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Solar Contract Types Explained
The Four Types of Solar Agreements
Who owns the system and how you pay for it decides where your exit terms live. Choose a type to jump to its full explanation.
Solar Lease
A third party owns the panels. You pay a fixed monthly amount to use them, often for 20 to 25 years.
Read about leases ↓
Power Purchase Agreement
A third party owns the panels. You pay for the electricity they produce at a set rate per kilowatt-hour.
Read about PPAs ↓
Solar Loan
You own the system and repay a lender over time. The loan may be secured by a filing against your property.
Read about loans ↓
Cash Purchase
You bought the system outright. Questions usually involve installation, warranties, or the sales process.
Read about cash purchases ↓Solar Lease
With a solar lease, a solar company or its financing partner owns the panels on your roof. You pay a monthly lease payment to use the system and keep the electricity it produces. Terms commonly run 20 to 25 years, and many leases include an annual payment escalator.
Because you do not own the equipment, getting out of a lease depends almost entirely on the exit terms the leasing company wrote into the agreement.
Common ways out
✓ Cancelling within the rescission window if the agreement was signed recently.
✓ Buying out the system under the buyout schedule in the contract.
✓ Transferring the lease to a qualified buyer when you sell your home.
✓ Prepaying the remaining lease payments, where the contract allows it.
Clauses to check
• Early termination and default provisions.
• Buyout timing and how the price is calculated.
• Transfer conditions and buyer credit requirements.
• Annual payment escalator percentage.
Watch out for: home sales. Buyers and lenders often ask about the lease during escrow, and a transfer can take time to approve. Reading the transfer clause early avoids surprises at closing.
Power Purchase Agreement (PPA)
A solar power purchase agreement is a contract in which a company installs and owns the system on your home, and you agree to buy the electricity it generates at a set price per kilowatt-hour. Your bill changes with production, and most PPAs raise the rate by a fixed percentage each year.
Like a lease, a PPA leaves ownership with the provider, so your options come from the termination, buyout, and transfer terms in the agreement.
Common ways out
✓ Cancelling within the rescission window if the agreement was signed recently.
✓ Purchasing the system at the price or formula the contract sets.
✓ Transferring the PPA to a qualified buyer when you sell your home.
✓ An arrangement negotiated directly with the provider.
Clauses to check
• Price per kilowatt-hour and the annual escalator.
• Purchase option dates and pricing.
• Transfer and assignment provisions.
• Any production guarantee and what it pays.
Watch out for: the escalator. A small yearly increase compounds over a 20 to 25 year term, and the rate can eventually exceed what your utility charges.
Solar Loan
With a solar loan, you own the system and borrow money to pay for it. You make loan payments to a lender, which is often a separate finance company rather than the installer. The loan may be secured by a UCC-1 fixture filing recorded against your property.
Since you own the equipment, the question is usually less about cancelling a contract and more about the loan itself: what you owe, what fees were financed, and what it takes to pay it off or sell your home.
Common ways out
✓ Cancelling within the rescission window if the loan and sale were recent.
✓ Paying off the loan early, if there is no prepayment penalty.
✓ Refinancing the balance with a different lender.
✓ Paying off the balance from sale proceeds when you sell your home.
Clauses to check
• Amount financed, including any dealer fee.
• Interest rate and payment change terms.
• Prepayment and payoff terms.
• The security agreement and any UCC-1 filing.
Watch out for: dealer fees. Some solar loans include a fee added to the amount financed to buy down the interest rate, which means you may owe more than the system's cash price.
Cash Purchase
In a cash purchase, you paid for the system outright and own it from day one. There are no monthly solar payments and no lender, so there is usually nothing to cancel once the rescission period has passed.
Questions about cash purchases tend to focus on whether the system was installed and performs as promised, and on what the installer's warranties require them to fix.
Common paths
✓ Cancelling within the rescission window if the contract was signed recently.
✓ Filing a warranty claim for equipment or workmanship problems.
✓ Raising a dispute about misrepresentations in the sales process.
✓ Selling the home with the owned system included.
Clauses to check
• Workmanship warranty length and coverage.
• Equipment and roof penetration warranties.
• Any production estimate or guarantee.
• Dispute resolution and arbitration terms.
Watch out for: installer closures. If the installer goes out of business, workmanship warranty claims can become harder to pursue, though equipment manufacturer warranties usually remain.
Side by Side Comparison
A quick reference for how the four agreement types differ.
General information only. Your actual agreement, your state, and how the sale was conducted all change the answer.
Not Sure Which One You Have?
Look at your paperwork for these clues. If it is still unclear, send it to us and we will tell you.
Check the title
The first page usually names the agreement: lease, power purchase agreement, loan agreement, or purchase contract.
Look at how you pay
A fixed monthly amount suggests a lease. A charge per kilowatt-hour suggests a PPA. Payments to a lender suggest a loan.
Find who owns it
Search the agreement for ownership language. If the company owns the equipment, it is a lease or PPA.
Review your statements
Monthly bills show who you pay and what for, which usually confirms the agreement type.
Find Out Exactly What Your Agreement Allows
Send your contract for a free review and we will explain its type, its exit terms, and your realistic options.