Chapter 6: Understanding Solar Contracts and Agreements
You’ve decided solar could be a great fit for your home—but how you pay for it is just as important as which panels you choose. The truth is, there’s no one-size-fits-all solution. Whether you want to own your system, pay over time, or simply pay for the power it produces, there’s a contract structure to fit your financial goals and lifestyle.
In this lesson, we’ll break down the four most common types of solar agreements—cash purchase, solar loan, solar lease, and power purchase agreement (PPA)—so you can feel confident choosing the path that’s right for you.
IN THIS LESSON
Different Paths to Solar
Which One Fits You Best?
Cash Purchase
What it is:
You pay the full cost of the system upfront and own it from day one.
Pros:
Highest return on investment (ROI) over time
You keep all available tax credits and incentives
No monthly payments or interest
Increases home value (you own the asset)
Cons:
Higher upfront cost
Takes longer to “break even” compared to loan/lease options
Best for:
Homeowners with available capital
People looking for maximum long-term savings
Those planning to stay in their home long-term
Solar Loan
What it is:
You finance the system with a loan and make monthly payments over time, just like a car loan.
Pros:
You still own the system and qualify for tax credits
Little to no upfront cost
Flexible terms (e.g., 5, 10, 20, or 25years)
Fixed monthly payments that may be lower than your utility bill
Cons:
You’ll pay interest over time
Involves taking on debt.
How you choose to use the federal solar tax credit partially determines your monthly payment amount.
Best for:
Homeowners who want to own their system but prefer to spread out payments
Those with good credit looking to build equity in their system
Solar Lease
What it is:
You pay a fixed monthly amount to "rent" the solar system. The solar provider owns and maintains it.
Pros:
Low or no upfront cost
All maintenance is handled by the provider
Predictable monthly payment
Cons:
You don’t own the system, so you don’t get tax credits
Monthly payment continues even if energy production decreases
Can complicate home resale
Generally not recommended anymore since PPA’s have all the benefits without the negatives.
Power Purchase Agreement (PPA)
What it is:
You don’t pay for the panels—you only pay for the solar electricity they generate, at a lower rate than your utility.
Pros:
No upfront cost
Simplest way to go solar.
Easy to transfer to a new homeowner if you move.
Lower electricity rate than your utility
Provider handles installation, maintenance, and performance
Cons:
You don’t own the system or receive tax credit directly
Can include small annual price escalators
Best for:
Homeowners who want lower power bills without the commitment to ownership
People more concerned with monthly savings than asset value
Key Takeaway:
There’s more than one way to go solar. Whether you want to own your power, reduce your bills, or avoid upfront costs, the right solar contract can help you get there. The key is understanding what you’re signing—and why it works for you.
Still Not Sure Which Option Fits You Best? Let’s Walk Through It Together
We’ll help you compare contract types side-by-side based on your goals, credit, and usage. No push. No pressure.
➡️ Schedule a free solar financing consultation today and make the confident choice for your home.