Solar lease vs. loan vs. PPA: what's the difference?

The four structures, quickly

Almost every solar offer is one of these, and the language gets used loosely enough that people sign without knowing which one they're in:

• Cash. You buy the system. You own it and everything that happens to it.
• Loan. You buy the system with borrowed money. You still own it and everything that happens to it, plus you owe a lender.
• Lease. A company owns the system and you rent it for a fixed monthly payment.
• PPA. A company owns the system and you buy the power it produces, priced per kilowatt-hour.

The first two are ownership. The second two are usually grouped as third-party ownership, or TPO. That split is the one that actually matters.

Buying: cash or loan

Paying cash gives you the lowest lifetime cost, because you skip interest entirely and you skip the dealer fee that lenders charge installers to buy down a rate. You own an asset outright.

A loan gets you the same ownership without the upfront check, at the cost of interest and that dealer fee, which commonly runs 15% to 30% of the system price and gets folded into the amount you finance. We break the numbers down in how much solar costs.

What both share is the part people underestimate: you own the whole lifecycle. Inverters need replacing. Batteries need replacing. Warranties only mean something if the company that issued them still exists, which has become a real question as solar installers have gone out of business.

One important change: the 30% federal tax credit that homeowners claimed when buying a system ended for installations completed after December 31, 2025. That credit was the single biggest argument for buying rather than going third-party, so the classic lease-versus-buy comparison you'll find in older articles no longer reflects the math. Confirm anything tax related with a tax professional.

Lease vs. PPA: the distinction almost nobody explains

These get lumped together constantly, and they're genuinely different in one respect that matters.

A leaseis rent for hardware. You pay a fixed monthly amount for the equipment on your roof. It's the same number whether your system has a spectacular June or a cloudy, underperforming one. You carry the production risk.

A PPAis a purchase of output. You pay an agreed rate per kilowatt-hour the system produces. If it underproduces, you're billed less. If it overproduces, you're billed more. The provider carries far more of the production risk, which also gives them a standing reason to keep the system running well, since a system sitting idle earns them nothing.

That's why it's worth knowing which one you're being offered when someone says "no upfront cost."

What third-party ownership actually trades away

Being direct about both sides: with a lease or PPA you don't own an asset, and you're committing to a long agreement, typically 20 to 25 years.

In exchange, you don't pay upfront, you don't pay interest, there's no dealer fee, and maintenance, monitoring, repairs, and replacement stay with the provider. If an inverter fails in year eleven or a battery reaches end of life in year fourteen, that's their cost, not a five-figure surprise on your side.

Whether that's a good trade depends on what you want. If your goal is to own equipment and build an asset, buy it. If your goal is lower, more predictable energy costs without taking on hardware risk, third-party ownership is built for exactly that.

Three questions worth asking about any agreement

Is there an escalator? Many leases and PPAs raise the payment by a set percentage every year, often 1% to 3%. Over 25 years that compounds. Ask whether yours has one and what the rate is.

What happens if I sell? Leases and PPAs generally transfer to the buyer, who usually has to qualify, and buyouts are often available. Loans typically have to be paid off or assumed at closing.

Who is responsible when something breaks?Under ownership, you are. Under third-party ownership, they are. Get the specifics of what's covered and for how long, in writing.

Where SOLRITE fits

For what it's worth, we're in the third-party ownership camp. SOLRITE installs solar and a properly sized battery at $0 upfront, owns and maintains the equipment, and covers replacement during the agreement. What makes ours a little different from a standard PPA is that the battery earns revenue through grid services, and that revenue is part of what funds the system.

If that sounds like the right trade for your home, the details are on our Solar VPA page.