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Never ever finnance any solar system. Cash Only.
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MSEE, PE -
That applies to pretty much everything though when cash is a choice. Am I missing something especially bad about financing solar?
If the offset is such that the money I would be sending to the power company is instead going towards the finance company, with a payoff that reduces that outlay completely not far down the road, then it still seems like a win.
I'm guessing that the resistance is a combination of Financing Bad (which I'm generally in agreement with), financing companies being sleazy/deceptive, and people overestimating the savings and ending up out-of-pocket more than they thought, but is there something else I should be aware of here?Comment
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Sunking is wrong and arrogant in this matter. I wouldn't keep paying someone 160 bucks when I could pay someone else 100 and get the same thing, Same as I wouldn't rent a house until I had every dollar to purchase my own in cash... Get a unsecured loan with lower than 4% APR and save thousands....If you have the ability to pay cash like some people do, awesome. But don't believe their BS about never financing solar.
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Dave, you must be younger than me with the mentality that financing everything is the way to live. Sunking is correct but you cannot stomach the truth due to his abrasive comment. Here, I will give you my $0.02 as long as you promise to not finance it...
He is simply trying to say financing solar and driving the ROI out further is silly. Solar is a luxury not a necessity. Housing and automobiles are somewhat required in this world and due to their major purchase cost, demand financing. BS like watches, clothes and other materialistic crap has no business being financed. Unsecured loans for solar? Are you high? Modifying a home's value with solar demands other financial vehicles.
I am 37, paid cash for my system after saving for years every extra dollar. I am not boasting but people with debt to income over the heads, financing silly luxurious items like boats, planes and solar need therapy. I owe on my house and nothing else. I pay all CC's at the end of the month in full and sometimes use some lowes 0% offers as a guilty pleasure. I havent paid interest on any debt (except my home 3.4%) in over 5 years. But this is why my life, credit score, and balance sheet is different than yours.
America, land of the free and the ability to borrow 200% of the value of anything @22.99% interest and not be called extortion...where do I sign? The irony is those who finance the most crap say the richest people in America need to pay more taxes but fail to see that their interest payments made the others rich... One's wealth is built not financed or loaned...
My rules for buying solar...
1. Pay cash
2. Use a HELOC and deduct the interest
3. Nothing else...
4. Never lease it...
5. See #1Last edited by Eleceng1979; 10-09-2016, 11:23 PM.Comment
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Eleceng1979, I think you're reacting to more than what's there, thought I'll let Dave speak for himself.
My point is simply that I'm going to spend money on power one way or the other. Power is a necessity, much like the mortgage and car you mentioned. I'd rather spend the same amount of money paying towards a system that I'll own, rather than simply paying the power company. I understand that I'm pushing the ROI date out, but not by THAT much, and again, the money is out the door one way or another. If the option is financing or not getting the system at all, it seems like an easy decision, assuming it can be financed for a reasonable rate. Basically I'm looking at adding car payment, for an amount that I'm already paying, that will give me "free" energy in the near future. I'm also getting a new roof shortly (which I am paying for in cash), and would like to time a solar installation around the same time, however without financing it won't happen. The financials are also a bit funky with the large initial outlay (say, 40K) that I'd have to have, but then only really paying ~20K in the end (due to state incentives to go along with the federal).
I generally don't finance things. Currently I have a mortgage (sub 3%) and a single car loan (2.2%) between the wife and I. I haven't payed credit card interest in years. I'm anti-financing. And I'm not seeing a huge downside here. That being said, a lot of the "solar" loans are higher interest than I'd really like (6%+), so I'm trying to find one low enough that I can work with (I unfortunately refinanced the house shortly before I started looking into solar, and really wish I'd just cashed out a bit to finance it, but really don't want to go through that again), or perhaps a HELOC.Comment
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Actually he didn't say it was silly he said it's a "problem".
IMO it's neither - unless you define "luxury" as everything that isn't a necessity.Solar is a luxury not a necessity.
Instead I would consider it a property improvement that pays for itself.
Actually he specifically said a loan at under 4%.Unsecured loans for solar? Are you high? Modifying a home's value with solar demands other financial vehicles.
And an unsecured loan at that rate would be a reasonable way to pay for it.
Well I am older than you - and I see no problem with financing a system.you must be younger than me with the mentality that financing everything is the way to live. ...I am 37, paid cash for my system after saving for years every extra dollar.
And it's great you were able to save up for the system and pay cash for it.
I also paid cash for mine - however if I hadn't had cash readily available, I would have had no problem financing it. Financing it would have changed my payback time from ~3 years to ~3.3 years.
