The short answer
A solar lease charges a fixed monthly payment for the equipment on the roof. A power purchase agreement charges per kilowatt hour the system actually produces. Both are third-party ownership, so the finance company owns the system and claims the Section 48E credit either way. What differs for the homeowner is whether the bill is predictable or tied to output.
- 01Lease: fixed monthly payment, whatever the system produces.
- 02PPA: a rate per kilowatt hour, so the bill moves with production.
- 03Both are third-party ownership, so the finance company claims the credit in both.
- 04A shaded or north-facing roof argues for a lease; a strong roof argues for a PPA.
Most installers used to treat these as two names for the same product, because when a cash sale carried its own thirty per cent credit the financed options were the fallback rather than the plan. That is no longer the case. Third-party ownership is now where the federal money is, which makes the difference between the two worth understanding properly.
What is the actual difference?
A lease is a rental. The homeowner pays a fixed amount each month for the hardware on their roof, and that amount does not change whether the system has a brilliant July or a dismal one. A power purchase agreement is a supply contract. The homeowner buys the electricity the system produces, at an agreed rate per kilowatt hour, and pays nothing for the kilowatt hours it does not produce.
In both cases a finance company owns the equipment. That is the part that matters federally, because ownership is what decides who can claim Section 48E. See Section 48E explained for solar installers for the mechanics and the deadline attached to them.
| Lease | PPA | |
|---|---|---|
| What the homeowner buys | Use of the equipment | The electricity it makes |
| What they pay | A fixed monthly amount | A rate per kilowatt hour |
| A bad production month | Same payment | Lower bill |
| A great production month | Same payment | Higher bill |
| Who owns the system | The finance company | The finance company |
| Who claims the credit | The finance company | The finance company |
Which one should you put in front of a homeowner?
The roof decides more of this than the customer's preference does, and a rep who leads with preference ends up with cancellations.
- 01
A compromised roof argues for a lease
Shading, an awkward orientation, or a production estimate you are not fully confident in. A fixed payment protects the homeowner from a system that underperforms, and protects you from the conversation that follows when it does.
- 02
A strong roof argues for a PPA
Good orientation, no shading, a production estimate you would defend. The homeowner captures the upside of a good year, and the per-kilowatt-hour framing compares cleanly against the utility rate they already know.
- 03
A nervous buyer argues for a lease
Some people want one number they can put in a budget. A PPA bill that moves month to month is the wrong product for them, however good the roof is.
- 04
An escalator clause changes both
Many agreements raise the payment or the rate a set percentage each year. Read it, say it out loud, and compare it against what the utility has actually done in your state. Skipping this is how a happy customer becomes an angry one in year four.
What does this do to your margin?
Third-party ownership pays differently from a cash sale, and usually less per job up front. That is the trade being made: the finance company carries the asset and the tax position, and takes a share for doing it. What you gain is a close rate that survived the credit ending.
The mistake is comparing close rates rather than revenue. TPO closes more of the people who were going to say no to a cash quote, so the honest comparison is closed revenue per hundred leads, run over a quarter, not the percentage of appointments that signed something.
How do you explain it without losing the room?
Two sentences, then a question. "With a lease you pay a set amount each month for the system. With a PPA you pay for the power it makes, so the bill moves a bit with the seasons. Which of those sounds easier to live with?"
That is the whole explanation. What you must not do is drift into who claims the tax credit unless they ask, because the moment you do you are having a tax conversation instead of a bill conversation, and you are not their accountant. If they do ask, how to explain the tax credit change to homeowners has the wording.
What to be careful about
- Say who owns the panels. A homeowner who discovers at closing that they do not own the hardware will cancel, and they will be right to be annoyed.
- Cover the house sale. Transfer or buyout terms are the second most common late objection. Know them before the appointment.
- Cover end of term. What happens in year twenty is a question people ask, and "I will find out" is a weak answer in a twenty-year commitment.
- Do not promise the credit to the homeowner. They are not claiming it. It reaches them as price, and saying otherwise is a complaint waiting to be made.
None of this is harder than the old pitch, it is just different, and it rewards preparation more than a rebate ever did. The rest of the process matters more now too, because these deals take more touches to close. See the solar sales follow-up sequence.
Stop reading, start booking
Volt builds and runs the system this article describes: the site, the follow-up, the inbox and the review funnel, for $297 a month.
No contracts. Cancel anytime.
Common questions
- Is a lease or a PPA better for the homeowner?
- Neither in general. A lease suits a compromised roof or a buyer who wants one predictable number. A PPA suits a strong roof and a buyer comfortable with a bill that moves with production.
- Does the homeowner get the tax credit on either?
- Not directly. The finance company owns the system and claims Section 48E in both cases, then prices it into the payment or the rate. See is there still a solar tax credit in 2026.
- What happens if the customer sells the house?
- The agreement is either transferred to the buyer or bought out, depending on the contract. Get the specifics from your finance partner before you quote, because it comes up at the kitchen table more often than people expect.
- Should we stop selling cash systems?
- No. Plenty of buyers still prefer to own, and some have the tax position to make it work regardless. Offer both and let the homeowner's situation decide rather than your commission.
