Understanding lease vs. loan for your business
Why a loan usually wins on total cost
A loan is usually cheaper over a matched term, since the business keeps the ITC and depreciation instead of the leasing company. On a $240,000 system over 15 years, a loan with 10% down at 7% nets out to about $250,464 total after tax benefits, versus about $415,042 for a lease at $2,000 a month with 2% annual escalation, a $164,578 advantage for the loan. That gap is almost entirely the value of the tax benefits the leasing company keeps instead of you. Run the loan vs. cash comparison next if you're deciding how to structure the loan itself, or the loan term comparison tool in our financing section for a deeper look at how term length affects that total.
Fixed payment versus production-based payment
A lease charges a fixed monthly payment regardless of how much electricity the system actually produces, while a PPA charges per kWh of actual production. If your system underperforms, a PPA payment drops with it, but a lease payment stays the same either way. That's a meaningful risk difference worth weighing alongside the cost numbers, especially on a site with any shading uncertainty. Check the shading analysis tool if that's a concern for your roof, and the Department of Energy's guide to going solar covers these ownership and financing tradeoffs at a more general level.
Who owns the system and the tax benefits
The leasing company owns the system in a standard commercial solar lease and claims the ITC and depreciation itself, similar to a PPA. That's part of why a loan, where you own the system directly, usually comes out ahead on total cost. Run the ITC calculator to see exactly how much value that represents for your specific system, and the solar loan vs. lease comparison runs this same question from a residential angle.
When a lease still makes sense
A lease can make sense if a business wants a predictable fixed payment with no maintenance responsibility, or doesn't have enough tax liability to use the ITC and depreciation efficiently. The old argument that a lease keeps the system off the balance sheet no longer holds the way it used to, since the Financial Accounting Standards Board's Topic 842 lease accounting standard now requires nearly all commercial leases longer than 12 months to appear on the balance sheet as a right-of-use asset and liability regardless of structure. Predictability and simplicity are still real reasons to prefer a lease, particularly for businesses that value simple, uniform monthly budgeting over the life of the agreement, though it's worth comparing against the PPA vs. ownership tool since a PPA solves a similar problem from a different angle. A battery can cut demand charges as well as store power. The battery storage size calculator in our Battery & Storage section can help you size one for your peak load.