Solar Lease vs Buy in 2026: The Credit Is Gone, So the Math Changed

For over a decade, the answer to "should I lease or buy solar?" was pretty clear: if you could afford it, buy. The 30% federal tax credit (the Section 25D residential Investment Tax Credit) was a dollar-for-dollar cut to your federal tax bill, and it only went to people who owned their system. That credit expired on December 31, 2025. It is gone for residential buyers in 2026, and that single change rewrote the math on every financing option.

Here is what most marketing won't volunteer: the commercial ITC (Section 48E) is still alive, at least through 2027. That credit belongs to companies, not homeowners, so it flows to the leasing company or PPA provider that owns the panels on your roof. In other words, a lessor is still pocketing a massive federal subsidy that you, as a cash buyer, no longer get. Industry analysts project that around 69% of 2026 residential installs will be third-party owned (TPO) precisely because the economics flipped that way.

But "the credit is gone" does not mean buying is dead. It means the gap between the options narrowed, and the right answer now depends more on your state, your cash, your credit, and how long you plan to stay. Let's walk through all four paths with real numbers.

The four options at a glance

• Cash purchase - you pay the full installed cost upfront, own everything, keep every state incentive, and add real equity to the home. No monthly payment.
• Solar loan - you finance the system and own it from day one. You pay a monthly bill, but you keep the state incentives and the home value premium, and most loans have no escalator.
• Solar lease - a third party owns the system and you pay a fixed monthly fee (usually with a 2-3% annual escalator). You own nothing and get no incentives.
• PPA (Power Purchase Agreement) - a third party owns the system and you pay per kilowatt-hour of what it produces (typically $0.08-$0.14/kWh with a small annual escalator). You own nothing and get no incentives.

The single biggest difference between "owning" (cash or loan) and "not owning" (lease or PPA) is who gets the incentives and the asset. Owners keep state tax credits, SREC production payments, net metering credits, and the home value bump. Lessees get none of that, and their payments climb 2-3% a year for 20 to 25 years.

A worked example: Phoenix, Arizona, 7 kW system

Phoenix makes a clean test case: 300-plus sunny days a year, utility rates around $0.125/kWh, no state income tax credit (Arizona eliminated its residential solar credit), a sales tax exemption on equipment, and a property tax exemption on added home value. The numbers below assume a 7 kW south-facing system at a 20-degree tilt, about 11,900 kWh in year one after an 80% performance ratio, 0.45% annual panel degradation, and 4% annual utility rate escalation.

Using a 2026 national average installed cost near $2.58/W, that 7 kW system costs about $18,060 gross.

• Cash purchase - net cost around $17,710 after the equipment sales tax savings. Year one offsets about $1,488. Simple payback around 11.9 years. Over 25 years, roughly $34,200 net after the system cost.
• Solar loan (7.99% APR, 20-year term, plus a 15% dealer fee baked into the principal) - about $174/month. The first year is actually negative (you pay more than the solar saves) because there is no credit to knock down the balance. Break-even versus the grid lands around year 12-13. 25-year net value roughly $14,800.
• Solar lease ($110/month, 2.9% escalator, 25-year term) - modest positive net in the early years that grows to about $590 a year by year 20. 25-year cumulative net around $7,400. You own nothing at the end.
• PPA ($0.14/kWh, 2.5% escalator) - you actually pay more than the grid in year one (about -$178) and break even around year 4-5. 25-year net around $5,100.

In Phoenix with no state credits, cash purchase wins by roughly $19,400 over the loan and about $26,800 over the lease over 25 years. That gap gets even wider in states with strong incentives.

Where owning pulls ahead even further

State incentives flow straight to you. New York offers a 25% state credit up to $5,000 plus NY-Sun incentives. South Carolina has an uncapped 25% credit, which on an $18,000 system is about $4,500 off your tax bill. Massachusetts adds a 15% credit (up to $1,000) plus $0.03-$0.10/kWh from the SMART program. New Jersey SRECs have traded around $225-$250 each in 2025-2026, so an 8 kW system can generate roughly $2,700-$3,000 a year from SRECs alone, which can shave 3-4 years off a payback. A lease or PPA customer gets none of any of this.

