Both structures usually involve third-party ownership
With a residential solar lease or power purchase agreement, a third party generally owns the solar equipment installed on the home. The homeowner receives solar energy under a long-term contract instead of purchasing the equipment outright.
That ownership structure is the biggest difference from a cash purchase or solar loan, where the homeowner generally owns the system.
A lease usually charges for use of the system
A solar lease typically uses a recurring payment for the equipment or service under the contract. Review whether the payment is fixed or escalates over time and what happens at the end of the term.
A PPA usually charges for the electricity produced
Under a power purchase agreement, the homeowner typically buys the solar electricity generated by the third-party-owned system at a contract price per kWh. The starting rate, escalation formula and actual production therefore matter to total payments.
Transfer and buyout terms matter before you sell
Before signing either structure, read the contract sections covering home sale, buyer qualification, contract assumption, system purchase options, early termination and equipment removal. A third-party-owned system can add steps to a future real-estate transaction.
Compare the full contract with ownership
Put lease or PPA payments on the same timeline as a cash purchase or loan. Include escalation, utility purchases that remain after solar, end-of-term ownership, maintenance responsibilities and any transfer or buyout costs.