A properly done solar install isn't a "silly luxurious item".people with debt to income over the heads, financing silly luxurious items like boats, planes and solar need therapy.
It's something that pays for itself in arelatively short time.
My rules for buying solar...
1. Pay cash
2. Use a HELOC and deduct the interest
3. Nothing else...
4. Never lease it...
5. See #1
If that's the way you want to live, I have no problem with you making that choice for yourself.
But if someone else doesn't have access to a HELOC (I currently don't) or can get a better interest rate on a different loan source, I see no problem with them using an alternative loan.
I think the statement that its a "problem" to finance it is significantly overstating it.
Instead it's a disadvantage to finance it.
A disadvantage that may or may not be overcome by other considerations.
It's simply something that should be included in the considerations when making the financial decision.
And right now with the changes to solar rules coming in CA, I can see that the benefit of an immediate install MAY outweigh the interest that would be paid over the short time period.
It requires putting pencil to paper - or keyboard to spreadsheet - and figuring out what the best choice is when looking 5 or 10 or 15 years out.Comment
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If done right, solar can indeed be correctly thought of as an income producing asset that may be competitive with other options/places for the money. If not done with an eye toward cost effectiveness, the ROI can and is often less than other places to put the assets, and/or the payback will be unacceptably long, or other less desirable outcomes. How to account for the added costs of financing a solar addition is one of the many factors to consider in determining whether or not solar is cost effective for a potential user and a particular application.
Cash is probably, but not necessarily always the most cost effective way to finance something, but the cost effectiveness or ROI for a PV addition, if thought of as an investment will almost always be higher without the costs of financing it, that is paying cash.
FWIW, foo1bar's 09/28/16, 12:37 P.M. post makes a lot of sense to me.
Similar to considerations such as how large (or small) to make an array, or price, or which vendor to use, or any number of other decisions, how to finance a solar addition, including the pros and cons of each option must be evaluated not only for their own merits or drawbacks, but also how those things impact the other choices and the overall impact on the project.
All that however, is relevant to only one aspect of adding PV - does it make financial sense ? Other considerations usually trump the financial ones.
NOMB/money/house/life, but most of the decision for most folks is, from what I've seen, mostly emotional, with financial considerations being an afterthought or secondary to the desire to join the solar parade, get even with their POCO, keep up with the Jones, simply follow the crowd, or some combination of those and other reasons.Last edited by J.P.M.; 10-10-2016, 10:52 PM.Comment
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First off I am 30 and own a 300k home with a 198k mortgage on it, 30k in a 401k, daughters have 529K Plans set up. Do have a new car and put 10k down on it and financed the rest. My Fico score is 742 and I pay all my CCs off monthly and am in a very good place for an annual salary of 60k, and I'm married with 2 kids and my wife is a stay at home mom. So I am either very luck or very smart.....or both.
If I break my solar down I will have a 3.32 ROI over 25 years without adding ANY inflation for utility rates, so it will be essentially higher but we'll just stick with 3.32% for arguments sake. Now that equates to a minimum of approximately 44k savings over 25 years, I can stomach that savings just fine, You and others are telling people to not take advantage of solar and the benefits of it on a purely on a virtuous opinion. You had the ability to pay cash, had you not I guarantee you would not have the same opinion.
From a financial standpoint a 3.32% ROI isn't spectacular but it is secure, helps the environment, and protects me from future rate increases. And saves me money, all good things. If someone else can benefit and do all these things with financing it is a win.
Unsecured loans for solar? Are you high?.....No lien or anything else on the title on my house, low interest rate of 3.99%, Why would I pull anything else out on my house? And in my situation the interest on any loan would not be tax deductible as I do not have enough to itemize. I financed 12.5k on the solar for 3.99 APR, I can pay this off quickly if I would like or not.....either way it was financial sound and convenient to use someone elses money when the benefits outweigh the negatives.
The pious argument based upon your views of other peoples frivolous spending is irresponsible to judge everyone by. You're thinking is obtuse when each situation is different.
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OutBack FP1 w/ CS6P-250P http://bit.ly/1Sg5VNHComment
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I have no issues with someone being able to afford to finance a solar pv system.
All I said was anything that you finance will end up costing more in the long run then paying cash and increases the ROI time frame. That may not be a problem for some but for others it can be an issue if they have to leave the home before the system pays for itself.Comment
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The point I was trying to make was about attacking someone regarding their opinion about solar financing is pointless and doesn't help the OP. Sunking is more than capable of defending himself but I still take offense to the arrogant comment about his opinion. Sunking has more stickies and post than I have brain cells, but I wouldn't call him arrogant. He is blunt with the truth and some cannot handle it.
