest monthly savings.

25-Year Financial Comparison

Let's look at an 8 kW system with $24,000 installed cost in a state with $0.14/kWh electricity:

Option	Upfront Cost	Monthly Cost/Savings	25-Year Total Savings	Net Benefit
Cash purchase	$16,800 (after credit)	+$150 savings	$55,000	$38,200
12-year loan (6%)	$0	+$20 years 1-12, +$150 years 13-25	$55,000	$28,000
20-year loan (5%)	$0	+$45 all years	$55,000	$24,500
Solar lease	$0	+$50 years 1-10, +$20 years 11-25*	$25,000	$10,000

*Lease escalators typically reduce savings over time as payments increase 2-3% annually while utility rates may not keep pace.

Why the Gap Is So Large

The difference between purchasing and leasing comes down to three factors:

1. The tax credit: With purchasing, YOU get the 30% credit ($7,200 on a $24,000 system). With leasing, the company gets it.
2. Ownership value: A purchased system adds $15,000-$20,000 to your home value. A leased system adds nothing—in fact, it may complicate your sale.
3. Long-term costs: After a loan is paid off, electricity is free. Lease payments continue for 20-25 years, often increasing annually.

Tax Credit Implications

The 30% federal Investment Tax Credit (ITC) is the single biggest factor in the lease vs. purchase decision. Here's what you need to know:

How the Tax Credit Works

The ITC reduces your federal income tax liability by 30% of your solar system cost. For a $24,000 system, that's $7,200 off your taxes.

Key points:

• It's a tax credit, not a deduction—it directly reduces taxes owed, dollar for dollar
• You must have sufficient tax liability to use it (owe at least $7,200 in federal taxes that year)
• Unused credit can be carried forward to future tax years
• The credit applies to the total installed cost, including equipment, labor, and permitting

Who Can't Use the Tax Credit?

Some homeowners genuinely can't benefit from purchasing due to their tax situation:

• Retirees with minimal taxable income
• Self-employed individuals with aggressive deductions
• Those with low income who pay little federal tax
• People who already have large credits (like EV credits) maxing out their liability

James in Tucson is retired and lives on Social Security plus a small pension. "My federal tax liability is about $2,800 per year. Even with carryforward, it would take me 3+ years to use the full credit—and I'm 72. Leasing actually made sense for me because I'll still save $40/month without worrying about the tax complexity."

The December 31, 2025 Deadline

The current 30% residential tax credit expires for home solar installations on December 31, 2025. After that date:

• The credit drops to 22% in 2026 for any remaining projects
• Commercial installations continue receiving credits under different rules
• State incentives vary and may also change

This deadline dramatically favors purchasing in 2025. If you can use the 30% credit, doing so before it expires saves thousands compared to waiting or leasing.

When Leasing Actually Makes Sense

• No tax liability: If you genuinely can't use the 30% credit, leasing captures its value through the leasing company—you benefit indirectly through lower lease rates
• No cash or credit access: If you can't qualify for any loan and have no savings for a down payment
• Moving very soon: If you're selling within 3-4 years, transferring a lease may be simpler than recovering purchase costs
• Aging roof: If your roof needs replacement in 5-7 years, leasing avoids the complication of removing and reinstalling panels you own

Patricia in Phoenix signed a solar lease in 2022. "I'm a freelance writer with inconsistent income and aggressive business deductions. My federal tax liability has been under $3,000 for years. A purchased system's tax credit would have taken 3+ years to fully use. My lease saves me $65/month with no upfront cost, and I don't have to deal with maintenance. It's not the maximum savings, but it works for my situation."

Lease Downsides You Need to Know

• Lower total savings: The leasing company keeps the majority of the financial benefit—they're in business to profit
• Escalators: Many leases increase payments 2-3% annually. Over 20 years, a $100/month payment becomes $148-$180/month
• Selling complications: New buyers must assume the lease (not all will agree) or you buy it out at potentially $10,000-$20,000
• No ownership: After 20-25 years of payments, you still don't own the panels
• Maintenance dependency: If the leasing company goes bankrupt or provides poor service, you're stuck with panels you don't control

Real Story: Home Sale Complications

Robert in San Diego learned the hard way about lease complications. "When I sold my house in 2023, the buyers initially refused to assume my Sunrun lease. I had to negotiate a $4,500 price reduction to get them to agree. If they had walked away, I would have needed to buy out the lease for $14,200 just to sell my home. That ate into my proceeds significantly. If I'd purchased the system originally, it would have added value to my home instead of creating a negotiation headache."

Financing Options in Detail

If you're not paying cash, here are your purchase financing options:

Solar Loans

Dedicated solar loans from specialized lenders or banks:

• Terms: 10-25 years (12-15 years is most common)
• Rates: 5-9% APR as of December 2025
• Secured (using solar system as collateral) or unsecured options
• Often include dealer fees that increase effective APR—read the fine print
• Many offer same-as-cash options if you pay off within 12-18 months

Common solar lenders include GoodLeap, Mosaic, Sunlight Financial, and Dividend Finance. Your installer will typically offer financing options, but you can also arrange your own financing for potentially better terms.

