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The death of the residential tax credit changed the math. Here's how each financing option compares now — and which one works best for your state.
Last updated: February 2026
Before 2026, buying solar with cash or a loan was the clear winner for most homeowners. The 30% federal tax credit (Section 25D) slashed upfront costs by thousands, making ownership the obvious financial choice.
That credit expired on December 31, 2025. Homeowners who buy with cash or a loan now receive $0 in federal tax credits.
But here's what most people don't realize: solar lease and PPA companies still qualify for the 30% Investment Tax Credit under Section 48/48E, because the installer — not the homeowner — owns the system. They pass those savings through to you in the form of lower monthly rates, making third-party ownership significantly more competitive than it was before.
Each option has different trade-offs for upfront cost, monthly savings, and long-term return. Your state incentives determine which one wins.
| Feature | Cash | Solar Loan | Solar Lease | PPA |
|---|---|---|---|---|
| Upfront Cost | $20K–$30K | $0 down | $0 down | $0 down |
| Monthly Payment | $0 | $120–$200/mo | $80–$150/mo | Varies by usage |
| Federal Tax Credit | $0 (expired) | $0 (expired) | 30% to installer | 30% to installer |
| Who Owns System | You | You | Leasing company | PPA provider |
| Maintenance | You | You | Included | Included |
| 25-Year Savings | Highest | High | Moderate | Moderate |
| Home Value Impact | +4% | +4% | Minimal | Minimal |
| Best For | Homeowners who plan to stay 10+ years and want maximum lifetime savings. Best in states with strong incentives. | Homeowners who want ownership benefits without paying upfront. Look for 0% dealer fees and rates under 6%. | Homeowners who want savings with zero risk. The installer owns and maintains the system for the lease term. | Homeowners who want to pay only for the power produced, at a rate lower than the utility. Great in high-rate states. |
Best for: Homeowners who plan to stay 10+ years and want maximum lifetime savings. Best in states with strong incentives.
Best for: Homeowners who want ownership benefits without paying upfront. Look for 0% dealer fees and rates under 6%.
Best for: Homeowners who want savings with zero risk. The installer owns and maintains the system for the lease term.
Best for: Homeowners who want to pay only for the power produced, at a rate lower than the utility. Great in high-rate states.
Numbers tell the real story. Below is a worked example using a 10 kW system in Massachusetts ($3.25/W, $320 state incentive via the per-watt rebate). Annual production is approximately 11,500 kWh, with a 3% annual electricity rate increase assumed. The homeowner currently pays $200/month to their utility.
Remember: the residential federal tax credit (Section 25D) is $0 in 2026 for cash and loan purchases. Lease and PPA providers capture the 30% ITC under Section 48/48E.
Highest total savings but requires $32,100 upfront. Payback in approximately 10-11 years without the federal credit. All electricity savings go directly to you from day one with no interest payments or escalators eating into returns.
$0 down, but the dealer fee and interest significantly erode savings. During the first 10-12 years, your loan payment ($276) may exceed your electricity savings ($200/mo), meaning you pay more than you would have without solar until rates rise enough.
Savings from day one with no upfront investment. The financing company claims the 30% ITC under Section 48/48E and passes savings through lower rates. The 2.9% annual escalator means payments grow over time, but so do utility rates (averaging 3-5% annually). Maintenance and monitoring are included for the full term.
You pay only for the power produced, at a rate below your utility's price. The PPA rate starts at $0.16/kWh versus the utility's $0.28/kWh in MA. The escalator keeps PPA prices below projected utility rates in most scenarios. Like a lease, the provider claims the 30% ITC under Section 48/48E.
Cash delivers the highest 25-year savings (~$57,000) but requires significant upfront capital and takes 10-11 years to pay back without the federal credit. A lease provides immediate savings (~$36,000 over 25 years) with zero risk and zero out-of-pocket cost. Solar loans with dealer fees are the most expensive path when you factor in total interest paid. The right choice depends on your cash position, credit profile, and how long you plan to stay in your home.
Most solar loan advertisements show rates like "2.99% APR" or "0% for 18 months." What they don't show is the dealer fee baked into your loan balance — and it changes the economics dramatically.
When a solar installer offers you a "low-interest" loan, they pay the lender a fee upfront — typically 15-25% of the system price — to buy down the interest rate you see. This fee is not disclosed as a separate line item. Instead, it is added to the total loan amount. You end up financing a system that costs $32,500 with a loan of $38,500-$40,600.
