Zero-down solar: What financing options are best?

If you’ve decided to go solar but you can’t afford to spend thousands of dollars out-of-pocket to have solar panels installed, you can take out a zero-down solar loan or solar lease to pay for your system over time instead. Most solar loans and leases don’t require any down payment, which makes them a more affordable financing option than purchasing a system upfront in cash.

Although the idea of having no down payment is appealing – especially for big-ticket purchases like cars or solar panels – it’s important to understand the overall financial commitment you’re making before spending tens of thousands of dollars on a solar system that you’ll rely on for more than two decades. 

With recent changes to federal solar incentives, the landscape for solar financing has shifted dramatically. The 30% federal solar tax credit will disappear entirely after December 31, 2025, creating urgency for homeowners considering solar. This change affects different financing options in distinct ways, making it even more important to understand which option provides the best value for your situation.

While solar loans are generally the most cost-effective choice for homeowners, we’ll walk you through the benefits and drawbacks of all of your zero-financing options, and which one is likely to make the most sense for your personal financial situation.

There are three main ways to go solar without any upfront costs – solar loans, and solar leases or power purchase agreements, also known as PPAs. Solar energy systems are an expensive investment, which is why about 85% of all solar system installations are financed.

Solar loans

The zero-down option with the most financial upside is a solar loan. When you take out a solar loan, you borrow money from a lender at a fixed-interest rate and pay it back in monthly installments. Your monthly payments will always be consistent and never increase. If you choose a solar loan to finance your solar panels, once you pay off your loan you own the system yourself (unlike with leases or PPAs), which allows you to capitalize on tax incentives like the federal solar investment tax credit, or ITC, which aren’t available to you if you lease your system instead.

For an average system costing about $30,000, the federal tax credit provides $9,000 in savings—but only if you own your system and install it before the deadline expires this year. This significant benefit isn't available to homeowners who lease their systems.

Most solar loans come with a zero-down option. The amount you pay monthly depends on how much your system costs to install, your interest rate, your loan term, and the type of loan you choose, but your monthly loan payments will still cost less than your previous electricity bill, providing you with immediate savings.

Solar leases

Solar leases are another option for financing a solar energy system without spending any money upfront, but there are more financial downsides. You don’t own your solar panels at the end of the lease, which means you’ve been making years of payments on a system you can’t continue to gain savings from even after you’ve paid it off. If you take out a solar loan, on the other hand, you own your system once your loan term is complete and reap the benefits of going solar for years to come.

Solar leases may become more competitive after 2025. While you don't own your solar panels at the end of the lease, leasing companies can still claim tax credits under a different section of the tax code (Section 48E) through 2027. This means that while homeowners lose access to the 30% tax credit after 2025, solar companies offering leases can continue to benefit from federal incentives and will likely be incentivized to encourage customers to sign leases.

With a solar lease agreement, you pay the leasing company a fixed monthly price for the energy your solar panels generate, which is based on your system's estimated electrical production. Your monthly costs should be about 10% to 30% lower than your previous electric bill.

However, there are still significant drawbacks to consider. One of the biggest downsides of most solar lease agreements is that they have an annual rate increase of 1-3% built into your agreement based on the expected increase in your local electricity rates. The yearly rate increase, commonly referred to as an escalator clause, negates some of the savings you should gain from going solar. In comparison, solar loans don't have escalator clauses, which means you'll save more money with a loan versus a lease.

For systems installed by December 31, 2025, loans still provide substantially better long-term value due to the federal tax credit. But for homeowners who can't act before the deadline, leases may offer more competitive savings moving forward than they have in recent years.

 Power purchase agreements (PPAs)

Zero-down power purchase agreements, or PPAs, work similarly to solar leases and face the same changing dynamics around federal tax incentives. Like leasing companies, PPA providers can continue claiming tax credits under Section 48E through 2027, even after the residential credit expires.

The main difference between PPAs and solar leases is how your payment is calculated. With a PPA, you agree to purchase the power generated by your system at a set per-kWh rate rather than the fixed monthly rate you pay for a solar lease, so you can expect your payments to fluctuate from month to month. That means you should be prepared to make higher payments during the summer months, for example, when you're likely to be using more electricity than the spring or fall.

With a zero-down solar PPA, you owe nothing to your provider upfront. Like solar leases, your monthly bill will likely be between 10% and 30% lower than your previous electric bill, and you'll likely have an annual rate increase of 1-3% per year (depending on your agreement).

If you can’t install your system by the end of this year to take advantage of the federal solar tax credit, PPAs may become more attractive as the playing field begins to level between owned and third-party systems.

For homeowners who can act before December 31, 2025, taking out a solar loan provides the clearest financial advantage. You'll capture the full 30% federal tax credit, own your system outright after paying off the loan, and avoid annual rate increases. The combination of system ownership and tax credit access makes loans the superior choice right now.

For homeowners considering solar after 2025, the decision becomes more nuanced. Without access to the federal tax credit, the gap between loans and third-party financing options narrows significantly. Leases and PPAs may become more competitive, especially for homeowners who prefer predictable monthly payments and don't want to handle system maintenance.

Regardless of which zero-down financing option you choose, you should always thoroughly research your options and understand how they compare. Make sure you read all of the fine print and ask questions to ensure you walk away with the highest quality solar system and the most cost-efficient financing plan possible.

On the EnergySage Marketplace, you can solicit quotes from qualified, pre-vetted installers and compare them side-by-side to understand the financial benefits of each type of installation and determine which one makes the most sense for your particular needs. Given the approaching expiration of the tax credit this December, we recommend getting quotes now if you're considering solar for 2025 installation.