A solar lease lets you rent panels and pay a fixed monthly fee with no ownership. A solar loan lets you buy the panels and own the system outright. Loans build equity and qualify for tax credits. Leases offer lower upfront hassle but fewer long-term benefits.
What Is the Difference Between a Solar Lease and a Solar Loan?
These are the two most common ways Americans finance solar panels without paying cash up front. They look similar on the surface but work very differently underneath.
With a solar lease, a solar company owns the panels on your roof. You pay them a monthly fee to use the electricity those panels produce. You never own the system.
With a solar loan, you borrow money to buy the panels outright. You own the system from day one. You repay the lender over time, just like a car loan or home improvement loan.
That single difference in ownership changes everything from your tax benefits to your home sale process to your long-term savings.
Solar Lease vs Solar Loan: Side-by-Side Comparison
| Feature | Solar Lease | Solar Loan |
| System ownership | Solar company | Homeowner |
| Federal tax credit (ITC) | No | Yes |
| Upfront cost | $0 | $0 to low |
| Monthly payment | Fixed lease payment | Loan repayment |
| Long-term savings | Moderate | Higher |
| Home resale impact | Can complicate sale | Adds home value |
| Maintenance responsibility | Solar company | Homeowner (usually) |
| Contract length | 20 to 25 years | 5 to 25 years |
| Cancellation difficulty | High | Moderate |
| Equity built | None | Yes |
How Does a Solar Lease Work?
A solar lease is essentially a long-term rental agreement. The solar company installs panels on your roof. You pay a fixed monthly amount, typically lower than your previous electricity bill, for the right to use the power those panels generate.
The company handles maintenance and monitoring. If a panel breaks, it is their problem. At the end of the lease term, you usually have three options:
- Renew the lease
- Have the panels removed
- Purchase the system at fair market value
Common Solar Lease Providers
Companies that heavily push solar leases include:
- Sunrun
- SunPower (through its dealer network)
- Sunnova
- Tesla Energy
- Vivint Solar (now part of SunPower)
- Momentum Solar
Lease escalators are a detail many homeowners miss. Most solar leases include an annual rate increase, typically 1% to 3% per year. Over a 25-year lease, that adds up significantly. Always check for an escalator clause before signing.
How Does a Solar Loan Work?
A solar loan works like any other home improvement loan. You borrow the full cost of the solar system, the installer gets paid, and you own the panels from day one. You repay the loan monthly over an agreed term.
Solar loans come in several forms:
- Secured solar loans tied to your home equity (lower interest rates, higher risk)
- Unsecured solar loans not tied to your home (higher rates, no lien risk)
- PACE financing (Property Assessed Clean Energy) tied to your property tax bill
Common Solar Loan Providers
- GoodLeap
- Mosaic Solar Loans
- Dividend Finance
- LightStream
- Sunlight Financial
- Service Finance Company
- EnergySage Marketplace lenders
- Local credit unions and banks
Many solar installers partner with one of these lenders and present the loan as part of the installation package. Always compare rates independently.
Who Gets the Federal Solar Tax Credit with a Lease vs a Loan?
This is one of the biggest financial differences between the two options.
The federal Investment Tax Credit (ITC) lets you deduct 30% of your solar system cost from your federal taxes. As of 2025, this credit is still at 30% under the Inflation Reduction Act.
With a solar loan, you own the system. You claim the 30% ITC on your taxes. On a $20,000 system, that is a $6,000 tax credit directly in your pocket.
With a solar lease, the solar company owns the system. They claim the tax credit, not you. This is one of the primary ways solar leasing companies profit from the arrangement.
This alone is often enough reason for homeowners with sufficient tax liability to choose a solar loan over a lease.
Solar Lease vs Solar Loan: Which Saves More Money?
Over the long term, solar loans almost always produce greater savings. Here is why.
With a loan, once you pay it off, your electricity from the solar panels is essentially free. You own the system. It keeps producing power with minimal cost for 25 to 30 years.
With a lease, you keep paying the monthly fee for the full lease term. Even if the payment is lower than your old utility bill, you never reach a point of free electricity.
Example over 25 years:
- Solar loan: Monthly payments for 10 to 15 years, then free electricity for the remaining years
- Solar lease: Monthly payments for all 25 years, often increasing annually due to escalator clauses
The break-even point and total savings depend heavily on your loan interest rate, your utility rate increases, and your local solar production. But ownership wins financially in most scenarios.
How Does Solar Financing Affect Your Home Sale?
Selling a Home with a Solar Loan
A paid-off solar system adds measurable value to your home. Studies from Lawrence Berkeley National Laboratory found that solar homes sell for a premium over comparable non-solar homes.
