Solar financing: How do you pay for solar panels?

Nearly five million U.S. homeowners have made the switch to solar, and for good reason: It's one of the smartest investments you can make for your home. Solar panels increase your property value while slashing your electricity costs for decades to come.

If you're paying $200 per month today, that's about $89,482 you'll spend on electricity in the next 25 years, accounting for inflation. Solar panel systems typically last 25 years or more and offset most or all of your monthly electric bill, which means you can avoid the vast majority of that future spending.

The average EnergySage shopper saves $61,093 over 25 years by switching to solar, but the way you pay for your solar panel system directly impacts your total savings and how quickly you'll break even. Whether you have cash on hand, prefer fixed monthly payments, or want to keep your capital available for other opportunities, there's a financing option designed for your situation.

There are four main ways to pay for your home solar system: upfront with cash, a solar loan, through a lease or power purchase agreement (PPA), or with a pre-paid lease or PPA. A typical 12 kW solar panel system costs about $30,505 before incentives, based on thousands of quotes in the EnergySage Marketplace.

Each financing option offers different trade-offs between upfront costs, long-term savings, and capital flexibility. The right choice depends on your financial priorities, whether you value maximum solar returns or prefer to keep your cash available for other investments.

Cash purchase

Buying your solar panel system outright delivers the highest long-term returns. You own your system from day one, avoid interest payments, and keep your investment working for you over 25+ years. There's no loan paperwork, no monthly payments after installation, and no escalating costs to track. You'll increase your home's value and qualify for any available state tax incentives and rebates directly.

The main tradeoff is upfront cost. Paying roughly $30,000 out of pocket isn't realistic for every homeowner. It typically takes 10 years to break even, but after that, electricity is essentially free. You're also responsible for any system maintenance not covered by warranties, though most systems require minimal upkeep.

A cash purchase makes sense if:

• You have the funds available to pay upfront

• You want to maximize the financial benefits of going solar

• You want to take advantage of any available state tax incentives and rebates

• You want to own your solar energy system outright

• You don't need to preserve capital for other investments or opportunities

Solar loan

Solar loans let you own your system without paying upfront. You'll make fixed monthly payments over 5-25 years while immediately benefiting from energy savings. Many loans offer $0 down, and depending on the terms, you can see net positive cash flow from month one when your energy savings exceed your loan payment.

You preserve cash for other needs while still increasing your home value and qualifying for state incentives. Fixed payments provide cost predictability, unlike utility bills or lease escalators that increase over time.

There are two main types of solar loans: unsecured and secured loans. An unsecured loan doesn't require any collateral for approval, so it will usually have a higher interest rate than a secured loan. A secured loan will tend to have a lower interest rate because it requires you to put up your home as collateral, which is a risky option because if you can't make your solar loan payments for any reason, your lender can foreclose on your house.

Taking out a personal loan or a home equity loan to finance your solar system is also an option worth considering.

Interest is the main trade-off with a loan: it reduces your total lifetime savings compared to cash. And if you move before paying off the loan, the sale can get complicated.

A solar loan makes sense if:

• You want ownership benefits without paying the full cost upfront

• You want to maximize your savings as much as possible

• You want to access any available incentives directly

• You want to preserve some liquidity for other needs

Solar lease or PPA

With third-party ownership (TPO) financing, a solar company installs, owns, and maintains the system on your roof. You pay either a fixed monthly rate (lease) or a per-kilowatt-hour rate (PPA) for the electricity it produces—typically 10% to 30% below what you'd pay your utility, according to the U.S. Department of Energy.

Here's what changed in 2026: Because the federal residential tax credit expired for purchased systems, the gap between TPO and ownership has narrowed significantly. TPO projects—where the company owns the system—still qualify for the commercial solar tax credit, allowing the solar company to claim it. Competitive providers should pass those savings along to you through lower monthly rates. You get $0 down, zero maintenance responsibilities, and immediate savings on day one.

But TPO comes with trade-offs, including lower lifetime savings than ownership, possible rate escalators over time (look for low or no escalators), and, sometimes, a complicated home sale since a buyer typically has to assume the agreement, or you'll need to pay it out. You won't own the system, so you typically won't see a home value increase, and you lose access to state-level tax incentives that are reserved for system owners.

