Solar Cash vs Loan vs Lease/PPA Calculator

How you pay for solar matters as much as the panels themselves. This calculator compares the four financing paths — cash purchase, solar loan, lease and power purchase agreement (PPA) — on a single yardstick: the net 25-year cost of each, after the electricity savings the system generates. It is built for the rules in force in 2026, after the federal residential credit disappeared.

What Changed in 2026

For nearly two decades, buying solar outright or with a loan came with a 30% federal tax credit (Section 25D) — worth $8,400 on a$28,000 system. That credit was repealed for systems installed after December 31, 2025, with no phase-down: cash and loan purchases in 2026 receive $0 in federal credit. Leases and PPAs work differently — the leasing company owns the system and can claim a separate commercial credit (Section 48E), which is factored into the pricing it offers you. State and utility incentives are unaffected and vary widely.

How It Works

The calculator projects 25 years for every path from the same savings baseline:

1. Savings baseline. Your monthly bill times 12, multiplied by the offset percentage (the share of your bill the system covers — 90% by default), gives year-one savings. The bill then escalates each year at the escalator rate (3% default), and the escalated savings are summed over 25 years.
2. Cash net is the system cost minus total savings.
3. Loan net is the total of all loan payments — the system cost amortized at your loan rate over your loan term — minus the same savings.
4. Lease net is 25 years of lease payments (the first year's payment escalates annually at the same escalator) minus the same avoided-bill savings. If you do not enter a lease payment, the calculator assumes 80% of your monthly bill.
5. PPA net is modeled identically except total payments are 95% of the lease total.

Each path's net is reported, and the lowest — often negative, meaning a net gain — is declared the winner.

The Formulas

$\text{Total Savings} = \sum_{y=0}^{24} \text{Bill} \times 12 \times \text{Offset} \times (1 + \text{Escalator})^{y}$

$\text{Net Cost} = \text{Total Payments (or System Cost)} - \text{Total Savings}$

Input Parameters

| Parameter | Unit | Description | |---|---|---| | System Cost | Currency | Full installed price before incentives. | | Monthly Bill | Currency | Your current average electricity bill; defaults to $150. | | Loan Rate / Term | % / Years | Solar loan interest rate (7.5% default) and term (15 years default). | | Lease Payment | Currency | Optional; defaults to 80% of your monthly bill. | | Offset | % | Share of your usage the system covers; defaults to 90%, maximum 150%. | | Escalator | % per year | Annual rise in electricity prices and in lease payments; defaults to 3%. |

Worked Example

A $28,000 system, a$180 monthly bill, 90% offset and a 3% escalator. Year-one savings are $180 × 12 × 90$1,944; escalated over 25 years, total savings reach $70,876.81. Against that baseline:

• Cash: $28,000 −$70,876.81 = **net −$42,876.81** (a$42,877 net gain).
• Loan at 7.5% over 15 years: $259.56 a month,$46,721.42 paid in total — $18,721.42 of interest — for a **net of −$24,155.39**.
• Lease: the default payment is 80% of the bill, $144 a month, escalating 3$63,001.61 over 25 years, for a net of −$7,875.20.
• PPA: payments at 95% of the lease total, $59,851.53, for a **net of −$11,025.28**.

Cash wins by a wide margin, and the ranking shows the structural story of 2026: with no credit for buyers, interest is the loan's handicap, while lease and PPA payments — even with the owner's commercial credit baked into pricing — consume most of the savings they generate.

Interpreting the Results

• Negative net means the path pays you. All four paths gain in this example because 25 years of escalating savings outweigh the costs; in lower-offset or low-bill situations some paths can come out positive (a true net cost).
• The spread is the decision. Here, choosing cash over a lease is worth about $35,000 over 25 years — the real price of avoiding the upfront payment.
• The escalator quietly drives everything. At 3%, bills roughly double over 25 years, which inflates the savings baseline for every path equally. Test a lower escalator to see how much of each path's "gain" depends on rising electricity prices.

Ownership Differences the Numbers Do Not Show

Cash and loan buyers own the system, capture any home-value increase, and control maintenance. Lease and PPA customers avoid upfront cost and shift maintenance to the owner, but accumulate no equity, face contract transfer negotiations when selling the home, and cannot claim any credit themselves. The calculator prices the cash flows; the ownership trade-offs are yours to weigh alongside them.

Limitations

• Lease and PPA are modeled, not quoted. The PPA is approximated as 5% cheaper than the lease total, and the default lease payment is a rule of thumb (80% of bill). Real quotes vary by provider, roof and credit profile.
• No state incentives, net-metering changes or degradation. Panel output decline, export-rate changes and state rebates are outside the model, as are loan fees and prepayment terms.
• Constant escalation. Electricity prices and lease payments are assumed to grow at one steady rate for 25 years.

Frequently Asked Questions

Is the 30% federal solar credit really gone for buyers in 2026?

Yes. Section 25D was repealed for systems installed after December 31, 2025, with no partial credit or phase-down. Cash and loan purchases receive no federal credit, which is exactly how this calculator models them.

How do leases and PPAs still benefit from a tax credit?

The leasing company owns the system and can claim the Section 48E commercial investment credit, available for projects starting construction by mid-2026 or placed in service by the end of 2027. That benefit is embedded in the monthly pricing they offer, though the pass-through is not dollar-for-dollar.

Why does the calculator assume a lease payment of 80% of my bill?

It is a modeling default for quotes you have not received yet — leases are commonly priced to undercut the bill they replace. Enter an actual quote whenever you have one; the comparison is only as good as the payment you feed it.

Which path is best if I might sell my home in a few years?

Owned systems (cash or loan) generally transfer cleanly and can add resale value, while an active lease or PPA requires the buyer to agree to assume the contract, which can narrow your buyer pool. The 25-year nets in this tool assume you stay for the full horizon.