You have decided to go solar — congratulations. Now comes the next big question: how should you pay for it? The financing option you choose can mean the difference between saving $30,000 and saving $50,000 over the life of your system. It affects your tax benefits, your home value, and your flexibility.
There are four primary ways to finance a residential solar system: cash purchase, solar loan, solar lease, and power purchase agreement (PPA). Each has distinct advantages and trade-offs. This guide compares them honestly so you can make the best choice for your situation.
Quick Comparison
| Factor | Cash Purchase | Solar Loan | Solar Lease | PPA |
|---|---|---|---|---|
| Upfront cost | Full system cost | $0 down | $0 down | $0 down |
| System ownership | You own | You own | Company owns | Company owns |
| 30% tax credit | Yes | Yes | No | No |
| Monthly payment | None | Loan payment | Fixed lease fee | Per-kWh rate |
| 25-year savings | Highest | High | Moderate | Moderate |
| Home value increase | Yes | Yes | Complicated | Complicated |
| Maintenance responsibility | You | You (warranty covers most) | Leasing company | PPA provider |
| Contract length | N/A | 10-25 years | 20-25 years | 20-25 years |
| Early buyout option | N/A | Pay off anytime | Yes, at market value | Yes, at market value |
Option 1: Cash Purchase
How It Works
You pay the full cost of the system upfront. The system is yours from day one.
Typical Numbers (7 kW System in Colorado)
- System cost: $21,000
- Federal tax credit (30%): -$6,300
- Net cost: $14,700
- Annual electricity savings: $1,500
- Payback period: 7 years
- 25-year savings: $37,000+
Pros
- Highest total savings. No interest payments means more money stays in your pocket over 25 years.
- Full tax credit. You receive the entire 30 percent ITC.
- Immediate ROI. Your electricity savings begin on day one with no monthly payment offsetting them.
- Maximum home value increase. An owned, paid-off solar system adds the most value to your home.
- Simplest arrangement. No monthly payments, no contract, no third parties.
Cons
- High upfront cost. $14,000 to $25,000 (after tax credit) is a significant cash outlay.
- Opportunity cost. Money spent on solar cannot be invested elsewhere (though solar's ROI of 10-15% is competitive).
- Maintenance is your responsibility. Though panels require minimal maintenance and are covered by manufacturer warranties.
Best For
Homeowners with available cash or home equity who want to maximize their return on investment. If you have the capital and plan to stay in your home for at least 7 years, a cash purchase delivers the best financial outcome.
Option 2: Solar Loan
How It Works
A lending institution finances your solar system. You make monthly payments over 10 to 25 years, typically at a fixed interest rate. You own the system from day one, which means you receive the 30 percent federal tax credit.
Typical Numbers (7 kW System)
- System cost: $21,000
- Federal tax credit: -$6,300
- Amount financed: $21,000
- Loan term: 25 years at 5.5% APR
- Monthly payment: approximately $128
- Current monthly electric bill: $150
- Net monthly savings: $22 (from day one)
- 25-year savings: $25,000 - $32,000
How to Handle the Tax Credit
Many homeowners use the $6,300 tax credit (received when filing taxes the following spring) to pay down the loan principal. This reduces the loan balance and monthly payment, increasing your ongoing savings. Some loan products automatically account for this with a "re-amortization" feature.
Pros
- $0 down. Go solar with no upfront cash investment.
- You own the system. Full eligibility for the 30% federal tax credit.
- Immediate savings. Monthly loan payments are often less than your current electric bill.
- Home value increase. Owned solar adds value to your property.
- Fixed payments. Your solar payment stays the same while utility rates continue to rise, increasing your savings each year.
- Flexible payoff. Pay off the loan early at any time with no prepayment penalty (on most solar loans).
Cons
- Interest costs. Over 25 years, interest adds $8,000 to $15,000 to the total cost.
- Credit requirement. Most solar loans require a credit score of 650+ for the best rates.
- Monthly payment obligation. Even though it replaces your electric bill, it is still a financial commitment.
Best For
Most homeowners. A solar loan lets you own the system and receive the tax credit while spreading the cost over time. If your loan payment is less than your electric bill, you save money from day one with zero upfront investment. This is the most popular financing option we see at ProGreen Solar.
Option 3: Solar Lease
How It Works
A third-party company installs solar panels on your roof and owns the system. You pay a fixed monthly fee to "rent" the panels and use the electricity they produce. The leasing company handles all maintenance.
Typical Numbers (7 kW System)
- Upfront cost: $0
- Monthly lease payment: $90 - $130
- Annual escalator: 0 - 2.9% per year
- Contract length: 20 - 25 years
- Current monthly electric bill: $150
- Monthly savings: $20 - $60
- 25-year savings: $5,000 - $15,000
Pros
- $0 down, guaranteed savings. Your lease payment is lower than your electric bill.
- No maintenance responsibility. The leasing company handles all repairs and monitoring.
- Simple process. No loan applications, no tax credit paperwork.
- Predictable costs. Fixed or slowly escalating payments.
Cons
- You do NOT receive the tax credit. The leasing company claims the 30% ITC since they own the system. This is a massive financial difference — $4,500 to $9,000+ that goes to the company, not you.
