Ask ten solar homeowners what kind of agreement they signed and a surprising number will say, "I'm honestly not sure." That's not your fault. Solar sales presentations often blur the lines between leases, power purchase agreements, and loans, and the paperwork can be long and technical.
But the type of agreement matters a lot. It determines who owns the equipment on your roof, how your payment works, what happens when you sell your home, and what your options are if the system doesn't deliver. Here's a plain-English breakdown.
The quick comparison
| Solar lease | PPA | Solar loan | Cash purchase | |
|---|---|---|---|---|
| Who owns the panels? | The solar company | The solar company | You | You |
| What do you pay for? | Use of the equipment | The electricity it produces | The system, plus interest | The system, up front |
| Typical term | 20–25 years | 20–25 years | 10–25 years | None |
| Annual increases? | Often (escalator) | Often (escalator) | Fixed or variable rate | No |
| Who maintains it? | Usually the company | Usually the company | Usually you (warranties vary) | You (warranties vary) |
| Tax incentives went to | The company | The company | You, if eligible | You, if eligible |
Solar lease
With a lease, a company installs panels on your roof and owns them. You pay a monthly amount to use the system, whether it produces a lot or a little in a given month. The company is usually responsible for maintenance and repairs.
Watch for: an annual escalator that raises your payment every year; a production guarantee (if any) and how it's measured; early termination and buyout terms; and what happens if you sell your home. Buyers often have to qualify to take over the lease, and if they won't, you may need to buy out the system. See our guide on selling a home with solar panels.
Power purchase agreement (PPA)
A PPA is similar to a lease, with one key difference: instead of paying a fixed amount to use the equipment, you pay for the electricity the system produces, at a set price per kilowatt-hour. If the system produces more, you pay more; if it produces less, you pay less, at least in theory.
Watch for: the starting price per kilowatt-hour compared with your utility's rates; the escalator (a PPA rate that rises every year can eventually exceed what your utility charges); minimum payment provisions; and how production is measured and billed. Our guide to solar escalator clauses explains why the escalator is often the most important number in a lease or PPA.
Solar loan
With a loan, you own the system, and you repay a lender over time. Many solar loans are arranged by the installer with a lender they work with, sometimes with very low advertised interest rates.
Watch for:
- Dealer or origination fees. Low-rate solar loans sometimes include significant fees baked into the loan amount, so the amount you borrow can be much higher than the system's cash price. Compare the loan amount with any cash price you were quoted.
- Tax credit assumptions. Some loans are designed around a large lump-sum payment within the first 12 to 18 months, often assumed to come from a tax credit. If you don't make it, the payment can rise.
- Liens and UCC filings. Lenders often record a UCC fixture filing against the equipment, which can show up when you refinance or sell. Learn more in Solar UCC filings and your home sale.
- Who fixes what. With ownership comes responsibility. Repairs typically depend on manufacturer and installer warranties.
Cash purchase
If you paid in full, you own the system outright with no monthly payment. Your concerns are usually about performance and workmanship: Does the system produce what was promised? Was the installation done properly? Are the warranties being honored?
Which one do I have?
Look at the first page of your agreement and the signature page. Common clues:
- Words like "Lease," "Lessor," "Lessee," or "Monthly Lease Payment" → lease
- "Power Purchase Agreement," "price per kWh," or "energy rate" → PPA
- A separate document from a lender with an APR, finance charge, and "Truth in Lending" disclosure box → loan
- An invoice or purchase contract with a total price and no financing → cash
If you have a loan, you may have two sets of documents: an installation agreement with the solar company and a loan agreement with the lender. Keep both.
Why the agreement type matters when something goes wrong
The type of agreement affects who's responsible for what, which company you deal with, and which resolutions may be realistic:
- Leases and PPAs: the solar company owns the equipment, so resolution often involves the company itself, sometimes through a buyout reduction, a rate adjustment, production credits, or removal of the system.
- Loans: both the installer and the lender may be involved, and the loan may remain even if the installer has problems or has gone out of business.
- Cash purchases: the focus is usually workmanship, performance, and warranties.
In every case, check whether your agreement includes an arbitration clause, which most do. Read what arbitration is and how it works for solar disputes.
A word about "switching" from one type to another
Some homeowners are told they can easily refinance a lease into a loan, or buy out a PPA at any time. Sometimes that's true, but buyout prices can be high and are usually set by formulas in the agreement. Before making any change, get the numbers in writing and understand how they were calculated.
Key takeaways
- Leases and PPAs: the company owns the panels; watch the escalator and transfer terms.
- Loans: you own the panels; watch dealer fees, tax credit assumptions, and UCC filings.
- Cash: you own it outright; focus on performance and warranties.
- Not sure what you have? Look for the clues above, or send us your paperwork for a free review.
Every agreement and every situation is different. Results vary, and no one can promise a specific outcome.
This article is general information, not legal advice. Laws and utility rules change, and your situation may differ. Solar Resolution Group is not a law firm.