Loan, Lease, PPA, Prepaid?

Loan, Lease, PPA, Prepaid: What’s the best way to pay for your solar system in California in 2026?

If you requested a solar quote in California this year and came away more confused than when you started, you’re not alone. Same equipment, same roof, four totally different deals and the only thing that makes them different is one boring sounding word: financing.

That word was once a footnote. It’s the whole story in 2026.

The explanation is simple. For 20 years the advice was the same: buy the system, get 30% back from the federal government and enjoy the savings. That time has passed. The so-called “One Big Beautiful Bill” that was signed in July of 2025 eliminated the residential Section 25D tax credit for any system installed after December 31, 2025. Here's what Solar.com says about it bluntly: “The homeowner tax credit is gone. So if you buy a house in California today, either with cash or a loan, the government check you get back is exactly zero dollars.

But here’s the part most people still haven’t heard: The federal money didn’t just go away. It just switched hands. The much lesser known commercial Section 48E credit is still alive: worth 30% (and up to 50% with domestic content or energy-community adders) and available through the end of 2027. The catch is you can't cash it in. Only a company that owns the system can do this. And that’s the reason leases, PPAs and prepaid structures are now at the heart of every kitchen-table solar conversation in California.

So let’s look at them all, in the round, and then let’s talk about why doing nothing may now be the most expensive choice of all.

Four Ways to Pay
The Loan (you own the system)

You borrow the money , you own the panels from day 1 and pay them off as you go .

The good news remains unchanged: owning pays off in your home, and a paid-off system often offers the most lifetime savings of any option over 25 years.

New is bad news. Without the 30% homeowner tax credit, you now pay the full gross price, and payback periods that used to hover around 8-10 years have extended to 12-15 years in many markets.

One more warning: Watch out for the hidden “dealer fee” that is lurking in those “low-interest” loans. Most often a 1.99% rate is a 20+% markup of the actual system price. Get the cash price and the financed price always.

Lease (someone else owns it, you pay a monthly fee).

The 48E tax credit is claimed by a company that owns and installs the system. In return you get a fixed monthly payment which should be less than your old electricity bill.

No downpayment. No need for big tax bill

But here’s the honest to goodness part: it’s really hard to know how much of that 48E value actually got passed through to you and how much the provider kept. Note the annual “escalator” clause – a 2.9% annual increase is real money by year 15.

the PPA (somebody else owns it you pay per kilowatt-hour)

A PPA is like a cousin to a lease, but rather than flat monthly fees, you pay for the electricity the system produces, typically at a rate less than utility pricing.

The same story on the tax credit: the provider claims it.

With California’s NEM 3.0 rules, where utilities pay just five to eight cents for exported daytime energy, a PPA really only works when combined with a battery so you can use your own stored power at night instead of selling it back for a penny.

One upside if you may move: most leases and PPAs are transferred to the next owner, and some have buyout options.

The Prepaid Option (owned by someone else for a while, but you pay up front).

Quietly the smartest choice in 2026, where I’d guide most California homeowners first.

You pay upfront to a third party that owns the property long enough to claim the 48E credit, and then passes that value to you in the form of a reduced effective system price.

Unlike leases or PPAs, where the transfer of value can seem murky, prepaid structures typically lay the discount out there in the numbers. In practice, you’re pretty much getting a system for 30% off, even if you can’t claim a federal credit for yourself anymore.

California installers are already marketing it this way directly, “30% prepaid discount.”

And because the provider owns the equipment during that initial time, you get a layer of protection that cash buyers and loan customers don’t:

production assurance.
free monitoring maintenance including and sometimes damage and theft coverage

Then ownership goes to you after about five years.

Prepaid: The smart move for 2026

My conclusion is simple, after putting all four options side by side:

For most California homeowners in 2026, a prepaid lease or PPA style structure is the best option for both economics and peace of mind.

It’s the only scheme remaining that still enables homeowners to indirectly enjoy the federal incentive that cash and loan buyers permanently lost financially.

And, as Solar.com explains, prepaid products tend to outperform standard leases or PPAs in long-term savings, because the balance is paid up front.

When it comes to security, you’re not alone. The system is owned by the provider, but you get:

production guarantees monitoring full maintenance and occasional theft/damage protection

But once you pay cash or get a loan, it's all your problem - your service calls, your warranty coordination, your bill.

With prepaid it’s all included.”

More recent prepaid programs have made the transfer of ownership almost frictionless. For example, the design of Propel is such that the ownership changes hands around year five with a built-in purchase option:

no balloon payment, no dealer fees and you just keep paying the same fixed monthly amount you had

They’re also sold without escalators – that very clause that quietly inflates many traditional leases over time.

Can’t afford the cash for a prepaid one-time payment? And that’s fine too. You can borrow a fixed rate loan to pay the pre-paid amount.

And the kicker here is that:

That payment is still on hold.

It doesn't rise. Ever.

It's built to be cheaper than what you pay the utility today and unlike your electric bill, it should look the same in year ten as it does today.

Your utility bill has been doing the opposite for years – which is precisely why waiting is expensive.

And whatever route you take, pair it with a battery.

That's not salesmanship. It’s math.

Under NEM 3.0, utilities pay almost nothing for daytime exports, and charge 40-55 cents per kilowatt hour during summer evening peaks. CPUC analysis shows that solar-plus-storage systems save a lot more each month than solar-only systems.

Why You Shouldn't Wait The Costly Choice

The uncomfortable truth that no “let me think about it” salesperson wants to admit out loud is:

Now is cheaper than later in this market.

Go with the federal deadline.

That 48E credit — the last meaningful federal solar incentive left, the one baked into every lease, PPA and prepaid arrangement — ends at the close of 2027 and the clock for starting construction is effectively ticking down even sooner.

When it's gone, it's gone.

No phasing out gradually.
No grace period
No ‘Let’s see what the next administration does.

The window is closing in real-time.

Then there’s California’s property-tax exclusion — the rule that doesn’t allow your home to be reassessed just because you put solar panels on it. But systems installed after Dec. 31, 2026, lose that protection under existing law.

Miss that deadline and you could be paying for your solar system twice:
once to the installer and again through higher county property tax.

And none of this even skims the surface of the biggest force of all:

Electricity prices are going up, and not slowly.

Electric rates jumped more than 50% in just seven years, the California State Auditor found. PG&E residential rates alone are up more than 40% since 2022. By early 2026, SDG&E customers were paying some of the highest rates in the nation, about 46 cents per kilowatt-hour, and SCE and PG&E aren’t far behind.

A fixed solar payment protects against exactly that problem:
you lock in your cost while the grid just goes up.

Every month you wait is another month of buying the most expensive electricity you will ever buy in your life.

Meanwhile, SGIP battery rebates for general market customers are largely gone, and the more generous equity budgets are waitlisted with no firm date for reopening. So the “I’ll wait for a better rebate” strategy is mostly waiting for a bus that’s already left the station.

That’s not to say you should sign the first contract offered to you by a door knocker.

3 quotations.
Ask for the cash price.
The escalator read.
Ensure equipment is compliant with the new federal rules on origin.

But be aware of what you are really choosing between:

not “now versus a better deal later,” but “now versus paying more for less”

Deals go downhill from here in 2026.

Lock in a predictable fixed cost today and you’ll be doing more than saving money, you’ll be buying your family a little certainty in a market that keeps taking it away.