Cash, Loan, Equity, Lease or PPA for Solar

How do solar financing options in Canada compare?

This page compares structures, not interest rates, because rates and offers change and quotes decide. Each option answers four questions differently: who owns the system, what it costs beyond the equipment price, who can claim incentives or tax treatment, and what happens if you sell.

• Cash: you own it, no interest, savings are tied up.
• Loan: you own it, interest adds to cost, payments are fixed or variable.
• Home equity: you own it, secured against the house, rate and terms depend on the lender.
• Lease: the company owns it, you pay a fixed fee.
• PPA: the company owns it, you pay per unit produced.

A shorter version of this comparison is in the financing overview.

Owning it: cash, loans and equity

When you own the system you carry maintenance and production risk, but you also keep any benefit tied to ownership. Interest raises the real price. A simple illustration with invented round numbers: 20,000 dollars borrowed and repaid with 3,000 dollars of interest means the system effectively cost 23,000 dollars, and your payback should be judged on that figure. The method is in the payback period guide.

Home equity borrowing is secured against the property, so missed payments carry a larger consequence. Ask the lender how the borrowing affects your mortgage terms. Some programmes have offered loans or financing help for efficiency upgrades, and you can look for current ones through the Government of Canada energy-efficiency pages and the provincial energy ministry.

Leasing and PPAs

A third-party deal can remove the upfront cost, though you give up ownership and often the incentives. Contracts run long and can carry yearly escalators. The details are in the lease and PPA guide. For selling a home with such a contract, see the selling guide.

Tax and incentive effects

Ownership usually decides who can use any tax measure or rebate. Households and businesses are treated differently, and a business may depreciate equipment while a household generally does not. Details live in the tax deduction guide and, for business owners, the small business tax guide. Interest on a loan may be treated differently depending on whether the system is for business use. Ask an accountant before you decide, not after.

Which option fits which situation?

Someone staying in the home for many years with spare savings tends to be best served by owning. A person who wants a low upfront cost and accepts less control may look at a lease, but should price it against a loan. Anyone planning to move in a few years should check transfer terms first. Whatever you choose, compare at least two written quotes, as in the quote comparison guide, and store the papers using the paperwork checklist.

The community heating project in the DLSC story shows a different model again, shared infrastructure funded and owned collectively, where long-term operation mattered more than quick payback.

What a lender or provider will ask you

Expect questions about income, credit history, the home's ownership and existing mortgage. A lease or PPA provider may check credit too, and may ask to register an interest against the property. Ask in advance what is registered, how it is removed and what it costs. For a loan, ask whether early repayment carries a penalty, because a windfall or a sale of the house can make that matter.

Compare the full cost, not the monthly payment. Two offers with the same payment can differ a great deal once term length, fees and escalators are added up.

Quick answers