i am your guide to solar finance for business

Energy savings and resource efficiency


Finance lease

With a finance lease, ownership of the solar system (the asset) reverts to you at the end of the contract, possibly after payment of a residual. The cost of finance depends on the asset value, the lease term and your business’s credit profile. Repayments are usually fixed for the term of the lease.

Also known as: Asset lease, capital lease


Below is an illustration of how the cash flows and benefits of a finance lease could work under a realistic, but hypothetical scenario.


Solar project

Solar system size


System cost


Replacement inverter cost (Assume a new inverter is needed after 15 years.)


Cost of daytime grid electricity

$0.21 to $0.28 / kWh

Capacity charge

$0.34 / kW / day

Finance conditions

Proportion financed



5 years

Interest rate


Residual payment


The chart below illustrates the annual cash flow outcomes based on this scenario.

Finance lease: cashflow analysis of an example 30kW solar PV system

In this chart you can see that the upfront costs are spread across years 1 to 5, with the largest payment in year 5 where a balloon payment kicks in to take ownership of the system. These are offset in part by bill savings resulting in small negative cash flow.

For the remaining 20 years the system delivers positive cash flow outcomes through bill savings. The exception is year 15, when this scenario assumes the inverter needs replacing. This option delivers an Net Present Value of around $55,000.




Finance details



Interest Rate

3 -10 years

$1k to $500k

5 to 16%

Fees, charges and other payments

Leases usually involve:

  • an establishment fee
  • monthly service fees
  • exit fees.

There is usually a residual at the end of the lease and this reduces repayments during the lease. You pay for maintenance of the solar system throughout the loan term. 

Accounting and tax

Although the financier owns the solar system, accounting rules may dictate that the asset and liability appear on your balance sheet. For that reason, you may claim tax deductions for fees, interest payments and depreciation of the asset, but may not be able to claim deductions for lease repayments against the value of the asset. 


  • Zero or reduced upfront cost, freeing up cash for other business investments.
  • Once the lease is complete you take ownership and continue to save on power bills for the life of the system.
  • Repayments are usually lower because of the need for a residual payment.
  • Repayments are fixed, making budgeting simple. 


  • It will affect your ability to borrow for other business purposes, because the asset is on your balance sheet.
  • You are typically responsible for the ongoing maintenance and operation of your system.


  • Energy bill savings may be less than the lease repayments, so you may not see net benefits until after the lease expires.
  • Fees and charges will vary between financiers, so make sure you understand them all.

The performance of any solar finance option is highly dependent on how you and your financier structure the agreement. This includes the amount financed, the term of the agreement, the interest rate charged, fees and charges and any balloon payments or residuals.

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Page last updated: 10 December 2015