Solar Carport Asset Finance / Lease

Asset finance (hire purchase or a finance lease) is the middle-ground commercial solar carport finance route, between full capital purchase and a 25-year PPA. The buyer finances the carport over 5-7 years through an asset finance lender, at a rate the lender sets for each deal. Monthly payments can be lower than the monthly electricity bill reduction, which makes cashflow positive from the first month on a suitable site. Under hire purchase the buyer typically keeps the AIA tax benefit and owns the asset at the end of the term; under a finance lease the lessor owns it, so check which structure is on offer.

How asset finance works

Three parties are involved: (1) the asset finance lender (a UK bank or specialist lender); (2) the buyer, as lessee or hirer; (3) the installer or supplier. The buyer signs a fixed-term agreement secured against the carport asset. The lender usually pays the supplier once the asset is delivered and accepted, and the buyer repays the lender in monthly instalments, commonly 60-84 of them. At the end of the term, ownership depends on the structure: under hire purchase the buyer owns the asset outright.

How asset finance is priced

The lender sets the rate for each deal. It depends on the borrower's credit, the term, the project size and the structure (hire purchase or finance lease), so this site does not quote a rate. Ask the lender for a written quote showing the rate, the total amount repayable and any fees, and compare more than one. Public-sector borrowers have no UK-wide subsidised loan to fall back on: PSDS closed to new applications in November 2024 and Salix programmes are nation-specific, so a public body compares asset finance against capital, prudential borrowing or a PPA.

Why asset finance over capital purchase

Three reasons buyers choose it: (1) capital preservation — £400k of working capital stays free for inventory, expansion or hiring; (2) cashflow that can be positive from month one — on a suitable site the monthly payment can sit below the monthly electricity bill reduction, so compare the two using the lender's written quote; (3) AIA retained — unlike a PPA, the buyer still claims the Annual Investment Allowance, recovering 25% of capex in year-one corporation tax saving.

Asset finance economics — worked example

Illustrative figures, not a quote: a £400k carport on 7-year finance. The monthly payment depends on the rate in the lender's quote, so take it from that quote. Annual saving: ~£170k (typical 300 kWp site). Year 1 net cashflow position: the £170k saving minus twelve monthly payments, with the ~£100k AIA tax saving coming on top, depending on the buyer's tax position. Years 2-7: compare each year's saving with that year's payments. Years 8-25: no finance payments and ~£170k/yr of saving on these assumptions.

Asset finance vs PPA — which to choose

Asset finance tends to suit a tax-paying business with good credit that wants to own the asset at term end and has an alternative use for capex yielding >10%. A PPA tends to suit a buyer that cannot fund capex, cannot access AIA (charity or public sector), wants zero asset management responsibility or has a >25 year planning horizon. Capital purchase tends to suit a buyer with capex available, a wish to maximise 25-year NPV and surplus profits for a year-one AIA claim.

What to ask an asset finance lender

A lender's credit committee typically needs a technical pack: the system specification, generation forecast, structural report and planning status, alongside the borrower's accounts. Ask the installer which of these it will prepare and by when. Then ask each lender, or a broker acting for you, for a written term sheet showing the rate and whether it is fixed, the term, the deposit, early-settlement charges, who owns the asset at the end of the term, who claims the capital allowances, and what security or guarantees are required. Compare several term sheets before choosing. Solar Car Parks is an information site and does not arrange finance.