Solar Lease vs. PPA: Which Is Better in 2026?
By MySolarWidget Team · February 25, 2026 · 7 min read
When a solar installer says you can go solar with "no money down," they usually mean a lease or a power purchase agreement (PPA). Both options let you get panels installed at no upfront cost — but they work very differently, have different benefits, and suit different homeowners.
In this guide, we break down exactly how each works, compare the numbers, and help you decide which — if either — makes sense for your situation.
How a Solar Lease Works
With a solar lease, you pay the solar company a fixed monthly fee to use the panels installed on your roof. You do not own the system — the solar company does.
Key Characteristics
- Fixed monthly payment regardless of how much electricity the panels produce
- Typically 20–25 year lease terms
- Annual payment escalator of 2–3% per year (payments increase over time)
- Solar company owns the system and handles maintenance
- You do not receive the federal 30% tax credit — the leasing company keeps it
- At term end: purchase option, extend the lease, or system removal
Typical Savings
A well-structured lease saves homeowners 10–30% on electricity costs compared to utility rates in year 1. However, as utility rates rise and lease escalators kick in, savings can shrink or disappear in later years if not structured carefully.
How a Solar PPA Works
With a power purchase agreement, you pay for the electricity the solar panels produce — measured in kWh — at a fixed rate lower than your utility rate. You still do not own the panels.
Key Characteristics
- Pay per kWh of solar power generated (not a flat monthly fee)
- PPA rates typically 10–30% below local utility rates at signing
- Annual escalator of 2–3% per year on the per-kWh rate
- Solar company owns the system and handles maintenance
- You do not receive the federal tax credit
- Lower months (winter, cloudy periods) = lower bills since you pay per kWh produced
Typical Savings
PPAs can provide 15–35% savings on electricity in year 1. Because you only pay for production, a poor production month means a smaller PPA bill — which is an advantage over a flat lease payment.
Lease vs. PPA: Side-by-Side Comparison
| Feature | Solar Lease | Solar PPA |
|---|---|---|
| Payment structure | Fixed monthly fee | Per kWh produced |
| Upfront cost | $0 | $0 |
| System ownership | Solar company | Solar company |
| Tax credit | Solar company keeps it | Solar company keeps it |
| Maintenance | Solar company | Solar company |
| Annual escalator | 2–3% on payment | 2–3% on per-kWh rate |
| Bad production month | Same payment | Lower bill |
| 25-year savings vs. ownership | 30–50% less | 30–50% less |
| Home sale impact | Must transfer or buy out | Must transfer or buy out |
Bottom line: Leases and PPAs save you money but far less than owning your system outright or via a solar loan. The main advantage is zero upfront cost and no maintenance responsibility.
Leases, PPAs, and Selling Your Home
Since you do not own the panels, you cannot simply include them in a home sale.
Your Options at Home Sale
- Transfer the lease/PPA to the buyer: Buyer assumes your remaining payments. Requires buyer approval and credit check. Some buyers are hesitant.
- Buy out the system before sale: Pay the remaining present value of the contract to own the system outright. Then include it in the home sale. Buyout amounts vary widely.
- Prepay the lease: Some agreements allow you to prepay all remaining lease payments at a discount, effectively ending the obligation.
Studies show homes with leased solar sell at the same rate as homes without solar — unlike owned solar systems, which command a 3–4% price premium on average.
Frequently Asked Questions
Which is better — a solar lease or a PPA?
A PPA is generally more flexible since you only pay for actual production. A lease is simpler with predictable fixed payments. Both are significantly less financially beneficial than owning your system through cash or a solar loan.
Can I cancel a solar lease early?
Solar leases are 20–25 year contracts and are difficult to exit early. You can buy out the system at fair market value, transfer it to a new buyer, or pay an early termination fee. Read the contract carefully before signing.
Does a solar lease increase my home value?
Typically not. Unlike owned solar (which adds 3–4% to home value on average), leased solar can sometimes complicate a sale. Some buyers see the assumed payments as a liability rather than a benefit.