- Lower total savings. Because you are paying a monthly fee and not receiving the tax credit, your 25-year savings are significantly less than with ownership.
- No home value increase. Leased solar systems do not add value to your home — in fact, they can complicate home sales. Buyers must agree to assume the lease.
- Long-term commitment. 20 to 25-year contracts with early termination fees.
- Escalator clauses. Some leases increase payments 2 to 3 percent annually. Over 25 years, a $100 monthly payment with a 2.9% escalator becomes $200.
- Transfer complications. Selling your home requires the buyer to qualify for and assume the lease, which can deter buyers or delay sales.
Best For
Homeowners who have low or no federal tax liability (and cannot benefit from the ITC), do not want any maintenance responsibility, and prioritize simplicity over maximum savings. In most cases, a solar loan is a better financial choice.
Option 4: Power Purchase Agreement (PPA)
How It Works
Similar to a lease, but instead of a fixed monthly fee, you pay a per-kilowatt-hour rate for the electricity your panels produce. The rate is typically 10 to 30 percent below your utility rate.
Typical Numbers (7 kW System)
- Upfront cost: $0
- PPA rate: $0.10 - $0.12 per kWh (vs. $0.14 utility rate)
- Annual escalator: 0 - 2.9%
- Contract length: 20 - 25 years
- Monthly savings: $20 - $50
- 25-year savings: $5,000 - $12,000
Pros
- $0 down.
- Pay only for what you produce. If panels produce less (due to a cloudy month), you pay less.
- Below-market electricity rate. Guaranteed discount on current utility prices.
- No maintenance responsibility.
Cons
- Same drawbacks as leases: No tax credit, no home value increase, long contracts, potential escalator clauses, and transfer complications.
- Variable monthly costs. Your payment fluctuates with production, making budgeting slightly less predictable.
- You may pay for electricity you do not use. If your system overproduces, you are still paying for every kWh generated.
Best For
Similar to leases — homeowners who cannot benefit from the tax credit and want a variable-cost structure rather than a fixed fee. PPAs are more common in commercial installations.
The Numbers Do Not Lie: Ownership Wins
Let us compare the 25-year financial outcomes for the same 7 kW system:
| Financing Method | 25-Year Total Cost | 25-Year Total Savings | Total Net Benefit |
|---|---|---|---|
| Cash Purchase | $14,700 | $52,000 | $37,300 |
| Solar Loan (25yr, 5.5%) | $38,500 | $52,000 | $13,500 - $25,000* |
| Solar Lease (2% escalator) | $33,000 | $45,000 | $12,000 |
| PPA (2% escalator) | $30,000 | $42,000 | $12,000 |
*Range depends on whether the tax credit is applied to reduce loan principal.
The cash purchase delivers the highest return, followed by the solar loan. Both ownership options significantly outperform leases and PPAs over the long term because you receive the 30 percent tax credit and build equity in the system.
What About $0 Down Solar?
"$0 down" is a marketing phrase used by all financing types. But $0 down with a solar loan is fundamentally different from $0 down with a lease or PPA:
- $0 down loan: You own the system, receive the tax credit, build home equity, and accumulate maximum savings. You just spread the cost over time.
- $0 down lease/PPA: You do not own the system, forfeit the tax credit, and save less overall.
Both involve zero upfront payment, but the financial outcomes are dramatically different. Read more in our $0 Down Solar guide.
Factors to Consider When Choosing
Your Tax Situation
If you pay $5,000+ in federal income taxes annually, a loan or cash purchase makes the most sense because you can fully utilize the 30 percent ITC. If you have little or no tax liability, a lease or PPA might be more practical since you cannot benefit from the credit anyway.
Your Credit Score
Solar loans require reasonable credit (650+ for the best rates). If your credit score is below this threshold, you may need to explore leases or PPAs, or work on improving your credit before applying.
How Long You Plan to Stay
If you are staying in your home for 7+ years, ownership (cash or loan) provides the best return. If you might sell within 3 to 5 years, a lease might be easier since there is no loan to pay off — though lease transfers can complicate sales.
Your Risk Tolerance
Cash and loans provide predictable savings with well-understood payback periods. Leases and PPAs shift performance risk to the third-party company but also shift the financial benefits.
ProGreen Solar's Recommendation
For the majority of Colorado homeowners, we recommend a solar loan with $0 down. Here is why:
- You own the system and receive the 30 percent federal tax credit
- Your monthly payment is often less than your current electric bill — you save from day one
- You build equity in a tangible asset that increases your home's value
- Your savings grow each year as utility rates rise while your loan payment stays fixed
- You can pay off the loan early at any time
We work with multiple lending partners to find the best rates and terms for your situation. Many of our customers use their tax credit refund to make a lump-sum payment on their loan, reducing their monthly payment and accelerating their savings.
Get Your Personalized Financing Analysis
Every homeowner's financial situation is different. Let us run the numbers specifically for you — comparing cash, loan, and lease scenarios using your actual electricity usage, tax situation, and goals.
Get your free solar estimate or call ProGreen Solar at (303) 484-1410. We will present every option transparently and help you choose the financing path that delivers the most value for your situation.
