7 Most Popular Solar Financing Options Explained (2025)

The rising cost of electricity and the increasing awareness of climate change have driven many homeowners and businesses toward solar energy. Solar panels not only reduce your carbon footprint but also lower your energy bills in the long term. However, the initial cost of a solar panel system can be substantial, leading many to explore various solar financing options.

In 2025, multiple avenues exist for funding solar installations, each with its own set of advantages and disadvantages. Below, we explore these financing options to help you determine the best fit for your situation.

1. Cash Purchase

Pros:

Immediate Ownership: When you pay upfront, you own the system outright. This gives you complete control over the panels and the energy they produce.
Highest Long-term Savings: Without monthly payments or interest, you maximize your savings over the system’s lifetime.
Incentives and Tax Credits: You can directly claim any federal, state, or local incentives, including the Investment Tax Credit (ITC), which remains at 30% in 2025.
No Debt: Paying in cash means no loans or financing agreements to manage.

Cons:

High Upfront Cost: A typical residential solar system can cost $15,000 to $25,000 after incentives, which may not be feasible for all households.
Liquidity Impact: Tying up a large sum of money could affect your cash reserves for other needs or investments.

2. Solar Loans (Solar Financing)

Pros:

Ownership with Lower Upfront Costs: Solar financing allow you to own the system while spreading payments over time.
Tax Benefits: Since you own the system, you are eligible for the ITC and other incentives.
Flexible Terms: Loan options in 2025 typically include low-interest rates and terms ranging from 5 to 20 years.
Immediate Savings: Monthly solar financing payments are often lower than your electricity bill, creating savings from day one.

Cons:

Interest Costs: Depending on your credit score, interest payments can add up, reducing overall savings.
Debt Obligation: Loans increase your debt-to-income ratio, which could affect your ability to secure future financing.
Risk of Default: Missing payments can harm your credit and potentially lead to repossession of the system.

Solar Financing Options

3. Solar Leases

Pros:

No Upfront Cost: Leasing companies cover the cost of installation, making solar accessible without a major investment.
Maintenance Included: The leasing company is responsible for system maintenance and repairs.
Immediate Energy Savings: Monthly lease payments are usually lower than traditional utility bills.

Cons:

No Ownership: Unlike the solar financing option, since you don’t own the system, you cannot claim tax credits or incentives.
Lower Long-term Savings: Leasing typically offers less financial benefit over 20-25 years compared to owning a system.
Contract Limitations: Long-term contracts may include escalation clauses, increasing payments over time.

4. Power Purchase Agreements (PPAs)

Pros:

No Upfront Cost: Like leases, PPAs eliminate the need for an initial investment.
Performance-based Payments: You pay only for the energy the system generates, which can lower costs compared to traditional utilities.
No Maintenance Costs: The provider handles repairs and maintenance.

Cons:

No Ownership: You can’t claim tax credits or other incentives.
Variable Savings: Savings depend on the terms of the PPA and your energy consumption.
Limited Flexibility: PPAs often involve long-term contracts with early termination fees.

5. PACE Financing

Property Assessed Clean Energy (PACE) financing allows homeowners to pay for solar installations through their property taxes.

Pros:

No Upfront Cost: PACE covers the full cost of installation.
Transferable: If you sell your home, the financing obligation transfers to the new owner.
Tax Deductible: Payments made through property taxes may be deductible.

Cons:

Higher Interest Rates: PACE loans often carry higher interest rates than traditional loans.
Potential for Foreclosure: Missing property tax payments can lead to foreclosure.
Limited Availability: PACE is not available in all states or municipalities.

6. Community Solar Programs

Pros:

No Installation Required: You can benefit from solar energy without installing panels on your property.
Low Cost: Participants typically pay a subscription fee, which is often lower than their traditional utility bill.
Flexible Commitment: Many programs allow you to join or leave with minimal hassle.

Cons:

No Ownership: You don’t own the system and therefore cannot claim incentives.
Limited Availability: Community solar programs are not available everywhere.
Potential for Lower Savings: Savings may not be as significant as owning your own system.

7. Solar Co-ops and Group Buying

Pros:

Cost Reduction: Group purchasing can lower installation costs by leveraging bulk discounts.
Community Support: Co-ops often provide resources and guidance for navigating the solar process.
Ownership Benefits: You own the system and can claim tax credits.

Cons:

Limited Flexibility: Co-ops may require you to work with specific installers or adhere to group timelines.
Time-Consuming: Participating in a co-op can involve meetings and collective decision-making.

Conclusion

Choosing the right solar financing option for solar energy in 2025 depends on your financial situation, long-term goals, and energy needs. A cash purchase offers the highest savings but requires significant upfront capital. Solar financing and loans provide a balance between ownership and affordability, while leases and PPAs cater to those looking for low initial costs without ownership responsibilities. PACE financing, community solar, and solar co-ops offer alternative pathways, each with unique benefits and challenges.

Before committing to any option, carefully evaluate the terms, calculate potential savings, and consider consulting a financial advisor or solar expert. With the right approach, solar energy can be a financially and environmentally rewarding investment.