Two identical arrays on two identical roofs can differ by tens of thousands of dollars over twenty-five years based purely on how they were paid for. Here is what separates the four options, and the specific clauses that decide whether a deal is good.
Cash purchase
You own the system outright. You claim any tax credits you qualify for, you keep all production value, and there is no lien or lease on the property. This produces the lowest lifetime cost and the highest return, and it is the simplest transaction to sell a house out of.
The catch is the capital. Compare the return against what that money would otherwise do. Solar returns are steady and inflation-linked in the sense that they rise as utility rates rise, which is a genuinely attractive characteristic, but the money is illiquid once it is on the roof.
Solar loan
You own the system and finance it. Still eligible for tax credits, still yours to keep. The complications live in the loan structure, and two features deserve careful reading.
Dealer fees. Low advertised interest rates on solar loans are commonly funded by a fee paid by the installer to the lender, which is built into the system price. A 2.99 percent loan can carry a dealer fee of fifteen to thirty percent of the contract. Ask directly for the cash price and the financed price. If the installer will not quote a cash price, you have learned what the fee is doing.
Re-amortization. Many solar loans are structured with a low initial payment that assumes you will apply your tax credit as a lump sum principal payment within the first 12 to 18 months. If you do not, or if you do not qualify for the credit you expected, the loan re-amortizes and the payment jumps significantly. This surprises people every year. Find the clause, read the two payment amounts, and know which one you are committing to.
Lease
A third party owns the system on your roof. You pay a fixed monthly amount for the equipment regardless of how much it produces. The owner claims the tax credits, not you. Maintenance and monitoring are typically the owner's responsibility, which has real value for people who do not want to manage equipment.
The clause that matters is the escalator. Many leases raise the payment by 1.9 to 2.9 percent annually for the full term. Over twenty years a 2.9 percent escalator nearly doubles the payment, and the deal only stays good if utility rates rise at least as fast for the entire period. Model the last five years of the lease, not the first.
Power purchase agreement
A PPA is similar to a lease with one structural difference: you pay per kilowatt-hour produced rather than a flat monthly amount. If the system underproduces, you pay less. That shifts production risk to the owner, which is the PPA's genuine advantage.
PPAs carry escalators too, and the same analysis applies. Compare the PPA rate today against your blended utility rate today, then compare the PPA rate in year fifteen against a reasonable projection of utility rates in year fifteen. If the PPA escalator exceeds likely utility inflation, the deal gets worse every year it runs.
What happens when you sell the house
This is where third-party arrangements create friction, and it is worth understanding before you sign rather than during a closing.
- Owned system, cash or paid-off loan. Cleanest. The system conveys with the house and generally supports the appraised value.
- Owned system with a loan balance. Usually paid off at closing from proceeds, like any other secured debt. Check whether the lender filed a UCC-1 fixture filing, because that will surface in title work.
- Lease or PPA. The buyer must qualify for and assume the agreement, or you must buy it out. Buyers with financing sometimes balk, and buyout amounts in the early years can be uncomfortably large. Read both the assumption requirements and the buyout schedule before signing, not after listing.
Comparing offers on one number
Advertised monthly payments are not comparable across financing types because the terms differ. Convert everything to lifetime cost per kilowatt-hour: total payments over the full term, divided by total estimated production over that term. That gives one number per offer that can sit next to your current blended utility rate.
Do it twice, once with the proposal's own production estimate and once with production reduced by ten percent, so you can see how sensitive each structure is to the system underperforming. A loan on an owned system is insensitive because you paid a fixed amount either way. A PPA is fully sensitive. A lease is the worst case, because you pay the same regardless.
Before you sign anything
Get the full contract, not the proposal summary, and find these five items: the total amount financed and the cash price, the escalator if any, the term length, the buyout or payoff schedule, and the assignment terms on sale. If any of the five is missing from the document you are being asked to sign, that is the answer.