Lease vs. PPA vs. loan: what's the real difference?

Contract basics · 8 min read · Updated May 5, 2026

Most homeowners can’t actually tell which kind of solar agreement they signed. The salesperson said “$0 down” and gave you a payment number. But what you actually signed was one of three very different financial instruments.

The three types at a glance

Lease

You rent the panels for 20–25 years at a fixed monthly rate. The rate goes up every year by the escalator. You don’t own the panels and don’t get the federal tax credit.

Exit: buyout at “fair market value,” prepay the remaining payments, or transfer the lease to a buyer when you sell.

PPA (Power Purchase Agreement)

Like a lease, but you pay per kWh produced rather than a flat monthly fee. If your system produces 800 kWh and the rate is $0.16/kWh, you owe $128 that month. Production drops in winter — so does the payment.

Watch out for: “minimum production” clauses where you owe a floor regardless of actual output.

Loan

You own the panels. You took out a loan from a finance company (GoodLeap, Sunlight Financial, Mosaic, Service Finance, etc.) and the system was installed. You qualify for the 30% federal tax credit.

Solar loans are governed by the federal Truth in Lending Act — required disclosures include APR, total of payments, and finance charges. Missing or wrong disclosures may give you legal grounds.

How to tell which one you have

• Find the front page of your agreement. The header almost always says “Solar Lease,” “Solar PPA,” or “Loan Agreement.”
• Search for the words “per kWh” — if found, it’s likely a PPA.
• Look for an APR disclosure — that’s a TILA loan.
• If you’re still unsure, our free review will identify it for you.