Lease vs Buy vs PPA Calculator
Compare solar cash purchase, loan, lease, and PPA side-by-side over 25 years. Shows cumulative savings, NPV at 7%, payback period, and 25-year winner — free, no signup.
Solar Lease vs Buy vs PPA Calculator
Enter your system details once and compare cash, loan, lease, and PPA side-by-side over 25 years - cumulative savings, NPV at 7%, payback period, and monthly payments.
| Metric | Cash Purchase | Solar Loan | Solar Lease | PPA |
|---|---|---|---|---|
| Upfront Cost | - | - | $0 | $0 |
| Monthly Payment (Yr 1) | None | - | - | - |
| You Own the System | Yes | Yes | No | No |
| Eligible for 30% ITC | Yes | Yes | No | No |
| 10-Year Cumulative Net | - | - | - | - |
| 20-Year Cumulative Net | - | - | - | - |
| 25-Year Cumulative Net | - | - | - | - |
| NPV (7% discount rate) | - | - | - | - |
| Payback Period | - | - | N/A | N/A |
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What This Calculator Covers
Four solar financing options compared side-by-side over 25 years. Enter your system details once - the calculator handles the rest in real time.
Cash Purchase
Full upfront payment. Eligible for the 30% federal ITC, state rebates, and SREC income. Highest 25-year savings, zero financing cost.
Solar Loan
Finance the system with a solar loan. You own the panels, keep the 30% ITC, and build equity. APR set by credit score - 5-25 year terms available.
Solar Lease
Rent the system for a fixed monthly payment with an annual escalator. No upfront cost, no ITC eligibility. Installer owns and maintains the panels.
Power Purchase Agreement
Buy the solar electricity at a per-kWh rate, not the system. Rate is typically 10–30% below your utility rate and escalates annually. No ownership, no ITC.
Key Features
Built for solar installers explaining financing options to customers, and for homeowners evaluating proposals side-by-side.
25-Year Cumulative Net Position Chart
Interactive line chart tracks cumulative savings (or costs) for all four options simultaneously over 25 years, with a break-even reference line. Hover to see exact values at any year.
NPV at 7% Discount Rate
Net present value calculated for all four options using 7% - the historical S&P 500 average - to account for the opportunity cost of upfront capital. Shown in the side-by-side table.
Credit Score → APR Quick-Select
Four credit score bands (Excellent 750+, Good 700–749, Fair 650–699, Below Fair) auto-populate the loan APR with market-rate estimates. APR is also editable directly.
ITC & SREC Income Modeling
Cash and loan options include the 30% federal ITC. Optionally apply the ITC refund to reduce loan principal in year 1. SREC income (NJ, MA, DC, IL, OH, PA) is added annually for ownership options.
Escalator & Rate Sensitivity
Set utility rate escalation (US avg 2.85%/yr per EIA), lease payment escalator (1.5–3.5% typical), and PPA rate escalator independently. The chart updates instantly to show how small differences compound over 25 years.
Contextual Risk Flags
The winner banner shows alerts when a non-ownership option wins despite ITC availability, when lease/PPA escalators approach the utility rate, or when a loan payback period exceeds 15 years.
How to Use This Calculator
Five input sections, one set of results - updated in real time as you adjust any field.
Enter system and energy details
Start with system size (kW), total installed cost, annual solar production (kWh from PVWatts or your design tool), and your current utility rate (¢/kWh). Set self-consumption percentage (how much solar you use directly vs export) and the expected annual utility rate increase.
Configure cash purchase inputs
Set the federal ITC percentage (30% for most residential installs through 2032), any state or local rebate amount, and annual SREC income if your state has a solar renewable energy credit program (New Jersey, Massachusetts, DC, Illinois, Ohio, Pennsylvania).
Set up the loan scenario
Select a credit score band to auto-fill the APR, or enter the rate directly. Choose loan term (5–25 years) and down payment. Check the ITC application checkbox if the borrower plans to apply their first-year ITC refund to reduce principal - the most common loan payoff strategy.
Enter lease and PPA terms
For the lease: enter monthly payment and annual escalator (typically 1.5–3.5%). For the PPA: enter per-kWh rate (should be 10–30% below your utility rate) and annual escalator. Set the term for each - 20 or 25 years. After the lease or PPA expires, the model assumes the customer pays full grid rates.
Read the results
The winner banner shows the 25-year champion and total savings. The comparison table shows upfront cost, monthly payments, 10/20/25-year cumulative net, NPV, and payback period. The line chart shows exactly when each option crosses break-even and how the gap between options widens over time.
Calculation Methodology
Transparent formulas based on NREL panel degradation data and EIA utility escalation averages. All assumptions are visible and adjustable.
Annual Energy Value
Production(n) = annual_kWh × (1 − 0.005)^n
Rate(n) = utility_rate × (1 + escalation)^n
Energy Value(n) = Production(n) × Rate(n) × (self_consumption + 0.80 × (1 − self_consumption))
Panel output degrades 0.5%/year per NREL standard. Exported energy is credited at 80% of the retail rate (net metering). In year 10 on a typical 8 kW system, degradation reduces production by about 4.9%.