HELOC/Home Equity Loan

Borrow against home equity:

• Lower rates (often 6-8%, sometimes lower than solar loans)
• Interest may be tax-deductible (consult your tax advisor)
• Puts home at risk if you default
• Requires sufficient equity (typically 15-20% minimum)
• Longer approval process than solar loans

Kevin in Portland used a HELOC for his solar purchase. "My credit union offered 6.25% on a HELOC versus 8.2% from the solar company's preferred lender. On a $22,000 system financed over 12 years, that's about $2,400 in interest savings. The HELOC interest is also deductible since I itemize. Just required some extra paperwork."

Credit Union Loans

Many credit unions offer solar-specific loans:

• Competitive rates (often 0.5-1% below bank rates)
• Member benefits and personalized service
• Local customer service if issues arise
• May require membership (usually easy to join)

Personal Loans

Unsecured personal loans work but typically have:

• Higher rates (8-15% depending on credit)
• Shorter terms (3-7 years typically)
• Lower maximum amounts ($35,000-$50,000 typical caps)
• No collateral requirement

Lease Contract Red Flags

If you're considering a lease despite the disadvantages, watch for these warning signs:

• Annual escalators above 2%: Payments increasing 3%+ annually can exceed your utility savings in later years, meaning you lose money
• Termination fees: Some leases charge $10,000-$20,000 to exit early—essentially trapping you
• Transfer restrictions: Complex buyer assumption requirements that could tank your home sale
• Performance guarantees: What happens if the system underperforms? Who pays for repairs or replacement?
• End-of-lease terms: Do you own the panels? Can you extend? What does removal cost if you don't renew?

Have an attorney review any lease before signing. The $300-$500 in legal fees could save you thousands in unfavorable terms.

Real Homeowner Stories

Here's what actual homeowners experience across all three options:

Cash Purchase: The Martinez Family in Texas

The Martinez family in Houston paid cash for their 10.5 kW system in early 2024. "Total cost was $31,200. After the 30% federal credit, we paid $21,840 out of pocket. We had the cash in savings earning 2% interest—using it for solar was a much better investment."

Their results after 18 months:

• Monthly electric bill: Dropped from $225 to $12 (connection fee only)
• Annual savings: $2,556
• Projected payback: 8.5 years
• 25-year projected savings: $42,000+

"The best part is the peace of mind. We're locked in while neighbors complain about 8-10% annual rate increases. Over 25 years, that protection is worth as much as the direct savings."

Loan Purchase: Single Mom in California

Jennifer, a single mom in Fresno, financed her 7.8 kW system with a 15-year solar loan. "I couldn't afford $22,000 upfront, but I could afford $145/month—especially when my electric bill was $180."

Her financing breakdown:

• System cost: $22,100
• Loan: 15 years at 6.5% APR
• Monthly payment: $145
• Monthly electric savings: $165
• Net monthly gain: $20 (cash-flow positive from day one)

"When I got the $6,630 tax credit, I put it straight into my daughter's college fund. After the loan is paid off in 2039, I'll have free electricity until I'm 70. Even if I sell before then, the system adds value to my home."

Lease Holder Who Regrets It

Michael in Las Vegas signed a 20-year solar lease in 2018. "At the time, I was nervous about the upfront cost and the lease salesman made it sound risk-free. I'm saving about $35/month after my lease payment. Meanwhile, my neighbor purchased around the same time and now has free electricity—he's saving $180/month."

His reality after 6 years:

• Total savings: About $2,500
• If he had purchased: Would have saved approximately $8,000 by now
• Remaining lease: 14 years with payments increasing 2.9% annually
• Buyout cost if he wants to exit: $16,400

"If I could do it over, I'd have taken a loan. The monthly payment would have been similar to my lease payment, but I'd own the system now and my payments would be going toward my own equity, not a leasing company's profits."

Making the Decision

Ask yourself these questions:

1. Can you use the 30% tax credit? If you owe $5,000+ in federal taxes annually, purchase wins decisively.
2. Can you get a loan with reasonable terms? If you can get 8% or better, purchase wins.
3. Are you staying 5+ years? If yes, purchase wins because you'll recoup costs and build equity.
4. Is your roof in good condition? If you need a roof replacement soon, factor that cost into your decision.
5. Is none of the above true? Leasing might make sense—but get multiple quotes and read every word of the contract.

The Bottom Line

The December 31, 2025 deadline adds urgency to this decision. The 30% credit makes purchasing dramatically better than leasing—by $20,000-$40,000 over the system's lifetime.

After 2025, when the credit drops to 22% and eventually disappears for residential, the gap between purchasing and leasing narrows. Leasing's lower upfront cost may become more attractive when the credit isn't available.

But right now, in December 2025, if you have tax liability and can access financing, purchasing solar—whether cash or financed—provides far superior long-term returns. The choice is simple: save the 30% tax credit for yourself rather than giving it to a leasing company.

Don't let the zero-down promise of a lease distract you from the zero-down reality of a solar loan. Both require no money upfront, but only one puts the tax credit in YOUR pocket.