If the loan is not yet paid off, you typically pay it off from the sale proceeds, just like a mortgage. The buyer gets a clean, owned solar system.
Selling a Home with a Solar Lease
This is where solar leases create real problems. The lease transfers with the home. The new buyer must qualify with the solar leasing company and agree to take over the lease payments.
Many home buyers do not want to inherit a 15-year lease obligation. Real estate agents often cite solar leases as a complicating factor in home sales. Some deals fall through because of it.
Companies like Sunrun, Sunnova, and Tesla have lease transfer processes, but they add paperwork, delays, and buyer hesitation.
What Happens at the End of a Solar Lease?
At lease end, you typically face three choices:
- Renew the lease for another term at a new rate
- Buy the system at fair market value (which can be negotiated)
- Have the panels removed at no cost to you in most contracts
None of these options give you the free electricity ownership provides. And after 25 years of lease payments, you still own nothing unless you buy the system.
Is a Solar Lease Bad for Your Credit?
Neither a solar lease nor a solar loan is automatically bad for your credit. However, they affect your credit differently.
A solar loan appears on your credit report as an installment loan. Making on-time payments builds credit. Missing payments damages it.
A solar lease may or may not appear on your credit report, depending on the company and the type of agreement. Some leasing companies do report to credit bureaus. Defaulting on a lease can result in collections, legal action, and damage to your credit score.
Solar Loan Interest Rates: What to Expect
Solar loan interest rates vary widely based on your credit score, loan type, and lender.
- Excellent credit (750+): 4% to 7% APR
- Good credit (680 to 749): 7% to 12% APR
- Fair credit (620 to 679): 12% to 18% APR
Some dealer-arranged solar loans have a “dealer fee” built in. This fee is paid by the installer to the lender. It is often factored into your loan amount without being clearly disclosed. Always ask about dealer fees when reviewing solar loan terms.
Can You Cancel a Solar Lease or Solar Loan?
Canceling a Solar Lease
Solar leases are notoriously difficult to exit after the rescission period. Early termination clauses can require you to pay the remaining lease balance, often tens of thousands of dollars.
You have a 3-business-day federal right of rescission after signing. Use it if you have second thoughts.
After that window, cancellation requires negotiation, legal review, or assistance from a solar contract cancellation specialist.
Canceling a Solar Loan
Solar loans can also be canceled during the rescission period under both the installation contract and the Truth in Lending Act (TILA), which provides its own 3-day right of rescission for certain secured loans.
After installation and outside the rescission window, you can pay off a solar loan early. Many solar loans have no prepayment penalty, though some do. Check your loan agreement.
Solar Lease vs Solar PPA: Are They the Same Thing?
No, but they are similar. A solar PPA (Power Purchase Agreement) is different from a lease in one key way.
With a solar lease, you pay a fixed monthly amount regardless of how much electricity the panels produce.
With a solar PPA, you pay per kilowatt-hour (kWh) of electricity the panels actually generate. If the panels underperform, you pay less.
Both are long-term agreements. Both mean the company owns the panels. Both come with transfer obligations when you sell your home. The financial analysis for PPA vs lease vs loan follows the same general logic: ownership through a loan beats both in long-term value for most homeowners.
Which Is Better: Solar Lease or Solar Loan?
For most homeowners, a solar loan is the better option if you have decent credit and sufficient federal tax liability to use the ITC.
A solar lease may make sense if:
- You have low or no federal tax liability and cannot use the ITC anyway
- You want zero maintenance responsibility
- You plan to stay in your home long-term and are comfortable with the transfer risk
- Your credit does not qualify you for a competitive loan rate
A solar loan is usually better if:
- You want to maximize long-term savings
- You plan to sell your home within the next 10 to 15 years
- You have a federal tax liability to absorb the 30% ITC
- You want to build equity in an asset
FAQs
Can I switch from a solar lease to a solar loan?
A: Yes, in some cases. You can buy out your lease and then finance that purchase. Contact your leasing company for a buyout quote, then explore solar loan options.
Does a solar lease affect my ability to get a mortgage?
A: It can. Some mortgage lenders treat solar lease payments as a debt obligation, which affects your debt-to-income ratio. Disclose your solar lease to your mortgage lender early.
Who owns the solar panels in a lease?
A: The solar company owns the panels throughout the lease term. You own the electricity they produce, within the terms of your agreement.
Can I get the solar tax credit with a lease?
A: No. Only the system owner can claim the federal ITC. With a lease, the solar company claims it, not you.
Conclusion
If you already signed a solar lease or loan and regret it, whether you are inside or outside the rescission window, Solar Equity Solutions can help. We are a BBB-accredited solar contract cancellation company.
We handle all types of solar contract exits, including lease terminations, PPA cancellations, and solar loan rescissions. Contact for a free contract review.