Comparing Ways to Pay for Home Solar

What are the main ways Hoosier homeowners pay for solar?

The four common paths are cash purchase, a solar loan, a solar lease, and a power purchase agreement (PPA). With a cash purchase, you buy the system outright and own it from day one. A solar loan lets you finance that purchase, often with little or no money down. A lease means a company owns the system and you pay fixed monthly payments. A PPA means a company owns the system and you buy the electricity it produces at a set price per kilowatt-hour. The U.S. Department of Energy notes that a purchased system installed with cash can cost less overall than one financed through a loan, lease, or PPA, but the best choice depends on your budget and how long you plan to stay in your home. See Homeowner's Guide to Solar.

How do cash purchases and solar loans compare?

A cash purchase avoids interest and gives you the full tax credit if you qualify. A solar loan spreads the upfront cost over time, and in many cases monthly loan payments are smaller than a typical energy bill, which can help you save from the start. Some jurisdictions offer subsidized solar loans with below-market interest rates. New homeowners can sometimes add solar to a mortgage through programs from the Federal Housing Administration and Fannie Mae. With either cash or a loan, you own the system and can claim the federal Solar Investment Tax Credit if it is available for your installation year. The Department of Energy explains these differences at Homeowner's Guide to Solar.

What should I know about solar leases and power purchase agreements?

Leases and PPAs let you host a solar system owned by a solar company. In a lease, you make fixed monthly payments based on estimated production. In a PPA, you pay a set price per kilowatt-hour for the electricity the system generates. Both options often require no money down and can lower your electricity bills without a loan payment. However, because you do not own the system, you are not entitled to tax benefits. The Department of Energy describes these tradeoffs at Homeowner's Guide to Solar.

How do net metering and utility rates affect my savings?

Your savings depend on how much electricity you consume, the size of your system, your roof's orientation and shade, your utility's electricity rates, and how much the utility compensates you for excess solar sent to the grid. Net metering is an arrangement between solar owners and utilities in which owners are compensated for exported solar power. The details vary by state and utility, so your local electric utility is a good place to check availability, eligible system size, rates, and bill credit design. The Department of Energy discusses net metering at Homeowner's Guide to Solar. For more on how these rules work in practice, see our article on what net metering means for a home.

What other costs and incentives should I consider?

The federal Solar Investment Tax Credit may reduce your tax liability if you own the system. The Department of Energy notes that the credit was extended at 26% for systems installed in 2020 through 2022 and 22% for systems installed in 2023, with expiration starting in 2024 unless Congress renews it. State and local incentives may also apply. DSIRE, operated by the N.C. Clean Energy Technology Center, provides a comprehensive list of financial incentives and regulatory policies by zip code. An experienced local installer should be able to help you claim available incentives. See Homeowner's Guide to Solar.

How can I avoid scams and bad financing deals?

Most people going solar have a positive experience, but the Department of Energy warns that rapid growth has opened the door to a small subset of bad actors. Red flags include pushy sales tactics, unwillingness to provide written terms, and claims that sound too good to be true. The Department of Energy recommends talking to certified installers, understanding your financing options, and reporting bad actors. On August 7, 2024, the U.S. Department of the Treasury, the Consumer Financial Protection Bureau (CFPB), and the Federal Trade Commission (FTC) issued a consumer advisory to help identify potential solar scams and file complaints. The FTC accepts reports at ReportFraud.FTC.gov, and the CFPB accepts complaints online or at 1-855-411-2372. For more, see Homeowner's Guide to Solar.

What if I cannot install solar on my own roof?

If your roof is not suitable due to age or shade, or if you do not own your home, community solar may be an option. Community solar allows multiple people to benefit from a single shared solar array, with costs divided among participants who buy in at a level that fits their budget. The Department of Energy suggests EnergySage's Community Solar Marketplace to compare projects. For Indiana context, see our articles on community solar basics and questions before joining a solar subscription.

How does financing affect home resale and system ownership?

Buying a solar system likely increases your home's value. A recent study found that home buyers across the country have been willing to pay a premium of about $15,000 for a home with an average-sized solar array, and homes with solar panels may sell faster. These findings focused on homeowner-owned arrays. Third-party owned systems add some complexity to real estate transactions, but overall impacts on sales price, time on market, and customer satisfaction are mostly neutral, and in some cases they can add value. For more on choosing an installer and reading contracts, see our articles on how to vet a solar installer and clauses to notice in a solar contract.

Decision checklist

Option	Who owns the system?	Upfront cost	Monthly payment	Tax credit eligible?	Best for
Cash purchase	You	Highest	None	Yes, if you qualify	Those who can pay upfront and want lowest total cost
Solar loan	You	Low or none	Loan payment	Yes, if you qualify	Those who want ownership but need to spread costs
Lease	Solar company	None	Fixed lease payment	No	Those who want no upfront cost and predictable payments
PPA	Solar company	None	Payment per kWh	No	Those who want no upfront cost and pay for actual production

Before deciding, review current federal and state incentives, confirm net metering rules with your utility, and have a qualified installer assess your roof. For guidance on policy and consumer protection, consult official sources such as the Department of Energy.