Solar financing: How do you pay for solar panels?

There's a reason why almost five million homeowners have installed solar systems in the U.S. It's a smart investment that will increase your home's value and save you tens of thousands of dollars in electricity costs.

Solar panel systems typically last for 25 years or more, and offset most or all of your monthly electricity bill. Those savings add up quickly: if you pay $150 per month for electricity today, you'll spend over $65,000 on electricity in the next 25 years.

By investing in solar, you can avoid most or all of that future spending on electricity. As with any home improvement or upgrade project, before you install solar panels, it's important to consider all of the financing options available to you and determine which one best suits your needs.

However you choose to pay for your solar installation, it's smart to act sooner rather than later when it comes to reaching out to installers. The Trump administration is eliminating many valuable clean energy tax credits at the start of next year, but you can still claim the 30% federal solar tax credit if you install your system by December 31, 2025. So if you know you're interested in going solar, don't wait and take advantage of existing tax credits this year—it's the quickest way to save the most money.

There are three main ways to pay for your home solar system: an upfront cash payment, a solar loan, or through a lease or power purchase agreement (PPA).

If you can’t afford to pay for your system out-of-pocket, solar financing allows homeowners to use products like loans and leases to finance the purchase of a solar system by spreading out the cost over time. A typical 11 kW solar panel system costs about $28,000 (pre-incentives) based on thousands of quotes in the EnergySage Marketplace.

The two most cost-efficient ways to pay for your solar system are through a cash purchase or a solar loan.

Generally speaking, these two options are the best way to go solar because you either own your own system right away or by the end of your loan. With a cash purchase, you buy your system for its full cost upfront and have no payments moving forward. If you choose a solar loan, it’s similar to financing a car or paying off your mortgage — you’ll be required to make fixed monthly payments over your loan term, which is usually anywhere from five to 25 years.

The third option for financing a new solar system is to enter into a lease or power purchase agreement (PPA). These options aren’t necessarily a smart financial choice because despite paying tens of thousands of dollars, you still won’t own your solar system by the end of the agreement. For example, if you lease a solar panel system for $100 a month for 20 years, you will have spent $24,000 on solar power over two decades, but at the end of the lease you won't own the system despite spending almost the same amount of money as if you had purchased them.

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All kinds of rebates and incentives are available to help you pay for solar panels, and they can go a long way toward offsetting your costs.

The most valuable incentive is the federal solar tax credit, also known as the investment tax credit (ITC), which credits you 30% of the cost of your solar panel system from your federal income tax. There's no cap on the value of the eligible system—you can claim 30% of the total cost of your system no matter how much you paid for it.

However, on July 4, 2025 President Trump signed the "One Big Beautiful Bill" into law, which terminates the 30% residential solar tax credit after December 31, 2025—nearly a decade ahead of its originally planned expiration. This means homeowners have until the end of 2025 to install solar panels in order to claim the full 30% federal tax credit.

To qualify for this credit, your solar panel system must be fully installed and operational before the end of 2025. Originally, the ITC was set to end in 2034, but the new law eliminates it completely after December 31, 2025.

State and local incentives are also available depending on where you live. New York, Rhode Island, Iowa, Connecticut, and Maryland are some of the friendliest states for solar tax incentives. You may also find rebates available through your solar panel manufacturer or installer.

A cash purchase makes sense if:

• You have the funds to pay for a solar panel system with cash upfront.

• You want to maximize the financial benefits of going solar. A cash purchase will net you the highest return on investment (ROI) for your solar system.

• You want to take advantage of the ITC before it expires on December 31, 2025, and other tax incentives and rebates. 

• You want to own your solar system outright.

A solar loan makes sense if:

• You don't have enough funds to pay for your solar panel system with cash upfront.

• You still want to maximize your savings as much as possible.

• You want to take advantage of the ITC before it expires on December 31, 2025, as well as any other tax incentives and rebates 

• You want to own your solar panel system outright.

A solar lease or PPA makes sense if:

• You're not looking for the highest return on investment (ROI) from your solar panel system.

• You won't be eligible for the ITC due to insufficient tax liability, or you're installing after the December 31, 2025 deadline.

• You don't care about owning your solar panel system outright at the end of your lease or PPA.

• You want to avoid the time pressure of completing installation before the tax credit expires.