.png){kind=logo}
Lease/PPA vs. loan
Leases, power purchase agreements (PPAs), and loans offer ways for homeowners and businesses to get a solar installation with no money down – but what are the differences between them? And which is right for you?
Lease, PPA – what's the difference?
In the article below, we use “solar lease” interchangeably to talk about both leases and PPAs. However, there is a key difference between the two options. You can read more about that here.
Solar loan or solar lease: costs and benefits summarized
| Financing option | Upfront cost | Monthly Cost | 20-year benefit |
| Cash | $$ | N/A | $$ |
| Loan | Zero | $ | $ |
| Lease | Zero | $$ | $ |
Differences between solar loans and leases
Here are some of the top differences between solar loans and leases to keep in mind as you’re comparing options:
Monthly payments & term lengths
Solar loans often have fixed monthly payments, and term lengths ranging anywhere from 5 years to 25 years, with longer term lengths typically requiring lower monthly payments.
Solar leases, on the other hand, usually only come with either 20 or 25-year terms. Additionally, leases often include annual escalators that increase your monthly payment by 1-3% each year.
Operations and maintenance requirements
If your solar panel system requires maintenance, the responsibility typically falls on the owner. If you finance with a solar loan, this would be you. If you lease a system, the financier or solar company owns the panels and equipment on your roof and is therefore responsible for its maintenance.
Application timeline
In some cases, it can take several weeks to get financing approval for a solar loan – especially if it’s a secured loan. With solar leases, on the other hand, approval can occur in a matter of hours.
Availability
Solar loans are available nationwide. The same is not true for solar leases – only ~28 states have passed legislation allowing for leases. Even in states that allow solar leases, it can be harder to find a company that offers this solution.
Solar incentives
Solar incentives–including tax credits, rebates, and performance-based incentives–go to the owner of the system. If you choose to finance with a loan, you can benefit directly from these incentives. With a solar lease, the owner gets to claim the financial incentives, including the federal investment tax credit.