In short: Paying cash is usually the cheapest way to own solar because you avoid interest and loan fees. A solar loan spreads the cost, but many installer-arranged loans bury a dealer fee of roughly 15–30% inside the financed price, so the advertised rate can mislead you. A lease or power purchase agreement (PPA) means little or no upfront cost, but you don’t own the system and payments often rise every year. The right choice depends on your savings, credit, plans for the home and local rules.
Time-sensitive. Last verified: 2 October 2026. Loan rates, dealer fees and incentives change often, and most published figures come from lenders and installers with a commercial interest. Treat the numbers below as ranges and ask for written quotes. In the US, the 30% federal credit no longer applies to homeowner purchases made after 2025: see Federal Solar Tax Credit Changes.
How you pay for solar can change your total cost by thousands, as much as the equipment you choose. This guide compares cash, loans, home equity borrowing, leases and PPAs, shows how a dealer fee distorts a loan quote with a worked example, and gives you questions to ask before you sign. For how to compare the system itself, read How to Compare Solar Quotes and Spot Red Flags.
The main ways to pay for solar
| Cash | Solar loan | Home equity loan or HELOC | Lease or PPA | |
|---|---|---|---|---|
| Upfront cost | Full price | Often $0 | $0 to small fees | Usually $0 |
| You own the system | Yes | Yes | Yes | No |
| Interest | None | Yes, plus possible dealer fee | Yes, no dealer fee | Built into the payment |
| Typical rate range (2026, US) | n/a | roughly 5–9% APR, widely reported | roughly 6.5–8.5% APR | Payment may rise about 2–3% a year |
| Federal credit for you | None for purchases after 2025 | None | None | Not directly: the owner may claim a business credit |
| Maintenance | You (plus warranties) | You (plus warranties) | You (plus warranties) | Often included in the contract |
| Total cost over time | Usually lowest | Medium to high | Medium | Often highest, but with savings from day one |
Option 1: Pay cash
Cash gives you the lowest total cost in most scenarios: no interest, no loan fees, full ownership and all the savings after payback. The trade-off is that you tie up a large sum and may miss other uses for that money.
Best if: you have savings you won’t need soon, you plan to stay in the home for many years, and the payback period is comfortable. See How to Calculate Your Solar Payback Period.
Option 2: Solar loans
A solar loan lets you own the system with little or nothing down and pay over 10–25 years. Your monthly savings on electricity may cover much of the payment, which can make the cash flow work from day one. Rates commonly quoted for 2026 run from about 5% to 9% APR depending on credit, term and lender, with wide variation across sources.
The dealer fee trap
Many installer-arranged loans advertise a very low rate, such as 1.99% or 2.99%. The catch is that the installer pays the lender a dealer fee to buy that rate down, and the fee is added to the amount you finance. Sources commonly put dealer fees at roughly 15–30% of the system price. The result: a “low-rate” loan on an inflated balance can cost as much as a higher-rate loan on the true price.
Illustrative example only. Suppose the cash price of a system is $20,000 and both loans run 20 years.
| Loan X: dealer-fee loan | Loan Y: no-fee loan | |
|---|---|---|
| Amount financed | $25,000 (includes a 25% fee) | $20,000 |
| Advertised rate | 3.99% APR | 6.5% APR |
| Monthly payment | about $151 | about $149 |
| Total repaid over 20 years | about $36,300 | about $35,800 |
Loan X looks cheaper because of its lower rate, but costs about the same or slightly more. The lesson: ask for the cash price and the financed price side by side, and compare total repayment, not the rate. Other things to check: prepayment penalties, balloon payments, and whether your savings estimate assumes an incentive you no longer get.
Cheaper ways to borrow
- Credit union or bank solar loans often have no dealer fee and a transparent market rate.
- Home equity loan or HELOC: no dealer fee, and you borrow the real price. Your home secures the debt, so missing payments puts it at risk, and interest may be deductible in some cases (ask a tax professional).
- Cash-out refinance: only worth considering if your current mortgage rate isn’t much lower than today’s rates.
Option 3: Leases and PPAs
With a lease, you pay a fixed monthly amount to use the panels. With a PPA, you pay for the electricity the system produces at an agreed rate per kWh. In both, a company owns the system, usually installs it at no upfront cost, and often handles maintenance. Since the homeowner credit ended, these have become more common in the US because the company can still access a federal business credit and may pass part of it on in your rate. Rules and deadlines for that credit are technical and sources describe them differently, so ask the provider how it affects your price.