Home value is real and documented. Lawrence Berkeley National Laboratory research has pegged owned solar at roughly a $15,000-$26,000 home value premium. That is an asset you can capture at sale. A leased system is closer to a liability: a buyer must qualify for the lease transfer, or you must buy it out, often at an inflated residual value. I have seen 10-year-old lease buyouts quoted at $8,000-$12,000, which eats right into any savings you collected.

You control the stack. Want to add a battery later, or swap to a newer inverter or panel? You can, on a system you own. On a lease, add-ons are restricted or sold to you separately at the lessor's price.

The hidden costs of a lease (and a loan)

Lease contracts have a few traps that show up years after you sign:

• Escalators. A $90/month payment with a 3% escalator becomes about $189/month by year 25. Total payments over the term can exceed $50,000, which can be more than the system cost outright.
• Home sale friction. When you sell, you either transfer the lease (buyer must pass a credit check and may refuse), buy it out with a lump sum, or the lender takes part of your sale proceeds. In solar-heavy markets, real estate agents report leased solar can reduce home value rather than raise it.
• Roof work. If your roof needs replacing during the lease, you typically pay $1,500-$3,000 for the lessor to remove and reinstall the panels, and some leases do not cover roof damage from the original install.

Loans have their own trap: dealer fees of 15-25% of system cost are commonly baked into the principal. On an $18,000 system that is an extra $2,700-$4,500 of hidden cost. Always ask for the dealer fee as a separate line item, and compare the financed price against the cash price to see what you are really being charged. A direct lender (your credit union, or a standalone solar lender) often beats a dealer-arranged loan.

When a lease or PPA is actually the right call

Ownership is not for everyone, and that is fine. A lease or PPA is the sensible choice in these situations:

• You have little or no federal tax liability. Retirees on Social Security and lower-income households would have had trouble using the old 30% credit anyway, and they still get no state credit value that a lessor can't also help with. The ownership advantage shrinks a lot here.
• You plan to move within 3 years. Ownership needs time to pay back; a lease keeps you out of the upfront purchase risk.
• You cannot qualify for a loan. Credit scores below roughly 640 often block loan options, and some leases have looser requirements.
• You have limited cash and limited loan access. Sometimes a lease is simply the only way to get on the roof.
• You value a fixed, predictable payment and do not care about maximizing 25-year savings or adding equity.

Outside those five situations, a lease meaningfully underperforms ownership over a full 25-year term.

Five questions that actually decide it

1. Do you have $15,000-$30,000 in liquid savings? If yes, cash is usually optimal.
2. Will you stay in the home 5+ years? If yes, ownership has time to pay back. If no, it may not.
3. Is your credit score 680+? If yes, you can shop competitive direct solar loans.
4. What state are you in? Strong credits (NY, SC, MA, NJ, CT) tilt the answer hard toward owning.
5. Is your roof going to last 10+ years? A leasing company will refuse a roof with less than 10 years of life, and buying solar on an aging roof means a $2,500-$4,500 removal and reinstall bill when you re-roof. Get a roof inspection before any solar conversation, no matter how you plan to pay.

What to do next

The financing decision is only one part of the puzzle. Before you compare a lease quote to a loan, you need to know how much a system on your actual roof would produce, what size fits, and what it would really save you on your real bill. Those numbers change everything downstream, and they are specific to your exact address and roof, not to your ZIP code.

At SolrScan, a $19 satellite scan of your home gives you the annual sunshine hours for your address, the recommended panel count and wattage, the estimated system size and installation cost, and your projected energy savings. Run those numbers first, and the lease-versus-buy decision gets a lot less like guessing and a lot more like arithmetic.

Scan your home at solrscan.com and see what your roof can actually do before you sign anything.