Which is best — lease, PPA, or cash for NJ solar in 2026? For most NJ homeowners with good credit and average cash flow, a solar loan (not lease or PPA) gives the best lifetime economics in 2026: you own the system, you keep the SRECs, and you build equity in your home. Cash beats loan if you can afford the upfront commitment. Lease or PPA can make sense if you have low tax appetite, want zero upfront cost, or want fully outsourced O&M.
The financing question is the one where the most money gets quietly given away. I’ve seen smart homeowners with solid credit sign 25-year lease agreements with 2.9% annual escalators when a 12-year loan would have netted them $40,000 more over the life of the system. The reason it happens isn’t because anyone’s lying — it’s because the four financing options aren’t really comparable on a one-page brochure, and most installer salespeople pitch the option their commission structure rewards.
Here’s the version of this I walk every client through, with the 2026 tax-policy changes folded in.
The four options, side by side
| Cash | Loan | Lease | PPA | |
|---|---|---|---|---|
| Upfront cost | $20K–$28K | $0–$2K | $0 | $0 |
| Monthly payment | $0 | ~$140–$210 | ~$120–$180 | ~$0.13/kWh produced |
| SREC income | You keep it | You keep it | Usually goes to lease company (read contract) | Usually goes to PPA provider (read contract) |
| Ownership | You own it | You own it (after loan paid off) | Installer owns it | Installer owns it |
| Federal tax credit (post-2026) | Not available (25D repealed) | Not available (25D repealed) | Captured by installer (48E commercial-side) | Captured by installer (48E commercial-side) |
| Transferable on home sale? | Yes (transfers with home) | Yes (loan typically paid off at sale) | Yes, but buyer must qualify | Yes, but buyer must qualify |
| Escalator clause? | N/A | N/A (fixed loan terms) | Usually 1.99–2.9% per year | Usually 1.99–2.9% per year |
| Payback (years) | 7–9 | 9–11 | Immediate (lower bill day 1) | Immediate (lower bill day 1) |
| 25-year total cost | ~$24K (cash + maintenance) | ~$32K–$42K (with interest) | ~$45K–$60K (with escalator) | ~$48K–$65K (with escalator + production) |
The 25-year totals are real-world ranges across my client base. The lease/PPA totals look higher because the escalator compounds — even a 2.9% per-year increase doubles the payment over 25 years.
The 2026 federal tax credit repeal
This changed the calculus meaningfully on January 1, 2026. The One Big Beautiful Bill Act (Public Law 119-21, July 2025) repealed Section 25D — the residential side of the federal Investment Tax Credit. Pre-2026, a cash or loan buyer claimed 30% of the system cost as a tax credit. Post-2026, they can’t.
However, Section 48E (the commercial-side ITC) is still in effect. Lease and PPA companies install the system, capture the 48E credit on their commercial tax return, and (theoretically) pass some of that benefit to the homeowner through lower monthly payments. In practice, lease/PPA companies have not dropped their monthly rates by the full 30% — most have used the credit to improve their own margins or offset their cost of capital.
What this means for choosing financing
- Cash and loan buyers: you lost the 30% federal credit. The math is still favorable in NJ because of SREC-II and 1:1 net metering, but payback shifts from ~5 years to ~7–9 years.
- Lease and PPA customers: the lease company captures the credit instead of you. You may see modestly lower monthly payments because of it (or you may not, depending on the company).
If you have low or zero federal tax liability — retirees with mostly Social Security income, for example — the credit repeal doesn’t change anything for you personally. You couldn’t have used the 25D credit anyway. For those folks, the lease/PPA math hasn’t shifted relative to cash/loan.
Cash: the simplest, the most efficient
If you can write a check for $20,000–$28,000 without straining cash flow, cash is the lowest-friction path. You own the system from day one, you keep every dollar of bill savings and SREC income, and you have no contract counterparty to manage. The trade is the upfront commitment.
I do not push cash. About 30% of my clients pay cash. The rest finance — that’s the median NJ homeowner profile.
Solar loan: the path I recommend most
A solar loan is a standard secured or unsecured loan (depends on lender) with a 10–25 year term and a fixed rate. The homeowner is the borrower. The installer is paid in full at install. The lender holds the lien (if secured) or the unsecured note.
Why I recommend loans most:
- You own the system from day one (loan is paid off as you go).
- You keep the SREC income — usually $760–$950/year on an 8.4 kW system.
- Your monthly payment is fixed. No escalator. Predictable for budgeting.
- The system adds ~9.9% to home value (per Zillow / NJ-specific NREL data) — that equity is yours.
- If you sell the home, you pay off the loan from sale proceeds. The buyer gets a paid-off, owned solar system — easier negotiation than a transferred lease.
