Solar leases: What to know before you sign

Want to go solar while keeping your cash free for other priorities? Solar leases make that possible. You get solar panels on your roof with no money down, someone else handles any maintenance that might arise, and you start saving on your electric bills from day one. Sounds pretty straightforward—and in many ways, it is.

But here's the thing: Solar leases work differently from buying or financing your system, and those differences matter for your long-term savings and flexibility. Whether a solar lease makes sense depends on your financial priorities. If you value keeping your capital available and want a hands-off experience, a lease can work well. If maximizing long-term savings matters most, buying your system outright or taking out a solar loan typically delivers better returns.

"In the right situation, solar leases can be a good way to help lower your electric bill," said Spencer Fields, former Director of Insights at EnergySage. "They allow you to go solar without putting any money down, reducing your monthly energy bills on day one and providing peace of mind around any future warranty or maintenance needs. But it's important to do your research and go into any lease agreement with open eyes. Specifically, look out for the escalation rate and see if you can get it as close to 0% per year as possible."

You can think of a solar lease like a car lease: It's a form of third-party ownership (TPO) where you don't own the product that you're paying for. Under a solar lease, a third-party owner (typically a solar company) installs solar panels on your property and then sells you the electricity produced at a predetermined monthly rate. Companies calculate this rate based on the estimated annual production of your solar panel system and include this rate in your contract. Your lease will also have a fixed term length, typically 20 to 25 years.

In most cases, your solar company will allow you to buy the system outright at its market value price at the end of your contract, but you'll likely pay additional fees—which means it's not the best financial choice for owning your solar panel system. Similarly, if you want to get out of your lease early, you'll often be on the hook for expensive early termination fees that can negate the savings of going solar in the first place.

Solar leases vs. power purchase agreements

You've probably heard the terms solar leases and power purchase agreements (PPAs) used interchangeably. While similar, the critical difference is that with a lease, you'll have a fixed monthly payment, whereas with PPA, you'll purchase the power generated by your system at a fixed price per kilowatt-hour (kWh).

Essentially, the key difference between a solar lease and a PPA is that with a solar lease, your monthly payments are predictable and stay the same over the lifetime of your contract. With a PPA, your monthly payment will vary depending on how much electricity your system produces. If a consistent monthly payment is more helpful for your budget, a lease makes more sense for you than a PPA.

However, if anything goes wrong with your system, with a solar lease, you could be stuck paying for power you're not receiving until your provider sends someone out to fix it.

Solar leases vs. solar loans

Solar leases and solar loans are similar in that they both offer zero down payment options, which means you don't need to have thousands of dollars saved up to go solar. Here's where they differ:

• Ownership: You maintain ownership of your solar panel system with a solar loan, but you don't with a solar lease. Owning your panels with a solar loan means that you can take advantage of any available state and local rebates and incentives upon installation. With a solar lease, the system's owner is the solar company, so they receive financial incentives instead. Lifetime savings with a solar loan are usually higher than those with a solar lease—but it can depend on the specifics of each agreement.

• Maintenance: If you choose a solar lease or PPA, the leasing company owns the solar panel system and typically offers a service program to cover any maintenance issues that arise during the lease term. On the other hand, if you take out a solar loan to purchase your system, you'll be responsible for its maintenance. But in either case, solar is a generally low-maintenance power source, and the equipment you buy with your solar loan should have warranties that range from 10 to 25 years.

• Monthly payments: Payment terms differ slightly between leases and loans. In a loan agreement, you usually have a fixed monthly amount due. With solar leases, many contracts include an annual escalator that increases your monthly payment by a preset rate over your term length (typically 1-3% each year). Look for providers offering low or zero escalators—these can significantly impact your long-term savings.

Federal solar tax credit changes: How they affect leases and PPAs

Recent changes to federal solar incentives have shifted the economics of solar leasing compared to ownership. Understanding these changes can help you evaluate whether a lease makes sense for your situation.

The federal solar tax credit expires for systems installed after December 31, 2025. This 30% income tax credit is no longer accessible for most homeowners due to limited installer capacity through the end of the year.

However, companies that offer solar leases and PPAs can still claim the 30% tax credit—though it goes directly to the company, not to you—with new restrictions that took effect when Congress passed the "Big Beautiful Bill" on July 4, 2025:

• Condensed timeline: Solar projects that begin construction before July 4, 2026 or are placed in service by December 31, 2027 will continue to qualify for the tax credit.

• FEOC restrictions: Starting in 2026, at least 40% of a system's component costs must not come from a Foreign Entity of Concern (FEOC). This requirement rises by 5% annually until reaching 60% in 2030.

The FEOC provisions are particularly consequential for solar projects, as much of today's solar equipment and materials come from countries like China, which are classified as FEOCs. As companies adapt to these market changes, these sourcing constraints may drive up equipment costs for leases and PPAs.

As with any solar financing option, solar leasing comes with its share of pros and cons:

Pros of solar leases

Cons of solar leases

When you're comparing solar lease providers, these factors will have the biggest impact on your experience and long-term savings:

Also, keep in mind that solar leases aren't available in every state, and some providers have limited geographic coverage.

Comparing popular lease providers in the U.S.

Solar leases are worth considering if you want to go solar without tying up capital in your roof. They're particularly appealing for homeowners who don't have a large enough tax bill to benefit from state tax credits, or those who value simplicity and don't want to handle maintenance responsibilities. If you want indirect access to federal tax incentives through lower monthly rates and plan to stay in your home for the duration of the lease term, a lease could work well for your situation.

On the other hand, solar leases might not be the best choice if you want to maximize long-term savings and have access to financing. They can also complicate things if you plan to sell your home in the next 5-10 years, since the buyer will need to assume your lease or you'll need to buy it out early. If you prefer full ownership and control over your energy system, or can benefit from state and local solar tax incentives by owning your system, a solar loan or cash purchase will typically serve you better.

The right choice isn't about which option is "best"—it's about which trade-offs align with your financial priorities. If you're comparing options, consider getting quotes for both solar loans and solar leases so you can see the numbers side-by-side.