SolarCity 20-year lease too good to be true?

[russ]

Hi Ken - No, not comparing this to off grid. What I was saying is that one can not lease such as that and claim they have done a green thing as all the rights belong to company doing the leasing.

Have fun and enjoy the lease! I do not trust salesmen - they may have good intentions but also may not. They may or may not know what they are talking about. Most likely folks would have no idea if they are being fed a line or not.

1) They won't leave a copy with you? Why?
2) It is different than Solar City's in several ways you listed. Solar City you have to - 1) provide the insurance 2) provide a high speed internet connection 3) guarantee to keep the trees (even on the neighbors property) trimmed so the panels are not blocked 4) in the event you decease your heirs have to honor the lease and conditions and payments - even if they are in another country and the house is empty, 5) provide them with an easement to the system if they feel it is needed, 6) accept cost escalation for the duration of the lease, buy it out if you want the system to go away - and others I don't remember right now.The lease goes with the property - just hope the prospective buyer to in 2 or 5 years wants a solar PV system

3) Anyone signing the lease before a lawyer goes over it carefully deserves whatever they get.

I would think it far better if Uncle Sam would allow the consumer to have the same benefits that make this a good deal for the leasing company. The way it is new groups have been set up to milk the market for whatever it is worth - at the public's expense.

Please go ahead and lease. At least you will make the salesman happy.

Russ

[Mike90250]

Unless you get some big tax advantage, a lease always makes more $ for the leaser, not the lessee. Why do you think they WANT to lease it to you. If you can afford to buy outright, and line up all their credits (sometimes only a large company gets the credits, homeowners only get offset) you get the benefits. Also, in 10 years, when you need to re-roof, "their" installers are likely going to soak you for the 2 days work to un-mount the racks, and likely force you to buy new racks, used racks are likely to be cut apart because of corrosion.

[sacsolarquest]

Russ, sounds like you're comparing this to an off-grid system?

We don't (yet) have a copy of the lease. We only read over it with the salesperson. At the time, we didn't think we were interested (we've never leased anything). But after running the numbers, it seems to make more economic sense than buying.

I'm just trying to make a decision: Buy vs. lease. It sounds like you (and Dereck) are just saying to walk away from solar altogether? Keep paying the ever-escalating electricity rates ad infinitum, and invest my money in ... oh, I don't know, the stock market? Clearly not a 1% money market account, since that really is losing (not loosing, sorry) money every year. And not a Treasury bond at 3-4% -- that may or may not keep up with the costs of electricity increases.

In this "new normal" economy, a "guaranteed" 6.6% return (with the possibility of it being much higher, if electricity rates rise higher than the 4% figure I used) sounded pretty good to me.

I was asking for a reason to buy instead of lease, and so far, no one has addressed that, AFAIK. Instead, it sounds like neither is a deal to consider.

[russ]

Outside of the return not being great, paying a guaranteed escalating price for power for 20 years plus paying 5800$, giving away all credits, SRECs etc - you can not even claim to be solar powered as 1) you are grid connected and 2) the solar credits and equipment all belong to someone else.

That is very different than the Sungevity lease I saw (someone copied and posted on another site.

There are a few gottchas in that one that some would live with and be happy I suppose.

Can you copy the proposed lease and post it here?

At any rate - take it to a good lawyer and get their opinion.

Russ

[Sunking]

Guess it depends on what you call a good investment. IMO if you cannot double your money in 5 to 7 years, it is not a good investment. At 20 years to break even on you rinitial investment is lousy. In reality you are loosing your shirt as inflation would completely consume it.

Example if you invest $1000 today, in 20 years you should be able to cash out $16,000. So if you invest $1000 today and 20 years from now it is only worth $1000, you lost $15,000.

[sacsolarquest]

Of course that's the case; sorry if I didn't make that clear.

The bottom line is, $5800 for a 20-year lease with all the stuff provided as I mentioned, versus $10,000 for purchase (net of all incentives, etc). Over a 20-year period, the lease option seems to give about a 50% better return on investment.

So, like I said, it just feels too good to be true.

[Sunking]

Well no one is going to give you something for nothing. Read carefully and I bet you will find the company gets all incentives, rebates, refunds and credits like SREC, and all you get the electric billl.

[sacsolarquest]

We all know when things sound too good to be true, they usually are. But we're not able to figure out the "gotcha" in this proposed deal, so we're hoping someone here can.

SolarCity gave us an estimate for a 3.44 kW DC grid-tied system. One of their options is a 20-year lease plan. For about $5800, we'd get:

20-years of solar production
All repairs, including inverter, free of charge
Monitoring
Insurance
Free removal at the end of 20 years (or we could optionally purchase the system for an unknown price -- probably not!)

The lowest quote we've obtained for purchasing a comparable system is $10,000 net.

Over 20 years, assuming the only repair we would need for a purchased system would be a single inverter for $2000 11 years down the road, the IRR works out to be about 4.7% (terminal value at $10k) vs. 6.6% for a leased system.

So the return on a leased system is almost 50% higher than purchasing one, and we don't have to worry about insurance, higher property taxes, or dealing with repairs. And in 20 years we could get rid of it and replace it with newer technology at a reasonable cost .

The lease is fully assumable if we decide to sell the home within the 20-year time frame.

What's the downside? What are we missing? Any ideas?

TIA,

Ken