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Solar financing: cash, loan, lease and PPA

Who owns the system under each option, who claims the incentives, the dealer fee and escalator to look for, what happens when you sell, and what to ask first.

Updated September 3, 2026

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Written by HyreSolar Research Desk Primary-source research and fact checking

The short answer

You can pay for solar four ways: cash, a loan, a lease or a power purchase agreement. The difference that matters is not the monthly payment but whether you end up owning the system. Ownership decides who claims any incentive, who carries maintenance, and how easily the house sells.

Ask for the cash price and the financed price separately; the gap is the dealer fee.

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How do cash, loan, lease and PPA compare?

The question underneath all four is whether you end up owning the system. Ownership decides who claims any incentive, who carries maintenance, and how easily the house sells.

Option	Who owns it	Upfront cost	Who claims an incentive	Payment escalates	Selling the house
Cash	You, from day one	Highest	You, if any applies	No	Transfers with the house
Loan	You, subject to the lender’s claim	Low or none	You, if any applies	No, but interest and any dealer fee apply	Repay, or the buyer assumes it; any UCC-1 must be cleared or subordinated
Lease	A third party	Low or none	The third-party owner	Can rise every year	The buyer qualifies and assumes it, or you buy it out
Power purchase agreement	A third party	Low or none	The third-party owner	Can rise every year	The buyer assumes it, or it is settled at closing

What are the trade-offs of each way to pay?

Cash: you own it outright

For: no interest, no dealer fee, no lien, no third party in the transaction.

Against: the largest upfront outlay, with the money tied up in the roof.

When you sell: it transfers with the house.

Loan: you own it, the lender has a claim

For: ownership without the upfront cost, and you keep any incentive that goes to the owner.

Against: interest, and possibly a dealer fee inside the principal. The advertised rate may not be the rate you pay.

When you sell: pay it off or have the buyer assume it; clear any UCC-1 at closing.

Lease: a third party owns it, you rent it

For: little or nothing upfront, and maintenance sits with the owner under the contract.

Against: no ownership and no owner incentives. An annual escalator can outrun the utility rate increases the deal was sold on.

When you sell: the buyer qualifies and assumes it, or you buy it out.

PPA: you buy the power it makes

For: little or nothing upfront, and you pay per kilowatt-hour, so a weak production year costs you less.

Against: the same ownership position as a lease, and the rate can escalate. Compare the year-fifteen rate with your utility rate today.

When you sell: the buyer assumes it, or it is settled at closing.

What is the dealer fee in a solar loan?

A dealer fee is a charge the installer pays a lender so a below-market interest rate can be offered. It is recovered by raising the system’s price and financed with everything else, so a low advertised rate can sit on a cash price well above what the same system costs paid outright.

The test: ask for the cash price and the financed price as two separate numbers. If they differ, the gap is the fee. The dealer fee calculator solves for the rate you are paying, and what “zero down” really means covers the pattern.

What assumption sits under an escalator clause?

An escalator raises a lease payment or PPA rate by a fixed percentage every year. The pitch is that utility rates will rise faster, so you stay ahead. That may hold, or it may not, and a fixed escalator has no mechanism for the case where it does not.

Run the rate out to years fifteen and twenty and compare it with what you pay your utility today, not with a projection from the company selling it. The escalator calculator does that, and lease vs buy compares both paths over the full term.

Why do solar liens surface at closing?

A solar loan can be secured against the equipment with a UCC-1 financing statement. That is normal, but it shows up in a title search and a buyer’s lender will want it resolved.

Known months before listing, it is paperwork; found a week before closing, it is an expensive scramble. UCC-1 liens on solar loans and selling with a loan or lease set out what has to be cleared.

How does financing change who gets the incentives?

Incentives that attach to the owner of the equipment go to whoever owns it. Under a lease or a PPA, that is the third party, not you.

Section 25D, the residential federal credit, was terminated for expenditures made after December 31, 2025, while the business credit behind third-party-owned systems, Section 48E, runs on a different timetable. Why a lease still gets a credit and you do not explains the split; solar incentives covers all four layers.

Source: Public Law 119-21, § 70506, enrolled text at the Government Publishing Office. Read September 3, 2026.

What should I ask before signing a solar finance agreement?

What is the cash price, and what is the financed price?

If they differ, ask what the difference is for.

What is the dealer fee, as a dollar figure?

Is there an escalator?

Ask what the payment becomes in year twenty.

Will a lien be filed?

Against the equipment, the property, or neither.

Who owns the system, and who claims any incentive?

What happens if I sell in year seven?

Exactly what must the buyer do?

What are the early buyout terms?

And how is the buyout price calculated?

Your inquiry

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Questions

What is a solar dealer fee?

A fee the installer pays the lender so a below-market interest rate can be advertised, recovered by raising the system’s price. It is built into the amount financed and may not appear as its own line. The headline rate looks low; the effective rate against the true cash price is higher.

Is it better to buy or lease solar?

It depends on whether you can use the benefits that come with ownership and how long you plan to stay. Owning keeps any owner incentive and the long-run value with you. A lease or PPA moves the upfront cost and maintenance to someone else, at the price of not owning the system.

What is an escalator clause?

A term that raises your lease payment or PPA rate by a fixed percentage every year for the contract term. It is sold on the assumption that utility rates will rise faster. Work out the rate in year fifteen and year twenty before signing, because that assumption may not hold.

Can I sell my house with solar?

Yes, but the financing decides how easily. An owned system transfers with the house. A loan with a UCC-1 filing, a lease or a PPA each has to be paid off, subordinated or assumed by the buyer before closing, and any of those can complicate a sale.

Does financing affect which incentives I get?

Yes. Incentives that attach to the owner of the equipment go to the third party under a lease or PPA, not to you. Whether any of that value shows up in your rate depends on the terms you sign. A tax professional can tell you what applies to you.

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HyreSolar Research

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Sources & retrieval dates

Public Law 119-21, § 70506, Termination of Residential Clean Energy Credit, Enacted July 4, 2025; enrolled text at the Government Publishing Office. Retrieved September 3, 2026.

HyreSolar does not finance solar systems, originate loans, or broker leases or power purchase agreements, and nothing here is financial or tax advice. Terms vary by lender, state and your own circumstances. Confirm anything you intend to rely on with a qualified professional before signing.