Loan Monthly Payment
PMT = P × r(1+r)^n / ((1+r)^n − 1)
where r = APR ÷ 12, n = term in months
P = system_cost − down_payment [− ITC_refund if checkbox selected]
Standard amortization formula. If ITC application is checked, the 30% federal credit is subtracted from principal in month 1 - reducing monthly payments for the remaining term. Most borrowers receive the ITC in the tax year of installation and apply it to principal.
Cumulative Net Position
Cash: cumulative += energy_value + SREC − [upfront cost in year 0]
Loan: cumulative += energy_value + SREC − annual_loan_payments
Lease: cumulative += energy_value − lease_payment × (1 + escalator)^n
PPA: cumulative += (utility_rate − PPA_rate × (1 + escalator)^n) × production
After lease or PPA term end, the model reverts the customer to full grid rate - showing the true cost of not owning the system at contract expiry.
Net Present Value (NPV)
7% discount rate represents the historical average annual return of the S&P 500 - the relevant comparison when deciding whether to deploy capital into solar vs leaving it invested. A higher NPV indicates better use of money over the 25-year period, even accounting for the time value of capital.
Solar Financing Options: Key Differences
How the four options compare on the factors that matter most for long-term financial outcome.
| Factor | Cash Purchase | Solar Loan | Lease | PPA |
|---|---|---|---|---|
| Upfront Cost | Full system cost | Down payment (or $0) | $0 | $0 |
| You Own the System | Yes | Yes | No | No |
| 30% Federal ITC | Yes | Yes | No - installer keeps it | No - installer keeps it |
| SREC Income Eligible | Yes | Yes | No | No |
| Increases Home Value | Yes | Yes | Complicates sale | Complicates sale |
| Maintenance Responsibility | Owner | Owner | Installer | Installer |
| 25-Year Savings (typical) | Highest | High (minus interest) | Moderate | Moderate |
| Payback Period | 6–10 years | 8–15 years | N/A (no ownership) | N/A (no ownership) |
When Each Option Makes Financial Sense
The "right" answer depends on the customer's tax liability, available capital, credit score, and how long they plan to stay in the home.
Cash Purchase wins when...
- The customer has sufficient liquidity and plans to stay 10+ years
- Federal ITC can be fully used in year 1 (sufficient tax liability)
- SREC income is available in the state
- Home sale is not imminent (no lease/PPA transfer complication)
Solar Loan wins when...
- Customer wants ownership and ITC benefits without tying up capital
- APR is below 8% and term is 10–15 years
- ITC refund will be applied to principal in year 1
- Customer has good credit (750+) for the lowest available APR
Lease wins when...
- Customer has low or no federal tax liability (can't use ITC)
- Predictable fixed monthly cost is more important than maximum savings
- Customer does not want maintenance responsibility
- Lease escalator is significantly below the projected utility rate increase
PPA wins when...
- PPA rate is substantially below local utility rate (15%+ discount)
- Customer prefers variable cost aligned with production vs fixed lease
- Low federal tax liability eliminates the ownership advantage
- Utility rates are rising fast and the PPA escalator is low
Pro Tips
Check ITC eligibility before recommending lease or PPA
The 30% federal ITC is worth roughly $7,300 on a typical $24,400 system - a significant gap vs non-ownership options. If the customer has sufficient federal tax liability, ownership almost always wins at 25 years. Use the calculator's ITC warning flag: if a lease or PPA is winning despite ITC availability, it's usually because the APR or system cost inputs are skewed.
Watch the escalator gap, not just year-1 savings
A lease at $120/month with a 3% annual escalator costs $219/month by year 25. If utility rates only escalate at 2.85%, the lease escalator exceeds utility rate growth - wiping out the savings advantage. Set both escalators to your best estimates and watch the 25-year chart. Small escalator differences compound dramatically over time.
Apply ITC to loan principal for maximum loan value
Most solar lenders structure loans expecting the borrower to make a large principal payment in month 12–18 using their ITC refund. Enable the "Apply 30% ITC Refund" checkbox in the loan section to model this correctly. It reduces monthly payments for the remaining term and significantly shortens payback period vs a no-ITC loan scenario.
Model lease/PPA transfer risk for near-term home sellers
Lease and PPA agreements transfer with the home sale - the new buyer must qualify to assume the contract or the seller must buy it out. This complicates real estate transactions and can reduce sale price. The calculator doesn't model transfer risk directly, but if the customer may sell within 5–10 years, ownership (loan or cash) eliminates this complication entirely.
Frequently Asked Questions
Is cash purchase always better than a solar loan?
Why do lease and PPA customers lose the 30% federal tax credit?
What happens after the lease or PPA expires?
What is a good solar loan APR?
What is a PPA rate and how is it set?
Does solar increase my home's value with a lease or PPA?
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