Watch the escalator
Many contracts raise the payment every year. Illustrative example: a $120 monthly payment with a 2.9% annual escalator.
| Year | Monthly payment |
|---|---|
| 1 | $120 |
| 10 | about $155 |
| 20 | about $207 |
| 25 | about $238 |
Check that your savings stay ahead of the payment as electricity prices change, and that the escalator isn’t higher than expected price rises.
Other lease and PPA risks
- You don’t own the system, so you don’t get the long-term savings or the asset.
- Selling your home: the contract usually has to be transferred to the buyer or bought out, which can complicate a sale.
- Paperwork and liens: some contracts file a notice against your property. Read the details.
- Incentives: tax credits and rebates generally go to the owner, not to you.
- Where available: some utilities and programs don’t allow third-party ownership, so check locally.
Which option fits you?
| Your situation | Often the best fit |
|---|---|
| You have the savings and plan to stay many years | Cash |
| Good credit, little cash to spare | A credit union or no-fee solar loan, or a HELOC if you have equity |
| Installer offers a very low advertised rate | Compare it with the cash price and with a no-fee loan before accepting |
| You want no upfront cost and maintenance included | A lease or PPA, after comparing the total cost with buying |
| You may move within a few years | Cash or a prepayable loan; be careful with leases |
| Low electricity prices and low export rates | Reconsider whether solar pays off at all. See Is Solar Worth It Without the Federal Tax Credit? |
What about the UK and other countries?
Rules differ a lot by country. In the UK, most households pay cash or use a personal or green loan, and offers of “free solar panels” deserve extra scepticism: check what you’re signing and who owns the system. Make sure any lender is authorised by the Financial Conduct Authority, compare the total repayable rather than the headline rate, and check what protections apply to your payment method. Remember that zero-rated VAT on residential solar is set to end on 31 March 2027: see VAT on Solar Panels in the UK.
Questions to ask before you sign
- What is the cash price, and what is the financed price?
- Is there a dealer or origination fee, and how much is it?
- What are the APR, the term and the total I’ll repay?
- Are there prepayment penalties, balloon payments or a lien on my home?
- For a lease or PPA: what is the escalator, who owns the system, who maintains it and what happens if I sell?
- Which incentives does the price assume, and do they apply to my type of purchase?
- What happens if the installer or lender goes out of business?
Also check the installer before you accept any financing they arrange: How to Choose a Solar Installer.
Common mistakes
- Comparing only the monthly payment or the advertised interest rate.
- Accepting an installer’s financing without seeing the cash price.
- Assuming a federal credit still applies to a purchase made after 2025.
- Signing a lease or PPA without checking the escalator and what happens when you sell.
- Choosing a loan with a long term and high total interest just to lower the monthly payment.
- Not shopping credit unions, banks and home equity options.
Next steps
- Get itemized quotes with the cash price: How Much Do Solar Panels Cost in 2026?
- Ask for the financed price, fees and total repayment in writing.
- Compare at least one outside loan (credit union, bank or home equity) with the installer’s offer.
- Recalculate your payback for each option: How to Calculate Your Solar Payback Period.
- Check state and local incentives: State Solar Incentives and Rebates Directory.
Frequently asked questions
Is it better to pay cash or take a solar loan?
Cash usually has the lowest total cost because you avoid interest and loan fees. A loan can make sense if you lack the cash and can get a fair rate without a large dealer fee, so that your electricity savings cover much of the payment.
What is a dealer fee on a solar loan?
It’s a fee the installer pays the lender to buy down your interest rate, and it’s added to the amount you finance. Sources commonly describe it as roughly 15–30% of the system price, so always compare the cash price and the financed price.
Are solar leases and PPAs worth it?
They can be, if you want no upfront cost and maintenance included and the payment is clearly below your current electricity cost after any escalator. But you don’t own the system, payments usually rise each year and a sale of your home can be more complicated, so compare the total cost with buying.
Is there still a federal tax credit for solar loans or cash purchases?
Not for homeowners who buy and install after 2025 in the US. Leases and PPAs may still benefit from a business credit held by the system owner. Check current rules with the IRS or a tax professional.
Is a home equity loan a good way to pay for solar?
It can be, because it avoids dealer fees and you borrow the real price. But your home secures the loan, so you should be confident you can make the payments, and interest deductibility depends on your situation.
What happens to a solar lease if I sell my house?
Usually the lease or PPA is transferred to the buyer, who must qualify, or you pay a buyout. Check the contract terms before you sign, because this can complicate or delay a sale.