My point I was trying to make is... #1 its a luxury, #2 financing luxuries could get you in trouble, possibly losing a roof over your head, and #3 the OP needs to weigh his options. Financing solar is just not for me and shouldn't be the only means to acquire solar. Do not lecture me about my financially conservative opinion and how it offends you. I do not care how you live your life, I am trying to state smart financial decisions to help someone by pointing out financing may not be the answer. You can go get 0%, no money down solar loans that balloon up to 13%+ after 12 months... but doesn't mean one should do it.... Or even worse go lease the stuff. If solar is a 10% return on investment, for a luxury that will pay for itself sometime, why cripple yourself with a 4% interest rate? doubling the time frame for payoff. The ITC, once applied to your tax situation comes back to you when you pay cash. So my cash purchase wiped out 100% of my taxes owed and I will get a nice refund to return to my savings to reuse for my next project. A loan should have the ITC return applied to the balance but very few actually do it due to being cash crazy and spending the tax return prior to getting it, which hurts the ROI even more and keeps the interest compounding.
My decision to purchase solar was purely financial, I get a 10% ROI annually and can do better than any non-stock market investment vehicle all while assuming zero debt, zero risk and a promise from the POCO to make even more profit due to their raising of rates all guaranteed for 25-35 years or longer. My savings account was only 1.5% APY so 10% is better but requires a longer ROI strategy. Saving the planet and other issues were not a play and should not be in such a financial decision.
Solar is a luxury, per merriam-webster, shouldn't be financed if at all possible, if ever. I get the whole pay the POCO or pay the bank argument. The POCO cannot come take your house, they shut off the lights when you fall on hard times and try to work with you. The bank however can come take it all and leave you homeless and laugh about it.
Unsecured loans have higher interest, no collateral and also less loan values due to their higher risk. As Bruce mentioned, they have higher fees rolled in and their all in cost is quite high. Also you cannot deduct this loan interest off your taxes due to it not being a HELOC. So again, why use it? If you have equity available then use it as the interest is lower and tax deductible. If you have no equity in your house and wish to spend big bucks on luxuries, you need your head examined. Your debt to income ratio is your salvation or demise, its your choice not mine.
Full Definition of luxury
something adding to pleasure or comfort but not absolutely necessary <one of life's luxuries>
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My 2 cents worth, I think you calling solar a luxury is the same as calling electricity a luxury and in my opinion is total BS, solar just makes electricity and if you buy it from the poco or pay it forward and buy solar whats the diff, assuming you will be in your house long enough to sail past the break even point
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So you ARE using the definition of "luxury" as everything that isn't a necessity.
I think the more common usage is "something that is expensive and not necessary"
I generally agree with the idea of not financing something that is a luxury by that definition.
But I don't agree with it when the definition is the one you've chosen.
I didn't see anyone offended by your opinion - just people that disagree with it.Do not lecture me about my financially conservative opinion and how it offends you.
That's not what you convey when you say:I do not care how you live your life,
"Unsecured loans for solar? Are you high?"
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"shouldn't be financed if at all possible, if ever."
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"you need your head examined."
IF that were what you were doing, I'd agree with you.I am trying to state smart financial decisions to help someone by pointing out financing may not be the answer.
Instead you've taken the position that essentially it should never (or almost never) be financed.Comment
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This conversation on ROI intrigues me, particularly from the perspective of those who are opposed to Solar Finaning. Here's why:
For argument's sake, let's assume that a $36k system will offset your $250/mo power bill (these seem like reasonable numbers for a significant numer of people here). We'll also assume both solar and electricity prices are stable. Finally, we'll assume that you could save $1,000/mo in order to pay for the system in 3 years:
Using the "don't buy it if you can't pay cash for it model, your total outlay for your solar system will be $45,000 (36k + 36 months of $250/mo electical bill).
Financing the system with at 5% interest (gasp) on the same 3 year term yields a monthly payment of $1078.95, for a total outlay of $38842.20, a savings of $6157.80 over waiting until you could pay cash. That's a 5.7% POSITIVE annual return on borrowed money (above and beyond the cost of capital)
Even if you financed it at 5% over 10 years, your monthly payment would be $381.84, for a total cash outlay of $45820.80.
Seriously, you could finance this system for 10 years for only $800 more than what you'd spend if you started saving today on a 3 year plan. Plus, on the 10 year plan, you'd still have $868.16 per month leftover from the budget to invest in things with a better ROI than saving to pay cash for an asset that saves you money.
This is a case where the ROI exceeds the cost of capital. If this were a real scenario and I were your financial advisor, I'd tell you to borrow, not save.
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