Prepaid lease vs. cash purchase considerations

[bando]

I just wanted to get any other opinions and considerations re: prepaid leases vs. cash purchase.

We are looking at about a $4,000-$5,000 savings by doing a prepaid lease over a cash purchase (after 30% tax credit).

What I've been told is that in all likelihood, the leasing company (Clean Power Finance) will convey the system to you at the end of year 20 because it would cost more for them to hire a contractor to remove the system, go to the city for permitting, take the system off the grid, etc. than it would to just "give it to you for free".

The other benefits of leasing are:

- no maintenance costs (not that we expect any with a cash purchase)
- if you do string inverter, leasing covers the replacement of that inverter in Year 13-18
- kWh production guarantee
- no need to "wait" to file for tax credit, it's built in to the cost
- maybe you WANT to have it removed for free b/c your roof will need replacing around that time period?


Given the above, it seems odd that anyone would purchase. But that assumes that the system is handed over to you in Year 21.

Am I missing any other information or opinions? Obviously there is some value in KNOWING that it is yours and you don't have to negotiate for them to give it to you in Year 20, but I just don't know if it's worth $4000. (I mean even if they charge you $4,000 in year 21 for it, how much is $4,000 worth in 2033?)

thanks

[Naptown]

Are there any state or utility incentives. SREC's ?

[bando]

not right now. i'm in San Diego, CA . the CSI has been exhausted for residential installs but when i spoke to them they said there is good progress towards funding it again, so who knows.

before it was exhausted, it was $0.20/Watt with no cap. apparently you can still fill out the paperwork and it will sit there as a pending application in case something goes through later?

[Naptown]

Then the lease sounds good

[NRGjason]

Leasing Solar System

Hey Bando,

I actually work for NRG Residential Solar Solutions.

If you would like to talk, we might have a better offer for you then what you currently have.

It is good to explore all of your options before making a decision.

Let me know if you would like to talk.

[Naptown]

Hey Bando,

I actually work for NRG Residential Solar Solutions.

If you would like to talk, we might have a better offer for you then what you currently have.

It is good to explore all of your options before making a decision.

Let me know if you would like to talk.

When did NRG go back into the lease business?
I ran 2 leases through them and they were a total nightmare.

[bando]

Then the lease sounds good

do you have any personal opinion on what might happen at lease end. we were just thinking worst case scenario maybe there will be some kind of secondary market for PV panels or the materials in which case they could say pay us $10,000 or we are taking it off.

its just very disconcerting that there is no ceiling "residual value" (like say, 20% of total gross purchase price) they can give. it will all be up to the market in Year 2033. at least when you lease a car there is a residual value given and you can either give it back or buy it.

[NRGjason]

When did NRG go back into the lease business?
I ran 2 leases through them and they were a total nightmare.

Hey Naptown,

Thanks for the question.

NRG recently started leasing again a few weeks ago.

I do know in the past there were a few road bumps when they first started this up.

We now have a great team of leaders that are customer focused and ready to step up and make sure things are done the correct way.
I don't want to troll or spam at all, but if you do have any questions at all, feel free to PM me or email me.

Since you are Admin here, I am sure you know how to reach out to me.
Thank you.

[SunEagle]

do you have any personal opinion on what might happen at lease end. we were just thinking worst case scenario maybe there will be some kind of secondary market for PV panels or the materials in which case they could say pay us $10,000 or we are taking it off.

its just very disconcerting that there is no ceiling "residual value" (like say, 20% of total gross purchase price) they can give. it will all be up to the market in Year 2033. at least when you lease a car there is a residual value given and you can either give it back or buy it.

I would be more concerned with comparing the $/kw of a purchased system to a prepaid lease then worry about what the system is going to be worth after 20 years.

It matters to me what I spend up front and how long it will take to pay for itself then if the leasing company will charge me to remove the system at the end of the lease. Unless there is something in the lease document stating you will have to pay for it's removal then why worry?

[bando]

I would be more concerned with comparing the $/kw of a purchased system to a prepaid lease then worry about what the system is going to be worth after 20 years.

It matters to me what I spend up front and how long it will take to pay for itself then if the leasing company will charge me to remove the system at the end of the lease. Unless there is something in the lease document stating you will have to pay for it's removal then why worry?

i agree the $/kw is important, but panels could last 25++++ years (they have some out in the field much older than that i'm sure). so in the event they take them away, you lose out that extra amount of years of useful life.

let's just say for arguments sake that the panels last 30 years. if you cash purchase, you are getting an additional 10 years of service out of those panels. if you lease and they Actually take them away (which everyone claims they won't), all that "free" electricity is down the tube and who knows how much a kWh is going to cost in Year 2033.

i guess this is really a futile debate no one has a crystal ball and no one knows what the cost of a new system will be or what the leasing companies could possibly attempt to charge you to keep the panels there. and maybe the efficiency will be so poor on the old panels we wouldn't want them anyway because newer and better ones have come out. all this is too much to account for ...


to answer your question though, we are looking at the following proposals on a 10,440W system:

Purchase with string inverter $3.35/W or $2.35/W after credit
Prepay lease with string inverter $1.89/W


Purchase with Enphase microinverters $3.50/W or $2.45/W after credit
Prepay lease with Enphase microinverters $2.04/W


as you can see, the prepay lease is financially VERY enticing, especially with the string inverter (we have no shading issues) because they will replace it when it craps out.

[Ian S]

Given the above, it seems odd that anyone would purchase. But that assumes that the system is handed over to you in Year 21.

Usually, there's not such a big $$ difference between prepaid lease and purchase so purchase typically looks better. I happen to believe that the lessor is likely to abandon the system at the end of the lease. But even if they don't, I'm sure you can make a decent deal at that time - you'll have had the benefit of that $4000 invested in something like SPY for 20 years. Or have them remove it while you replace the roof and ponder another installation.

[NRGjason]

Well as for the question "What happens at the end of the lease?"

I do know that we have 3 options for you.

1. Renew the lease for 5 more years
2. Purchase the system
3. We will come take it off your roof at no cost to you.

Hope that helps.

[Naptown]

Those are pretty standard clauses
Do you offer an early buy out at say year 6 or7?
And how is the system valued at either time?

[Ian S]

do you have any personal opinion on what might happen at lease end. we were just thinking worst case scenario maybe there will be some kind of secondary market for PV panels or the materials in which case they could say pay us $10,000 or we are taking it off.

its just very disconcerting that there is no ceiling "residual value" (like say, 20% of total gross purchase price) they can give. it will all be up to the market in Year 2033. at least when you lease a car there is a residual value given and you can either give it back or buy it.

You have to remember that the lessor makes all their money off prepaid within the first five years. In 20 years, if they have to wind up removing the system, they will have to pay for that to be done. The lease should stipulate that they have to leave the roof in acceptable condition i.e. they can't leave a bunch of holes to leak. Even if they take the panels off carefully, what would they be worth? Unless they test them, those panels won't fetch much more than pennies on the dollar and what's the replacement inverter - that's probably halfway through its lifetime - worth? Again pennies on the dollar.

[NRGjason]

Those are pretty standard clauses
Do you offer an early buy out at say year 6 or7?
And how is the system valued at either time?

Yes, at year 7 you have the option to do an early buy out, or you can prepay the rest of your lease.

As far as the system value at the time, it would determine one what kind of system you have, and what is agreed upon the actual leasing contract, or the then fair market value of the Solar System as determined by reference to a readily available independent source such as PV Value, or something similar.

Leasing is not for everybody, but we do want to do what is best for our customers when they do decide to go the leasing route.