Solar · financing

Cash, loan or lease?

The same £5,600 system, saving £568 in its first year, bought three different ways. All three are measured the same way, over the same 25 years, at the same 5% discount rate.

What do kWp and kWh mean?

kWh — kilowatt-hour: A unit of energy, and the thing your electricity bill charges you for. A 1,000-watt heater running for one hour uses one kWh. A typical home uses somewhere between 2,000 and 10,000 kWh a year depending on where it is and how it heats.
kWp — kilowatt-peak: A unit of capacity — how big the solar array is, not how much it makes. It is the output the panels would produce under standard test conditions: bright, cold and perfectly aimed. Real roofs rarely see those conditions, which is why a 4 kWp array does not generate 4 kW for most of the day. One modern panel is roughly 0.4 kWp, so 4 kWp is about ten panels.
Putting them together: kWp is the size of the system; kWh is what it produces over time. The ratio between them — kWh generated per kWp installed, per year — is the honest way to compare locations, because it strips out how big the system happens to be. It runs from roughly 700 in cloudy high latitudes to over 1,800 in sunny deserts.

The system

Installed cost £

Identical across all three routes, so the comparison stays like for like.

Saves in year one £

From the payback calculator, or from your quote.

Energy prices rise %

Per year. The lease escalator below is separate — that gap decides the lease.

The loan

Interest rate %

The rate on the loan. Unsecured home-improvement lending is often 6% to 12%.

Loan term

Longer means smaller payments and more total interest.

The lease

Monthly rent £

Year one. Set to 0 to model a pure power-purchase agreement.

Rent escalator %

The single number that decides whether a lease improves or decays. Compare it above.

Saving passed to you %

Providers typically keep export income and the asset itself.

Lease term

After it ends the panels still generate — for whoever owns them.

Comparison basis

Discount rate %

The opportunity cost of cash. Set to 0 to compare nominal totals only.

Compare over

Same horizon for all three routes.

£5,240cash, net present value

£4,842loan at 6.9%

−£1,295lease, 20 years

Pay cashbest on this measure best in every modelled scenario

A loan at 6.9% costs £398 in present value against paying cash — and that is the honest comparison.

The tempting one is different: a loan has no upfront cost, so it looks free next to £5,600 leaving your account on day one. But the cash buyer did not lose that money, they converted it into a system, and they stop paying after that. Over 10 years this loan repays £7,768 in total, of which £2,168 is interest, at £65 a month.

Where the routes diverge

Cash starts at −£5,600 and climbs steadily. The loan starts at zero but climbs slowly while repayments run, then accelerates once the loan clears at year 10. The lease stays close to flat throughout, because most of the benefit is going to the party that owns the panels.

All three on the same measure
Route	Upfront	Net present value	Nominal total	Break-even	Who owns it
Pay cash	£5,600	£5,240	£15,109	year 9	You do
Borrow over 10 years	£0	£4,842	£12,941	year 12	You do
Lease for 20 years	£0	−£1,295	−£2,298	never	The provider

Does the answer survive the assumptions?

The figures above are one run. This is the same comparison run 200 times with the three things nobody knows drawn from their own distributions — what the system really saves in year one, how fast energy prices rise, and what the installation actually cost.

Pay cash comes out best in 100% of the 200 modelled scenarios. The individual figures move a great deal — the spread on each route below is thousands wide — and the ranking barely moves at all.

How often each route comes out best across the modelled scenarios.
Route	Wins
Pay cash	100%
Borrow over 10 years	0%
Lease for 20 years	0%

The reason the ranking is so stable is structural, and it is the best argument for comparing this way. All three routes are fed the identical saving, so a disappointing system is disappointing for the cash buyer, the borrower and the lessee alike. What separates them is not the weather or the energy market — it is the interest rate, the escalator and who owns the panels at the end. Those are terms you can read before signing, and they are where the attention belongs.

Net present value for each route across the modelled scenarios. A high value is the favourable end.
Measure	Base case	Favourable end	Middle	Unfavourable end
Pay cash	£5,240	£7,682	£4,696	£2,302
Borrow over 10 years	£4,842	£7,291	£4,274	£1,893
Lease for 20 years	−£1,295	£261	−£1,626	−£3,137

What this range is, and what it is not

This is a sensitivity interval, not a forecast. It says that if the assumed distributions are right, 80% of sampled outcomes land between those figures. It does not say those distributions match reality, because they have never been checked against observed installations. That is why nothing here calls any outcome probable, expected or typical.

Contract terms are not sampled, on purpose. The loan rate, the lease escalator, the pass-through share and the terms are things a signed agreement states exactly. Blurring them would hide the very numbers this page tells you to go and read. Vary them with the controls instead — the lease sensitivity grid below does precisely that.
The year-one saving carries another page's uncertainty compressed into one number. It is sampled at ±12% here, which is narrower than the payback page's own interval on the same quantity. If that figure came from a quote rather than from this section, treat it with more suspicion than the arithmetic implies.
Nothing models a route becoming unavailable. A loan you are not offered and a lease that is withdrawn are outcomes with no net present value at all.
Judged over 25 years. Every route is compared on the same horizon; where a contract runs longer, the value beyond it belongs to whoever owns the panels.

Uncertainty model 0.1.0 · 200 samples, Latin hypercube with a Gaussian copula · seed 3335383343, derived from the scenario rather than a clock, so the same inputs always produce the same range.

The lease question nobody asks

A lease removes the upfront cost, which solves a real problem for a real household. What it also does is transfer the asset. After 20 years the panels are still on your roof and still generating, and under a lease they are not yours — the value of those remaining years belongs to the provider unless your contract says otherwise.

The rent also escalates. This comparison uses 3.5% a year against electricity prices rising at 3%. When the escalator outruns the energy price, the arrangement gets worse every year it runs — a hedge that moves the wrong way. Check that one number in any contract you are shown, because it is the one that decides whether the deal improves or decays.

Which lease terms would change the verdict

The lease result above is negative, and it depends entirely on three numbers this page chose rather than measured. Here is what happens when they move: rows are the share of the saving passed through to you, columns are the annual rent escalator. Green is a lease worth taking.

Lease net present value across plausible contract terms. 7 of 16 combinations come out positive.
Pass-through	0.0% escalator	2.0% escalator	3.5% escalator	5.0% escalator
75%	£71	−£1,118	−£2,202	−£3,485
85%	£978	−£212	−£1,295	−£2,578
95%	£1,885	£695	−£388	−£1,671
100%	£2,338	£1,149	£65	−£1,218

The pattern is the useful part: the escalator matters more than the pass-through. A lease that passes through everything but escalates faster than energy prices still decays, while a lease with a flat rent survives a mediocre pass-through. If you are shown a contract, the escalator is the number to find first.

What this assumed

All three routes share every assumption they can, so the comparison is like for like.
Assumption	Value	Note
System cost	£5,600	Identical across all three routes
Year-one saving	£568	From the same physics engine as every page here
Horizon	25 years	Same for all three
Discount rate	5% nominal	The opportunity cost of the cash
Loan	6.9% over 10 years	Unsecured home-improvement lending; check your own market
Lease rent	£45/month, +3.5%/yr	Representative structure, not a quoted product
Lease pass-through	85%	Providers typically retain export income and the asset
Energy price rise	3%/yr nominal	Nominal throughout, matching the discount rate

The lease figures are the least reliable on this page, and not because of the arithmetic: real lease and PPA contracts vary enormously in what they pass through, what they escalate, and what happens at the end. Treat this row as a worked example of how to read a contract, not as a quote for one.