Savings and payback
See how a lease's annual escalator stacks up against buying with cash, including whether your escalator could eventually cost more than staying on the grid.
Current status: the 30% federal residential solar tax credit (Section 25D) expired for systems placed in service after December 31, 2025. If you're buying with cash or a loan in 2026 or later, use your full system price with no credit subtracted. Only subtract 30% if your system was placed in service by the end of 2025.
How it works
Step 1
Use figures from the payback period calculator if you haven't worked these out yet.
Step 2
The tool checks whether your lease's escalator rate outpaces utility rate growth, which is exactly when a lease can quietly become more expensive than the grid. Compare against the loan vs PPA comparison for another financing structure.
An escalator is a clause that automatically increases your lease payment every year, typically by 2% to 3%, similar to how utility rates rise over time. Most leases run 20 to 25 years, so a seemingly small annual increase compounds meaningfully by the end of the term, sometimes more than doubling the original payment. The Department of Energy's guide to solar financing, leases, loans, and PPAs lays out each option with its costs and trade-offs.
If your lease escalates at 3.9% a year but utility rates only rise 2%, the lease payment can cross above what you'd otherwise pay the utility within about 11 years, eliminating the savings advantage from that point forward and potentially leaving you paying more than if you'd never gone solar at all. This crossover risk is the central tradeoff worth checking carefully in any lease contract. Utility rates drive the whole savings calculation, and the US Energy Information Administration's electricity data track them state by state.
For a $22,000 system, buying with cash can net roughly $32,000 more over 25 years than leasing the same size system, since cash ownership avoids ongoing payments entirely after the upfront cost. Leasing eliminates that upfront cost, but forfeits ownership and much of the long-term financial upside compared to the cash vs loan comparison's numbers, or the net present value calculator's treatment of upfront cost. Output varies by roof and weather, and the real world vs nameplate output gap calculator shows what your site should produce in a typical year.
Leasing avoids interest and upfront cost, but introduces its own considerations. You never own the system, don't qualify for tax credits, and the lease must typically transfer to a buyer if you sell your home, which can complicate a sale, unlike the resale value premium covered in the home value increase estimator, which applies to owned systems only. If an EV is in your plans, the ev charging cost with solar vs grid comparison adds its charging load to the sizing math.
Questions
An escalator is a clause that automatically increases your lease payment every year, typically by 2% to 3%, similar to how utility rates rise over time. Most leases run 20 to 25 years, so a seemingly small annual increase compounds meaningfully by the end of the term.
Yes, if the escalator rate outpaces actual utility rate growth. If your lease escalates at 3.9% a year but utility rates only rise 2%, the lease payment can cross above what you'd otherwise pay the utility within about 11 years, eliminating the savings advantage entirely from that point forward.
Significantly less in most cases. For a $22,000 system, buying with cash can net roughly $32,000 more over 25 years than leasing the same size system, since cash ownership avoids ongoing payments entirely after the upfront cost.
It avoids interest and upfront cost, but introduces its own tradeoffs. You never own the system, don't qualify for tax credits, and the lease must typically transfer to a buyer if you sell your home, which can complicate a sale.
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