Note: third-party ownership isn't available in every state. Check out DSIRE's map of states that allow PPAs to see if they're available in your area.

A solar lease or PPA makes sense if:

• You want to preserve maximum capital flexibility for other investments or needs

• You prefer not to own the system or handle any maintenance responsibilities

• You can't easily benefit from state tax incentives

• You value immediate savings without upfront costs

• You want the peace of mind of not having to monitor your system

Pre-paid solar lease or PPA

Pre-paid TPO is quickly gaining traction in 2026's solar market. Instead of monthly payments, you pay the full lease or PPA cost upfront at a discounted rate, then take ownership of the system after a defined period (typically around six years). It's a hybrid that combines the tax credit benefits of TPO with an eventual path to outright ownership.

Because the solar company still owns the system during the initial term, it claims the commercial solar tax credit and passes much of that value—often around 20-30%—directly to you through a lower upfront price. After the holding period ends, most contracts allow you to take ownership, often for $0. Many pre-paid products can also be financed with a solar loan, so you don't need tens of thousands in cash to get started.

There are important nuances to understand. The six-year ownership timeline is rooted in federal tax law: Commercial solar tax credits are subject to recapture rules if a system is sold too early, so leasing companies must retain ownership for at least five years. Most contracts specify a "fair market value" transfer at the end of the term rather than explicitly guaranteeing $0—a gap between what's marketed and what's contractually locked in. In practice, many companies honor the $0 transfer, but this area of the market is still maturing, and the terms vary by provider. Read the full contract carefully, not just the sales materials.

One other caveat: To qualify for the commercial tax credit, pre-paid TPO systems (as with standard lease and PPA systems) must meet FEOC compliance rules that restrict equipment from certain foreign manufacturers, which can limit solar panel, inverter, and battery choices compared to a standard cash or loan purchase.

A pre-paid lease or PPA makes sense if:

• You want a path to ownership and want to capture some tax credit value

• You have capital to pay upfront, but want a discount on the full purchase price

• You're comfortable with a ~six-year timeline before you own the system

• You've carefully reviewed the full contract and transfer terms

Your financing choice directly impacts which incentives you can claim and how much you'll actually benefit from them.

Tax credits and rebates

If you plan to own your system through a cash purchase or loan, the federal solar tax credit expired in 2026. But you can still claim any available state tax credits and rebates directly. The benefit goes straight to you, reducing your out-of-pocket costs or providing a refund on your tax bill.

With a lease or PPA, the solar company owns the system and claims the incentives instead. These projects still qualify for the federal tax credit and will continue to qualify as long as they begin construction before July 2026 or are placed in service before January 2028.

Competitive providers should pass those tax savings along to you through lower monthly rates. Similarly, if there are state solar tax credits or rebates for businesses where you live, the company claims them, but you should see the benefit reflected in your pricing.

Net metering

Net metering credits you for excess electricity your solar panels send back to the grid. When your system produces more power than you're using, your utility meter literally runs backward, and you bank credits that offset future electricity bills.

With ownership (cash or loan), you receive net metering bill credits directly whenever your system overproduces. With a lease or PPA, your agreement structure determines how net metering flows to you—typically through the fixed rate you pay for solar electricity, which should account for that benefit. Either way, you'll see lower electricity bills when your panels are pumping out more than you need. You'll usually capture slightly more net metering value as a system owner, but the difference varies by state and agreement.

There's no universal answer—and that's more true today than it was a year ago.

For homeowners with capital who want maximum lifetime savings, a cash purchase still delivers the best long-term return. For those who want ownership without tying up tens of thousands of dollars, a solar loan offers that with fixed, predictable payments. For homeowners who want immediate savings while keeping capital flexible and don't mind not owning the system, a monthly lease or PPA makes more sense. And for homeowners who want both a path to ownership and some indirect access to tax credit savings, a pre-paid lease or PPA is an increasingly compelling middle ground (though it requires careful contract review).

*Tax credits for these projects should get passed along as lower rates/upfront cost with the right provider.

The right choice isn't about which option is "best"—it's about which trade-offs align with your financial priorities, how long you plan to stay in your home, and how much you value simplicity versus maximum returns.