The downsides: you need decent credit (typically FICO 700+, some lenders go lower with higher rates). And you do pay interest over the loan life. The interest cost is usually $4,000–$8,000 over 15 years — modest relative to the system’s total income.
Lease: the predictable monthly model
A lease is a 20–25 year agreement where the lease company owns the system and you pay them a fixed monthly amount. The lease company is responsible for maintenance, warranty, and repairs. You consume the electricity the system produces (you save on your utility bill). The lease company keeps the SRECs (almost always) and captures the federal tax credit.
Where a lease can make sense:
- You have no upfront capital and don’t want a loan.
- Your federal tax liability is low (so you couldn’t have used the 25D credit pre-2026 anyway).
- You value zero-touch ownership — somebody else handles every issue that comes up.
- You don’t plan to sell the home for at least 8–10 years (lease transfers are real but they add friction to a sale).
The escalator clause is the single most important thing to review. A 2.9% escalator on a $130/month base means you’ll be paying $267/month in year 25. Compounded across the contract, that’s $52,000 in payments. Some leases offer a flat (no-escalator) structure — those are the ones I recommend if you choose the lease path. NJ Attorney General settlements with several solar companies have specifically cited undisclosed or misrepresented escalator terms as a consumer-protection violation.
PPA: pay per kWh produced
A power purchase agreement is similar to a lease, but instead of a fixed monthly payment, you pay a per-kWh rate for the electricity the system produces. Typical NJ PPA rates as of 2026 are $0.12–$0.15/kWh — below the retail $0.21–$0.26 you’d pay otherwise.
The structural difference from a lease: under a PPA, your monthly cost varies with how much sun the system gets. A cloudy month means a lower bill from the PPA provider. A bright sunny month means a higher one (but still well below retail).
PPAs in NJ have the same caveats as leases: escalator clause (usually 1.99–2.9%), SREC assignment to the provider, and contract-review issues. They’re slightly more complex to compare because the per-kWh structure makes apples-to-apples math harder — be sure the salesperson is showing you projected total payments over 25 years, not just the first-year rate.
Who keeps the SRECs?
This is the line item I see most often misunderstood. The default by financing type:
- Cash, loan: You keep the SRECs. The income flows to your account quarterly via your installer’s GATS aggregator (see my SREC-II post). $760–$950/year on a typical system.
- Lease, PPA: The financing company keeps the SRECs. They use the income to subsidize their own balance sheet, then pass through a portion (or not) via the monthly payment level. Some leases do pass SRECs to the homeowner. The only way to know is to read the contract — look for “SREC ownership” or “Solar Renewable Energy Certificate” language.
If a salesperson tells you “you keep the SRECs” on a lease, ask to see the contract line. If it’s not in writing, it’s not real. This is a common source of disappointment 6 months in.
What if you move?
| Financing | If you sell within 5 years | If you sell 10+ years in |
|---|---|---|
| Cash | System adds ~9.9% to sale price (NREL data). Pure equity. | Same, but with more of the payback realized. |
| Loan | Pay off loan from sale proceeds. Buyer takes paid-off system. | Loan may be substantially paid down — small payoff at closing. |
| Lease | Lease transfers to buyer (subject to buyer’s credit). Some buyers will negotiate price reduction. Possible obstacle to sale. | Same mechanics; less time on the lease remaining is generally easier. |
| PPA | Same as lease. | Same as lease. |
Real-estate agents in NJ tend to prefer owned-solar homes over leased — easier negotiation and clearer chain-of-title. Doesn’t mean leased solar can’t sell, but it’s a real-world detail I flag for any client whose 5-year plan includes selling.
The honest decision matrix
If you fit one of these profiles cleanly, here’s what I usually recommend:
- 700+ FICO, planning to stay 10+ years, has some federal tax appetite: solar loan. The math is best.
- $20K+ cash available, doesn’t want monthly payments: cash. Simplest.
- Below 650 FICO, can’t access loan rates that work: lease, but flat-escalator only.
- Retired, low federal tax, doesn’t want O&M responsibility: PPA or lease (escalator-flat preferred).
- Planning to sell within 3 years: probably wait, or buy cash. Solar payback won’t materialize in time, and lease/PPA transfer adds friction to the sale.
Bottom line, in plain English
The 2026 federal tax credit repeal made cash and loan buyers slightly worse off, and lease/PPA companies slightly better off in relative terms. NJ’s state-level incentives (SREC-II, 1:1 net metering, sales-tax exemption, property-tax exemption) are still strong enough that any of the four paths can work — the question is which one fits your cash flow, your credit, and your time horizon. The single biggest financial mistake I see is signing a lease or PPA without reading the escalator clause. The single biggest relational mistake is signing any contract without an independent review of the contract — which is most of what a broker does.