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New Boilers on Finance: What You Need To Know
With a new boiler costing upwards of £1,000, many homeowners use boiler finance schemes so that they can benefit from a new, energy efficient boiler. It means you can get a new boiler on finance and not be left out of pocket.
Always compare a number of boiler finance schemes to ensure you get the best deal.
What is a boiler finance scheme?
For most of us, the upfront costs and installation of a new, energy efficient boiler can seem quite expensive.
Boiler finance schemes are credit agreements that allow you to spread these costs over a set number of months or years.
They are also known as flexible finance schemes and finance plans. They allow you to essentially pay for your new boiler on a monthly basis.
Some schemes are better than others. Always do your homework beforehand to check you are getting the deal that’s fair and right for you!
How do they work?
Boiler finance plans are currently available in England, Scotland and Wales from; boiler suppliers, manufacturers and most energy suppliers.
To apply for a boiler finance scheme, you need to provide some personal details to the company you are applying to for the finance or credit agreement. All finance options are considered on an individual basis, subject to your status and credit checks.*
Once you’ve chosen and successfully applied for a scheme, the lender will pay for the upfront costs and installation of a new, efficient boiler in your home. You are agreeing to then pay the lender back, usually via a set amount of monthly payments over an agreed period.
There are many boiler finance schemes available to suit your needs, with different repayment plans and terms to suit most budgets. How the overall finance plan works, in terms of how much you borrow from and pay back your creditor, will vary between schemes and your personal circumstances. Some schemes require a deposit upfront, some have higher rates of interest, and others take longer to pay back.
You should research a few different options or price plans with different suppliers and look for the best repayment plan for you. Always make sure you can keep up the agreed monthly repayments before signing an agreement.
How much will I pay for a boiler on finance?
There are a range of boiler finance options and packages available. Some are more competitive than others. Generally, you will pay back more than you borrowed.
How much you will pay back depends on:
- the total cost of your boiler, plus installation
- the interest rate applied by your finance scheme
- any deposit you pay upfront (or additional charges)
- the number of months you’ve agreed to spread your payments over
Here are some representative examples:*
|Type of price plan||Cost of boiler and installation borrowed||Total amount of credit charged||Term of loan (months)||Yearly interest rate||Monthly repayments||Total amount repayable|
|10 year pay monthly||£2,122||£1,428.80||120||11.3%||£29.59||£3,550.80|
|5 year pay monthly||£2,122||£665.60||60||11.3%||£46.46||£2787.60|
|3 year pay monthly||£2,122||£389.72||36||11.3%||£69.77||£2511.72|
*Examples only, based on the same quote for a new boiler with installation, at a fixed interest rate and no upfront deposit.
Is a boiler on finance right for me?
Not always! The best option is always to pay for the costs of a new boiler and installation upfront yourself, if you can afford it. Paying for the boiler outright means you will get a better return on your investment versus paying more for the boiler over the long term through a boiler finance scheme.
Typical costs for a new boiler installation are between £1,200 – £3000, which not everyone can pay for upfront.
Using a boiler finance scheme could be right for you if you:
- want to replace your old, inefficient boiler with a new, highly efficient boiler
- need to buy and install a new gas boiler
- can’t afford the upfront costs of buying a new boiler and would prefer to spread the cost over a monthly payment plan
- want to save on energy costs by installing a new, A-rated gas combi boiler
- don’t qualify for the government’s free boiler scheme
- are looking for a way to spread the cost of your boiler
- can afford to keep up the monthly minimum repayments
Boiler finance schemes are not ideal if you can:
- afford to pay for the costs upfront yourself
- qualify for the government’s free boiler scheme
What are the risks of boiler finance schemes?
As with any loan, you should always be aware of the risks, which include:
- you’ll pay back more than the original cost of the boiler and installation
- if you don’t research different finance schemes beforehand you could miss out on a better deal
- failure to keep up your monthly repayments will affect your credit rating
- finance deals are based on your credit score, those with a lower or poor score are typically offered a higher interest rate and will pay back more
- a credit agreement is like a contract, once you’ve signed it you’re tied into it for an agreed period of time. If your boiler is stolen, broken through a fault which is not covered by a guarantee or warranty, or you move house during the finance scheme, you will still have to pay your repayments back
- generally taking out a finance plan over a longer term means you will pay back more – for example paying back a 10 year agreement versus a 2 year agreement
Are there any alternatives?
There are two alternatives to using a boiler finance scheme, you can:
- Pay for the costs of your new boiler and installation upfront yourself. This means you own the boiler outright. This always works out cheaper as there are no interest or additional charges to pay.
- See if you qualify for the government’s free boiler scheme. Part of a government energy scheme, this involves applying for a free grant towards replacing your old boiler with a new, efficient gas boiler. You may be eligible if you are a homeowner, tenant or landlord, receive certain benefits and your boiler is over 10 years old.