Quick answer: In California in 2026, a solar lease often beats a solar loan on monthly cash flow for the first time in a decade. The federal residential tax credit (Section 25D) expired December 31, 2025, so cash and loan buyers now get $0 from the IRS, while lease and PPA providers still claim a 30% federal credit under Section 48E and pass part of it through as lower payments. A loan or cash purchase still wins on 25-year total cost and home value if you avoid dealer fees and stay in the home 12+ years.
Key takeaways
- Buy solar with cash or a loan in 2026 and your federal tax credit is $0. Section 25D was repealed effective December 31, 2025.
- Lease and PPA providers still claim 30% under Section 48E, which is why lease payments in 2026 frequently undercut loan payments on the same system.
- The biggest trap in solar loans is not the APR. It is the dealer fee, typically 20% to 30% of the system price, buried in your principal.
- Ownership still wins long term: no escalator, a home value bump, and California’s solar property tax exclusion, which sunsets January 1, 2027.
- Under NEM 3.0 the financing question is really a solar plus battery question. Run the numbers on the full system, not panels alone.
For ten years I gave every California homeowner the same advice: if you can qualify for a loan, do not lease. The 30% federal credit belonged to the owner, so leasing meant handing the single biggest incentive in solar to a finance company. In 2026 I have to update that advice, because Congress handed the incentive to the finance companies for us.
What changed for solar financing in 2026?
The short version: the federal tax credit now only flows through leases and PPAs, not purchases. The One Big Beautiful Bill Act, signed July 4, 2025, repealed the Section 25D Residential Clean Energy Credit for systems installed after December 31, 2025. The IRS confirms that a system you buy and place in service in 2026 earns no federal credit. On a $34,000 solar plus battery project, that is $10,200 that vanished from the buy side of the ledger overnight.
The commercial credit survived. When a solar company owns the system on your roof and leases it to you, that company claims 30% under Section 48E, generally for projects placed in service by the end of 2027, and providers that stockpiled equipment before the July 2026 construction deadline can keep offering credit-backed leases beyond that. The provider keeps some of that 30% and passes the rest through as a lower monthly payment. Industry analysts expect roughly two thirds of 2026 residential installs nationwide to be third-party owned for exactly this reason.
One more deadline California homeowners should know: the state’s property tax exclusion for solar sunsets January 1, 2027. A system you own that is completed in 2026 is permanently shielded from property tax reassessment. Leased systems never triggered reassessment anyway, but for buyers this is a real, expiring reason to move this year rather than next.
How do solar loans work in 2026?
A solar loan finances a system you own, and in 2026 you should judge it on two numbers: the APR and the dealer fee. Typical solar loan APRs run 6% to 10% for borrowers with a 720+ FICO score, with credit unions posting the lowest rates, roughly 6% to 8% with no dealer fee.
The dealer fee is where most homeowners get hurt. When an installer offers a teaser rate like 0.99% or 3.99%, the lender charges the installer a fee of 20% to 30% of the system price, and that fee gets rolled into your loan principal. A $34,000 system financed with a 22% dealer fee means you borrow $41,480 and pay interest on all of it for 25 years. The Consumer Financial Protection Bureau has flagged this exact structure because the fee is not reflected in the advertised APR. Our rule across NRG installs: always ask for the cash price and the financed price side by side. If they differ by more than a few percent, the low APR is a costume.
One relic to watch for: some lenders still structure payments assuming you will make a large “tax credit” prepayment in month 18. In 2026 there is no federal credit for a purchased system. If a loan quote shows a payment that jumps after month 18 unless you prepay 30%, that quote was built for 2025 and your real payment is the higher one.
How do solar leases work in 2026?
A lease (or its cousin, the PPA) puts a system the provider owns on your roof for a fixed monthly payment, usually with $0 down, with the provider handling maintenance, monitoring, and insurance. Because the provider claims the 30% Section 48E credit, 2026 lease pricing on a given system is often 20% to 30% below the loan payment for the same hardware.
The two clauses that decide whether a lease is good or bad:
- The escalator. Many leases raise the payment 2% to 3% every year. A $165 payment with a 2.9% escalator becomes $328 in year 25 and adds over $21,000 to lifetime cost versus a flat payment. Flat-payment leases exist. Ask for one.
- The transfer terms. When you sell the home, the buyer must qualify to assume the lease or you must buy it out. Get the buyout schedule in writing before you sign, not during escrow.
The 2026 comparison, side by side
Table: Solar loan vs. solar lease in California, August 2026
| Solar loan (you own) | Solar lease (provider owns) | |
|---|---|---|
| Federal tax credit | $0 (Section 25D expired 12/31/25) | 30% to provider (Section 48E), partially passed through |
| Upfront cost | $0 down available; dealer fee risk | Usually $0 down |
| Typical 2026 pricing | 6% to 10% APR clean; teaser APRs carry 20% to 30% dealer fees | Monthly payment often below the equivalent loan payment |
| Payment over time | Fixed | Fixed or 2% to 3% annual escalator |
| Home value | Owned systems add resale value | No added value; lease must transfer or be bought out |
| Property tax | Excluded from reassessment if completed before 1/1/27 | Not applicable |
| Maintenance | Yours (panel warranties 25 yr) | Provider’s responsibility |
| 25-year total cost | Lowest if dealer-fee free | Typically highest, especially with escalator |
Source: IRS Section 25D guidance; CPUC rate filings; 2026 lender rate sheets.
