Reading your loan vs lease result
Why this comparison changed in 2026
The federal residential solar tax credit expired for systems installed after December 31, 2025. Before that, a loan usually won this comparison decisively, since owning the system let you claim 30% of the cost back, worth about $8,400 on a typical $28,000 system, more than most people's total interest on a 20-year loan. With that credit gone, the comparison is closer, and depending on the specific lease rate quoted, a lease can now come out ahead over the same time span. The IRS Form 5695 instructions confirm the current eligibility rules.
What the numbers show in one example
On a $28,000 system with a 20-year loan at 6.99% APR and no down payment, the loan totals about $52,060. A lease starting at $150 a month with a 2.9% annual escalator totals about $47,878 over that same 20-year window, meaning the lease comes out about $4,182 cheaper in this specific example. A different lease rate, loan rate, or term would change this, so run your own numbers rather than assuming either path wins by default. The cash vs loan savings comparison can help you check this against a straight cash baseline too.
What a lease still gives up in exchange
A lease trades any potential savings for a lower or zero upfront cost and no ownership responsibility. The leasing company handles maintenance and monitoring, and if a panel fails, it's their equipment and their repair bill. You also don't build any home equity or resale value from a leased system, and transferring a lease at a home sale, while usually simpler than transferring a loan balance, can still make a home slightly harder to sell. If the roof needs work first, borrow for the whole job. The roof replacement cost calculator in our Solar + Roofing Integration section can help you estimate the combined roof and solar cost.
How the escalator changes things over time
A 2.9% annual escalator sounds small, but compounded over 20 or 25 years it adds up fast. A $150 starting payment with a 2.9% escalator reaches roughly $258 a month by year 20, and closer to $298 by year 25. Run your own contract's escalator rate through this tool, since even a 1-point difference changes the total by thousands of dollars over the full term. The DOE's homeowner's guide to solar financing covers lease escalators in more general terms.
Why a lower lease rate matters more than it used to
Since owning no longer carries an automatic tax-credit advantage, the specific lease rate and escalator you're quoted now matter more directly in deciding which path is cheaper. A lease provider may factor in a separate commercial credit through 2027 when pricing their offer, so compare a real lease quote against a real loan quote rather than assuming a rule of thumb still holds. The third party owned vs owned comparison covers this same shift in more depth.
Comparing this to a straight cash purchase
If you have the cash available, paying outright avoids both loan interest and lease escalation entirely, and usually produces the fastest payback of any option. Run the cash purchase vs financed payback comparison to see how much faster.