Worked example: a warehouse funds 150 kWp on six-year hire purchase

In this scenario a third-party logistics operator running a large distribution shed with continuous daytime activity, chilled bays, conveyors, forklift charging and heavy lighting wants to bring down a substantial energy bill without a six-figure cash outlay. It funds a 150 kWp rooftop system on a six-year hire-purchase agreement, spreading the cash while claiming the capital allowances as owner. The operator is hypothetical and the numbers are modelled assumptions that show how the route works.

The funding structure

Under hire purchase the operator puts down a modest deposit and pays fixed monthly instalments that include interest. The lender holds legal title until the final payment, and the model assumes the business claims the capital allowance on the whole cost in year one; because roof-mounted panels are usually fixtures, to which the hire-purchase rules do not apply (HMRC CA23320), that timing is one to agree with an accountant. At the end of the term ownership passes across for a nominal fee and the payments stop for good. Because the tax treatment depends on the agreement being hire purchase rather than a lease, the business should confirm the structure in writing before signing.

The model uses an assumed installed cost of about £850 per kWp for a system of this size, an indicative 2026 figure, which puts the 150 kWp array at roughly £127,500 before VAT, and the VAT-registered business reclaims the VAT. Spread over a six-year term at an indicative finance rate of base plus a margin, the agreement costs about £23,400 a year, or roughly £1,950 a month.

The numbers

The model assumes the system generates around 142,500 kWh a year. With the warehouse worked hard through the day, the scenario sets self-consumption near 70%, so roughly 99,750 kWh is used on site. Those units displace grid power at an assumed grid price of 28p a unit, worth about £27,930 a year. The remaining 42,750 kWh is exported at an assumed export rate of 8p (Smart Export Guarantee tariffs vary by supplier), adding about £3,420. Together that is a gross annual benefit of about £31,400 in the model.

Set the roughly £1,950 monthly instalment, about £23,400 a year, against the £31,400 annual benefit and the project is cash-positive by around £8,000 a year across the whole six-year term, before tax relief. The full cost falls under the £1m Annual Investment Allowance, so the operator claims 100% first-year relief. Assuming corporation tax at 25%, that relief is worth roughly £31,900 against its year-one tax bill. Measured the simple way, the cost net of that relief divided by the gross annual benefit gives a payback of about 3.1 years, or about 4.1 years against the full pre-relief cost of £127,500. Neither figure includes the interest built into the instalments, which lifts the total paid over the term above the cash price, so the cashflow comparison above is the fairer test of the hire-purchase route.

When the six years end, the finance cost disappears entirely and the operator owns a system with fifteen or more years of generation left, all of it flowing straight to the bottom line in the model.

Why this route suits this scenario

Hire purchase is the popular middle path for owners who want the asset and the relief but not the cash hit, and it fits this scenario closely. A 150 kWp system is a serious capital item, and the operator prefers to keep its cash and its overdraft free for stock, vehicles and the ups and downs of a logistics operation. Hire purchase lets it do that while keeping the capital allowances, which a lease would leave with the lessor. The modelled monthly payment sits well below the modelled monthly saving, so the roof pays the finance and then some, and at the end the business owns the array outright. For a capital-heavy asset on a settled building it is hard to beat, as long as the instalments actually quoted leave a similar margin below the saving the site can realistically expect.

Model this against your own electricity spend in the finance calculator, then get costed quotes when you are ready.