U.S. electricity rates have climbed 21% in just five years, and the U.S. Energy Information Administration expects them to continue increasing through 2026. Costs from grid upgrades, surging demand from data centers, and aging infrastructure are all being passed directly to you as a ratepayer.
The end of the residential solar tax credit has led some homeowners to wonder whether solar is still worth it. The answer is yes. Solar remains an affordable way to reduce your energy costs, and prepaid solar leases are making it easier than ever to get started without paying the full cost of a system upfront.
Solar, whether owned outright or through a lease, gives you a way off this treadmill. But with the expiration of the residential solar tax credit (Section 25D) at the end of 2025, a financing option is quietly rising to the top: the prepaid solar lease.
What is a prepaid solar lease—and why every homeowner should know about it
A prepaid solar lease is exactly what it sounds like: instead of making monthly lease payments over 20 to 25 years, you pay most of the system's cost upfront, typically through cash or financing. A third-party company owns the solar system during the lease term and is generally responsible for installation, monitoring, and maintenance.
Because tax rules require the system owner to hold the asset for several years to avoid credit recapture, many prepaid lease programs include a defined path to ownership. Homeowners may have the option to purchase the system through a buyout or ownership transfer after about six years.
This structure is especially relevant today because third-party-owned systems may still qualify for federal clean energy incentives under Section 48E. Eligible solar projects may qualify for additional federal incentives when they use qualifying U.S.-made materials and products. Some prepaid lease providers may pass a portion of the value of these incentives on to homeowners through lower project costs or financing.
Some prepaid lease providers are designed to pass the value of these incentives, including the Domestic Content Bonus, back to homeowners through lower project costs or financing, helping keep solar affordable even after the residential tax credit has expired.
One example is the Propel prepaid lease, which offers homeowners a defined path to ownership while using qualifying Enphase systems. Unlike many traditional lease programs, Propel is designed to pass the Domestic Content Bonus where applicable and potentially eligible federal incentive savings, through lower project costs or financing, while also providing system monitoring, maintenance, and performance guarantees during the initial ownership period.
Prepaid lease vs. buying solar outright
When you buy a solar system outright, you own it immediately and have complete freedom to choose whatever equipment you want. The right choice depends on your budget, how long you plan to stay in your home, and how much flexibility you want in choosing equipment.
The trade-off is that there's no longer a federal tax credit available to individual homeowners for direct purchases. To qualify for certain commercial incentives, projects must meet Foreign Entity of Concern (FEOC) compliance requirements and other IRS eligibility rules, which may influence the equipment selected for the project.
Why homeowners are choosing this path
A few forces are converging to make prepaid leases more attractive than ever.
No monthly payment headaches
Traditional solar leases often come with escalator clauses—your payment in year one may be meaningfully different from future years. With a prepaid structure, that monthly obligation disappears entirely after your upfront payment.
A defined path to ownership
Although prepaid TPO (Third-Party Ownership) systems are not new, changing federal incentives and higher borrowing costs are making them more attractive to homeowners looking for alternatives to traditional solar loans.
The financing landscape has shifted
As median solar loan rates climbed to 7.5%, 38% of contractors reported decreased loan demand as customers sought alternative financing options like solar leases. Prepaid leases offer a middle path: leasing providers may pass eligible commercial incentive savings through lower project costs or financing.
The industry is moving this direction
According to the Aurora Solar Snapshot, nearly two-thirds of surveyed solar sales companies expect most of their projects to be third-party owned in 2026, and 55% of installers reported that TPO has become their most-used project financing scenario.
Can you add battery storage to a prepaid solar lease?
In some cases, yes. Some providers allow battery storage to be included as part of the prepaid lease agreement, while others offer batteries through a separate financing arrangement.
Adding battery storage can help homeowners store excess solar energy, reduce electricity use during peak-rate periods, improve backup power during outages, and potentially participate in virtual power plant programs where available. Availability depends on the installer, utility policies, and the structure of the lease itself.
What to watch before you sign
Prepaid leases are a strong option—but they're not one-size-fits-all. A few things to review carefully:
Equipment selection
Ask your provider specifically which panel and inverter brands are on their approved list, and whether high-quality microinverter solutions are available. The equipment installed today will be on your roof for 25+ years—it's worth knowing exactly what you're getting.
Ownership transfer terms
Confirm in writing exactly how fair market value will be determined at year six, and what the expected buyout cost looks like. The difference between a "$0 transfer" in the sales pitch and what the contract actually says can be significant.
Provider track record
Prepaid leases are still relatively new, and many of the companies offering them have short operating histories. Ask for customer references, check independent reviews, and evaluate how responsive they are to service requests. A low-cost lease from an unreliable provider may not be worth it if the provider has poor service or support.
Home sale logistics
If you think you might sell your home during the initial ownership period, ask your provider directly how a transfer to a buyer works in your specific state. This process varies and is still being standardized across the industry.
Is a prepaid solar lease right for you?
A prepaid lease tends to work best for homeowners who have access to upfront capital (or can take a loan), want to avoid long-term monthly obligations, and are looking to own their system outright within a realistic timeframe. Paired with a high-performance microinverter system, you'll also get the monitoring and reliability data to verify your system is producing what it promised—which is worth more than people often realize.
The solar financing landscape is evolving fast. Prepaid leases represent one of the most practical paths forward in a post-tax-credit world, helping homeowners benefit from commercial clean energy incentives that can lower project costs while putting them on a path toward long-term energy independence.
Both involve a single upfront payment, third-party ownership, and a path to owning your system after ~6 years. The key difference: a prepaid lease charges a fixed amount to rent the equipment, while a prepaid PPA charges based on the electricity the system produces. In practice, the choice often comes down to what your installer offers in your state.
Prepaid solar leases can reduce upfront costs compared with purchasing a system outright because the leasing provider may pass through some of the value of available federal tax incentives. Potential savings depend on your current utility rate, system size, and local sun exposure. The higher your electricity bill today, the faster you'll recoup your prepaid investment.
No—they're structurally different. With a solar loan, you own the system from day one and borrow money to pay for it. With a prepaid solar lease, a third party owns the system for about six years before you may have the option to purchase it. Loans also no longer provide a federal residential solar tax credit for homeowners.
Yes, but the process varies by state and provider. Most prepaid lease agreements include a transfer provision that allows the lease to pass to the new buyer at closing. Some providers also offer an early buyout option if you’re selling before the term ends. Ask your provider to walk through the transfer process specifically for your state before you sign, and make sure your real estate agent is aware of the arrangement.
This is one of the most important questions to ask before signing. Review the contract for provisions that address company insolvency or acquisition—reputable providers include language that protects homeowners in these scenarios. Confirm that your ownership transfer rights at the end of the term are documented in the contract itself, not just in sales materials. Choosing a provider with an established track record significantly reduces this risk.
Availability varies by state and installer. Programs are most widely offered in states with strong solar markets and established third-party ownership regulations. The best way to find out what’s available in your area is to request quotes from multiple certified Enphase installers and ask specifically about prepaid TPO options.