The effect is that your "low rate" loan has a much higher effective cost than the advertised APR suggests. A loan marketed at 2.99% APR with a 25% dealer fee has a true effective cost closer to 8-9% when you account for the inflated principal you are paying interest on for 20 years.
Before 2026, dealer fees were less painful because the 30% federal tax credit ($9,750 on a $32,500 system) could be applied to the loan balance, reducing the amount you actually carried. Now that Section 25D has expired, you carry the full inflated balance for the entire loan term.
Get the installer's cash price in writing before discussing financing. If the "financed price" is 15-25% higher than the cash price, that difference is the dealer fee.
Take the total of all monthly payments over the loan term, subtract the cash price, and compare that total interest to what a standard personal loan or HELOC would cost. The difference is what the dealer fee costs you in real dollars.
A HELOC at 7-8% on the actual system cost ($32,500) often results in lower total payments than a solar loan at 2.99% on an inflated balance ($40,600). Credit unions frequently offer home improvement loans at competitive rates without hidden fees.
Since installers save 15-25% by not paying a dealer fee, many will offer a 5-10% cash discount for direct payment. Always ask — even if the discount is not advertised.
A 10 kW system in MA costs $32,500 cash. With a 20% dealer fee, the loan balance becomes $39,000. At 2.99% over 20 years, the monthly payment is $216 and total payments are $51,840. The same $32,500 financed via a HELOC at 7.5% over 15 years costs $301/month and $54,180 total — but you pay it off 5 years sooner and start saving $301/month in year 16. Over 25 years, the HELOC path saves approximately $8,000 more than the dealer-fee loan despite the higher rate.
Enter your solar quote details to reveal the hidden dealer fee and compare the true cost of different financing paths.
The dealer fee is hidden in your loan amount
Dealer Fee = Financed Amount - Cash Price Solar lenders charge installers 15-30% of the system cost. That cost gets passed to you as a higher loan balance, even when advertised as "0% APR."
Ask your installer: "What would I pay if I wrote a check today?"
Common rates: 0%, 0.99%, 1.49%, 2.99%, 3.99%
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Your credit score and debt-to-income ratio determine what rates you qualify for — and your financing choice affects both of these going forward.
No credit check, no new debt, no change to your debt-to-income ratio. Your credit profile stays exactly the same. This is the only option that has zero effect on your ability to qualify for a mortgage, car loan, or other financing.
Hard inquiry drops score 5-10 points. The loan appears as installment debt, increasing your debt-to-income ratio by the monthly payment amount. With dealer fees, the reported balance is 15-25% higher than the actual system cost.
Hard inquiry plus revolving debt on your credit report. Uses your home equity as collateral, so it reduces your borrowing capacity for future home-related needs. The balance reflects the actual system cost (no dealer fee inflation).
Soft credit check only — no hard inquiry, no impact on your score. The lease does not appear as debt on your credit report. Your debt-to-income ratio remains unchanged. Some mortgage lenders may consider the lease payment as an obligation during underwriting, but this is not universal.
If you have strong credit and substantial home equity, a HELOC often beats a solar loan despite a higher nominal interest rate. The reason is simple: you finance the actual system cost, not an inflated balance with a hidden dealer fee. A HELOC at 7.5% on $32,500 costs less over its lifetime than a solar loan at 2.99% on $40,600.
HELOCs also offer flexibility: most allow interest-only payments during the draw period, which can be useful if you want to minimize monthly outflow in the first few years. The interest on a HELOC used for home improvements may also be tax-deductible (consult your tax advisor).
The downside is that a HELOC uses your home as collateral. If you are planning to sell within 5 years, the HELOC balance must be paid off at closing. For homeowners staying long-term with good equity, a HELOC is frequently the most cost-effective loan path in 2026 — especially with the federal tax credit no longer available to offset an inflated solar loan balance.
State incentives are the deciding factor now that the federal credit is gone. Here's our recommendation for an 8 kW system in each state we serve.
Strong incentives offset the loss of the federal credit. Buying maximizes long-term savings.
Strong incentives offset the loss of the federal credit. Buying maximizes long-term savings.
No state incentives mean leasing lets the financing company capture the 30% ITC and pass savings to you.
No state incentives mean leasing lets the financing company capture the 30% ITC and pass savings to you.
