PPA vs Self-financed Solar (Asset Finance)
Solar PPA vs asset-financed direct ownership. Asset finance lets you own the system over 5-10 years; PPA keeps it off your balance sheet for longer.
Quick answer: Solar PPA or Asset finance / hire purchase?
Solar PPA vs Asset finance / hire purchase: Asset finance gives you the system for £0 down then ownership; PPA gives you cheaper kWh but no asset. Pick based on whether you want the long-term residual value.
Side-by-side comparison
| Solar PPA | Asset finance / hire purchase | |
|---|---|---|
| Capital required | £0 | £0-20% deposit typical |
| Term | 15-25 years | 5-10 years |
| Ownership at end | Provider (or buy-out) | You |
| Annual cost | Per kWh (variable) | Fixed loan repayment |
| Annual Investment Allowance | No (PPA = operating expense) | Yes — 100% in year 1 up to £1m. Solar is special-rate, so it is excluded from full expensing; above the AIA cap the 50% FYA applies |
| Best for | Cashflow + admin simplicity | Off-takers wanting eventual asset ownership |
Our verdict
Asset finance gives you the system for £0 down then ownership; PPA gives you cheaper kWh but no asset. Pick based on whether you want the long-term residual value.
Two low-deposit routes that diverge at the finish
Both of these let you go solar without a big cheque — a PPA needs £0 upfront, asset finance typically a 0–20% deposit — so the entry point feels similar. The divergence is what you hold at the end. Asset finance (a loan or hire purchase) means you own the system outright once it's repaid, usually over 5–10 years. A PPA runs 15–25 years and leaves ownership with the funder unless you exercise a buy-out.
How you pay, year to year
Under asset finance you make a fixed loan repayment regardless of output, then enjoy near-free power once the debt clears and the system keeps producing for its remaining life. A PPA charges a variable per-kWh rate for the whole term — lower hassle, no maintenance to fund, but no moment where the cost drops to zero. One front-loads commitment for a residual asset; the other spreads a steady charge and owns nothing.
The tax line that's easy to misstate
Ownership is what unlocks capital allowances, so it belongs to the asset-finance buyer, not the PPA off-taker. Get the mechanism right: solar PV is a special-rate asset and is therefore excluded from full expensing and the main-rate 100% first-year allowance. The genuine 100% route is the Annual Investment Allowance up to £1m, with a 50% first-year allowance on spend above that cap. A PPA generates no such relief because you never own the kit — the payments are simply a deductible operating expense.
Deciding on residual value
If you want the asset, its end-of-loan cheap power and the tax relief, self-finance is the play. If cashflow protection and a hands-off, maintenance-included deal matter more, take the PPA. Explore the numbers via the PPA financing routes, see how PPA rates are built, and line everything up in the comparison hub.
Comparison FAQs
Which option should I pick?
Asset finance gives you the system for £0 down then ownership; PPA gives you cheaper kWh but no asset. Pick based on whether you want the long-term residual value. Run your specific numbers in our PPA calculator before deciding.
Can the two be combined?
Sometimes. SEG income always layers on top of either route. Capital allowances combine only with cash or self-finance — and note solar is a special-rate asset, so it does NOT qualify for full expensing; the correct 100% route is the Annual Investment Allowance (up to £1m/year). PPA + grant rarely stack — most grants exclude PPA structures.
Where can I read more about the underlying mechanics?
Our mechanics hub covers 10 deep-dives on PPA structure, pricing, escalators, term, end-of-contract, off-taker covenant, EPC, O&M and M&V.
Want to model your specific site?
Our calculator runs both scenarios with your actual kWh, tariff and site assumptions.
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