The worked example: a Riverside home on SCE
Here is one scenario carried all the way through. A Riverside household on SCE’s TOU-D-4-9PM plan uses 800 kWh per month. At SCE’s average residential rate of roughly 34.5 cents per kWh after the January 2026 decrease, with peak pricing in the 40 to 55 cent range during the 4 to 9 p.m. window, that is about a $276 monthly bill. The quoted system: 7.2 kW of panels plus a 13.5 kWh battery at $34,000 installed, in line with the $2.40 to $3.25 per watt we see across California quotes (full breakdown in our California solar cost guide).
Under NEM 3.0, the CPUC’s net billing tariff pays only a fraction of retail for exported power, so the battery does the heavy lifting: store midday production, spend it during the 4 to 9 p.m. peak. A well-sized pairing offsets 85% to 90% of this bill, cutting it to roughly $40 per month and saving about $235 per month in year one.
Table: Three ways to pay for the same $34,000 system
| Cash | Loan (no dealer fee, 8.99%, 15 yr) | Lease ($165/mo, 2.9% escalator) | |
|---|---|---|---|
| Upfront | $34,000 | $0 | $0 |
| Amount financed | n/a | $34,000 | n/a |
| Monthly payment, year 1 | $0 | $345 | $165 |
| Year-1 monthly cash flow vs. old bill | +$235 | -$110 | +$70 |
| Payment in year 25 | $0 | $0 (paid off yr 15) | $328 |
| 25-year cost of the system | $34,000 | ~$62,000 | ~$71,200 |
| You own it at the end | Yes | Yes | No |
Assumes $235/mo year-1 savings growing with utility rates. Loan payment calculated at 8.99% APR over 180 months. Lease total is the sum of 300 escalating payments.
[CHART: grouped bar chart, “25-Year Cost of the Same 7.2 kW + Battery System, Riverside CA”, x-axis: financing method (Cash, Loan 8.99% no fee, Loan 3.99% with 22% dealer fee, Lease 2.9% escalator), y-axis: total dollars paid, values: $34,000 / $62,000 / $65,600 / $71,200, source: NRG calculations from 2026 lender rate sheets and standard lease terms]
Takeaway sentence for below the chart: the cheapest month-one option (the lease) is the most expensive 25-year option, and the dealer-fee loan costs nearly as much as the lease despite its 3.99% sticker rate.
Read that cash flow row again, because it is the flip. In 2025, the loan buyer applied a $10,200 federal credit and the loan cash-flowed near breakeven from year one. In 2026 the same loan buyer is $110 per month underwater until rates rise or the loan retires, while the lease is cash-flow positive from month one. That is why leases are winning kitchen-table conversations this year. But the loan buyer owns a $34,000 asset outright in year 15, then banks every dollar of savings for another decade or more, while the lease payment marches to $328 and the system never becomes yours.
So which should you choose?
The honest answer depends on three things: your cash, your credit, and your timeline.
A loan (or cash) still wins if you can access dealer-fee-free financing (a credit union solar loan or HELOC), you plan to stay in the home 12+ years, and you want the home value bump plus the pre-2027 property tax exclusion. Payback on an owned system in SCE or SDG&E territory, where bundled rates hit 45.7 cents per kWh in January 2026, runs roughly 10 to 13 years without the federal credit, and every approved rate increase shortens it. PG&E customers should note the March 2026 bill redesign we covered in our PG&E rate guide: a new fixed Base Services Charge with a lower per-kWh rate, which slightly trims the value of each offset kWh.
A lease wins if you have little or no federal tax appetite anyway (retirees on fixed income were always poorly served by 25D), you want $0 down with positive cash flow from month one, you do not want maintenance risk, or your credit puts loan APRs in the 10%+ range. In 2026 this is a rational choice, not a consolation prize. Just insist on a flat payment or the lowest escalator you can negotiate, and get the transfer and buyout terms in writing.
Neither wins if the quote ignores NEM 3.0. A solar-only system sized to dump power onto the grid pencils badly in PG&E, SCE, and SDG&E territory no matter how you finance it. The design conversation and the battery conversation come before the financing conversation. (LADWP and SMUD customers still have traditional net metering and more flexibility here.)
For the full menu including PACE, HELOCs, and prepaid leases, see our California solar financing options guide, and check what applies in your area on our California locations page.
FAQ
Can I still get the 30% federal tax credit if I buy solar in 2026?
No. Section 25D expired for systems placed in service after December 31, 2025. A system you purchase with cash or a loan in 2026 receives no federal credit. Only third-party-owned systems (leases and PPAs) still carry a federal credit, claimed by the provider under Section 48E.
Do lease companies pass the whole 30% credit to me?
No. The provider keeps a portion to cover its costs and margin and passes the rest through as a lower payment. That is why you should compare the lease payment against a clean, no-dealer-fee loan payment on the same system rather than assuming the lease price reflects the full credit.
What is a dealer fee on a solar loan?
It is a fee of roughly 20% to 30% of the system price that the lender charges the installer for a low advertised APR, and it is rolled into your loan principal. On a $34,000 system, a 22% dealer fee means you borrow $41,480. Compare the cash price to the financed amount on every quote.
Is a solar lease bad when I sell my house?
Not automatically, but it adds friction. The buyer must qualify to assume the lease, or you buy it out per the contract’s schedule. An owned system transfers with the home and typically adds resale value.
Does the lease vs. loan answer change with NEM 3.0?
The financing answer does not change, but the system design does. Under NEM 3.0’s net billing tariff, exports earn far less than retail, so a battery that shifts your solar into the 4 to 9 p.m. peak is what makes the savings math work in PG&E, SCE, and SDG&E territory, however you pay for it.
How long until an owned system pays for itself in California in 2026?
Roughly 10 to 13 years for solar plus battery without the federal credit, depending on your utility and rate plan. SDG&E territory pays back fastest because rates are highest.