SolarToolsHow This Tool Works
The Solar Loan vs Cash Calculator answers the question every solar buyer faces: should I pay cash or finance? The answer depends on your loan APR, the return you could earn investing that cash instead, and how long you plan to stay in the home. This calculator models both scenarios over 25 years and shows which comes out ahead.
The key insight: paying cash ties up money that could be invested. If your loan APR is 5.99% but you could earn 7% in the market, financing is mathematically better — you're borrowing at 6% to earn 7%. But if your loan APR is 8.99% and your investment return is 5%, cash wins.
The calculator also accounts for electricity inflation (solar savings grow over time) and any state incentives (applied to both scenarios). The federal tax credit expired Dec 31, 2025. The result shows the 25-year net benefit of each approach and the difference between them.
- Enter your system cost — from your installer's quote.
- Federal tax credit — 30% of system cost. Both scenarios get this.
- Down payment — 0% if financing the full amount, or enter what you'll put down.
- Loan APR — get quotes from solar lenders (Sunlight Financial, Goodleap, credit unions). Credit unions often offer the best rates.
- Loan term — 10, 15, or 20 years. Shorter terms have higher monthly payments but less total interest.
- Annual solar savings — from your Solar Savings Calculator result.
- Investment return — what your cash would earn if invested instead. 7% is a conservative stock market average.
The "opportunity cost" line shows how much your cash would have grown if invested instead of spent on solar. This is the real cost of paying cash that most comparisons ignore.
When to Use This Calculator
The opportunity cost of cash
If you pay $17,500 cash for solar (after ITC), that's $17,500 that isn't invested. Over 25 years at 7% return, that money would have grown to $95,000. The opportunity cost of paying cash is $77,500 — the foregone investment growth. This is the real cost of cash that most comparisons miss.
When a solar loan makes sense
A solar loan at 5.99% APR makes sense when: (1) your investment return exceeds the loan rate, (2) you want to keep liquidity for emergencies, (3) you plan to move within 10 years (the loan is often assumable), or (4) you can invest the ITC refund rather than applying it to the loan principal.
When cash makes sense
Paying cash makes sense when: (1) your loan APR is high (8%+), (2) you're risk-averse and prefer no debt, (3) your investment returns are uncertain or low, or (4) you're retired and can't use the ITC efficiently. Cash also simplifies the transaction — no lender approval, no origination fees, no liens on your home.
The dealer fee trap
Many solar loans have "dealer fees" built into the APR. A 5.99% APR loan might actually cost 9% when the fee is included. The fee is financed into the loan principal, so you pay interest on it for 10–20 years. Always ask for the "effective APR" including all fees, and compare to a credit union loan which often has no dealer fees.
Prepayment and the ITC
Most solar loans allow prepayment without penalty. When you receive your ITC refund (up to $7,500), apply it to the loan principal — this reduces total interest significantly. On a $17,500 loan at 5.99% over 10 years, applying $7,500 in year 1 saves $3,200 in interest and shortens the loan by 4 years.
What about PPAs and leases?
Power Purchase Agreements (PPAs) and leases are different — you don't own the system. The installer owns it and sells you the electricity at a contracted rate. PPAs can be attractive with $0 down but typically save less over 20 years than ownership. Avoid PPAs if you plan to sell the home — the new buyer must assume the contract, which can complicate the sale.
Frequently Asked Questions
It depends on your loan APR and investment return. If your loan APR (5-6%) is lower than your expected investment return (7%+), financing wins. If your loan APR is 8%+ or you're risk-averse, cash wins. Run the numbers with this calculator for your specific situation.
4.99–6.99% for well-qualified borrowers (700+ credit score). Credit unions (PenFed, Suncoast) often offer the best rates. Avoid loans with dealer fees above 8% effective APR. Always ask for the APR including all fees, not just the stated rate.
Yes — most solar loans allow prepayment without penalty. Apply your $7,500 ITC refund to the loan principal in year 1. This saves thousands in interest and shortens the loan term. This calculator assumes you keep the ITC; adjust if you apply it to principal.
Hidden fees (10–30% of loan amount) financed into the principal. A $25,000 loan with a 20% dealer fee actually borrows $30,000. The stated APR looks low (5.99%) but the effective cost is much higher. Ask lenders for the 'effective APR' including all fees and compare to no-fee credit union loans.
A HELOC may offer lower rates (prime + 0.5%) and no dealer fees, but uses your home as collateral and often has variable rates. Solar loans are unsecured (no collateral) and fixed-rate. For discipline and simplicity, solar loans win; for lowest rate, HELOCs may win — but rates can rise.
Solar loans are typically unsecured personal loans — they stay with you, not the house. The buyer benefits from the solar system but you're still paying the loan. PPAs and leases are different — they attach to the property and the buyer must assume them, which can complicate sales.
Further Reading
Deep-dive articles and guides related to this calculator.