No state incentives mean leasing lets the financing company capture the 30% ITC and pass savings to you.
No state incentives mean leasing lets the financing company capture the 30% ITC and pass savings to you.
No state incentives mean leasing lets the financing company capture the 30% ITC and pass savings to you.
No state incentives mean leasing lets the financing company capture the 30% ITC and pass savings to you.
No state incentives mean leasing lets the financing company capture the 30% ITC and pass savings to you.
No state incentives mean leasing lets the financing company capture the 30% ITC and pass savings to you.
No state incentives mean leasing lets the financing company capture the 30% ITC and pass savings to you.
* Recommendations are general guidance based on available state incentives. Your actual best option depends on electricity rates, roof orientation, credit score, and how long you plan to stay in your home. Get a personalized comparison with a free quote.
With homeowners no longer eligible for the federal tax credit, third-party ownership models have a structural advantage they didn't have before.
Because the leasing or PPA company owns the system, they claim the 30% Investment Tax Credit under Section 48/48E. This credit is unavailable to homeowners who buy (Section 25D expired), so only third-party owners can capture it.
The 30% ITC reduces the installer's cost basis, allowing them to offer lower monthly lease payments or per-kWh PPA rates than before. Many homeowners now pay 20-40% less than their utility bill from day one.
No upfront investment means no payback period to worry about. You save money from month one without taking on any financial risk. If you sell your home, the lease transfers or can be bought out.
The leasing company is responsible for all system maintenance, repairs, and replacements for the duration of the agreement. If an inverter fails or a panel cracks, it's their problem, not yours.
Most lease and PPA providers include 24/7 system monitoring as part of the agreement. They proactively detect issues and schedule service calls, so you never have to worry about production drops going unnoticed.
Worried about moving? Solar leases and PPAs can be transferred to the next homeowner at closing. Many buyers see solar as a plus because it means lower electricity bills from the day they move in.
Going beyond solar? If you're also considering a heat pump, EV charger, or battery storage, see our whole-home electrification cost guide for a complete breakdown of bundling solar with other clean energy upgrades.
There is no single best financing option. The right choice depends on four factors: how long you plan to stay, your available cash, your credit profile, and your state's incentive strength. Use this framework to narrow down your decision.
Cash is the highest-return option for long-term homeowners with available capital. Without the federal tax credit, payback is 10-12 years in high-incentive states and 12-15 years in low-incentive states. After payback, every dollar of electricity savings is pure profit. The 4% home value increase applies only to owned systems.
The loan path makes sense only if you can avoid or minimize dealer fees. A HELOC on the actual system cost is usually cheaper than a dealer-fee solar loan despite the higher nominal rate. If your only option is a high-dealer-fee loan, compare total payments against a lease — you may find the lease delivers better cash flow and comparable long-term value.
The lease is the lowest-risk option and is significantly more attractive in 2026 because the financing company captures the 30% ITC under Section 48/48E that homeowners can no longer claim. You save from day one, maintenance and monitoring are included, and the lease transfers to the next owner if you sell. The annual escalator (typically 2.9%) is usually below utility rate increases (3-5%), so your savings tend to grow over time.
NuWatt's $0-down option: Our Propel $0-down program offers solar with no upfront cost and instant savings from day one.
A PPA works like buying electricity from a private, cheaper utility installed on your roof. You pay a per-kWh rate below your utility's price and the PPA provider handles everything else. Like leases, the provider captures the 30% ITC under Section 48/48E. PPAs are ideal for homeowners in high-rate states who want to hedge against rising utility prices. Be aware that PPAs are not available in every state.
The most important variable is how long you will stay in your home. If you plan to move within 5 years, a lease or PPA is almost always the right choice because you will not recoup the upfront cost of buying. If you are staying 15+ years, cash or a no-dealer-fee loan will deliver the highest total return. The 5-15 year range is where the decision is closest — and where state incentives tip the balance.
Compare GoodLeap, Sunlight, Dividend, Enfin, and no-fee alternatives. See dealer fees, APRs, and true total costs.
Enter your cash price and financed amount to reveal the hidden dealer fee and compare total costs.
Full 25-year comparison of leasing vs. owning solar panels now that the residential ITC is gone.
Get a personalized side-by-side comparison of cash, loan, lease, and PPA pricing for your home. Free, no-obligation quotes from NuWatt Energy.