Hire Purchase Quotes for Commercial Solar: How to Compare Them

A hire purchase quote for a commercial solar system can arrive in a form that makes comparison hard: one shows a monthly payment, another a flat rate, a third a total. This guide sets out what every quote should show and uses a worked example to show how term changes the cost. The mechanics of the route are on our hire purchase page, and this page is about comparing offers.

It is general information, not financial or tax advice. We are a comparison and quote service, not a lender.

What a hire purchase quote must show

• The cash price of the system, and what it includes.
• The deposit, if any, and the amount financed.
• The term in months and the payment amount and frequency.
• The APR, and the total amount payable including every fee.
• The option-to-purchase fee, and the date you take ownership.
• Early settlement terms, and any security or personal guarantee.

If a quote shows only the monthly payment, ask for the rest before you compare.

A worked example: how the term changes the cost

These figures are illustrative arithmetic at an assumed 8% APR on £400,000 financed, not a quote or a market rate. Fees are not included.

• Five years: about £8,111 a month, £486,633 in total, so about £86,633 of interest.
• Seven years: about £6,234 a month, £523,697 in total, so about £123,697 of interest.
• Ten years: about £4,853 a month, £582,372 in total, so about £182,372 of interest.

A longer term lowers the payment and raises the total cost. Which is right depends on how the payment compares with the electricity you expect to save each month. Use the finance calculator to compare your own saving against a payment.

Ownership, allowances and timing

Under hire purchase you end up owning the system, so you are the party who can claim capital allowances. Be careful about assuming the whole cost qualifies in year one: The date the spend counts as incurred depends on the contract and when the system is brought into use. Agree the timing with your accountant before you sign. Our guide to solar panel capital allowances explains the reliefs, and the hire purchase vs lease vs loan guide compares the routes.

What a deposit changes

Putting money down reduces the amount financed and the interest. On the same illustrative £400,000 at 8% over seven years, a £40,000 deposit means £360,000 is financed. The payment falls to about £5,611 a month, the repayments total about £471,327, and the whole cost including the deposit is about £511,327, against about £523,697 with no deposit. That saves about £12,370 of interest, at the price of £40,000 of cash up front. Compare that trade with what else the cash could do in the business.

When two quotes disagree

If two hire purchase quotes for the same system differ, find out why before choosing. Common causes are a different cash price (check what the system includes), a different term, fees added to the loan in one and paid separately in the other, and a different option-to-purchase fee. Put both on one sheet with the same term, and the real difference usually shows itself in the total payable.

Questions to ask each funder

• What is the APR, and what is the total payable including fees?
• What is the option-to-purchase fee, and when do I take ownership?
• Can I settle early, and what does it cost?
• Do you need a personal guarantee or security over other assets?
• Who is responsible for insurance and maintenance during the term?

Next step

When you have quotes in hand, put them on one sheet and compare the total payable. Our quote guide covers APR against flat rate and the fees to look for. To have the routes costed against your numbers, request finance quotes and we reply by email.