Solar Leasing

 

Solar Leasing Sheep

 

FACT: If you owe federal income taxes, then there's absolutely no such thing as a $0 down solar lease or PPA.

And here's why: A mandatory condition of both of these rental programs is that you forfeit the 30% federal tax credit and any cash rebate to the solar lease or PPA company.

The 30% federal tax credit alone is worth about $10,000.00 on a typical 6kW solar system at their much higher pricing.

Before signing any contract, always demand to be shown, in writing, both the amount of the tax credit and any rebate that you're providing as a down payment as well as the total system price.

If your solar lease or PPA salesman refuses to provide you with this information, then it is in your best financial interest to ask your salesman to leave.

 


 

Here's How The Typical Solar Lease Or PPA Scheme Unfolds:
 

Step 1. The solar leasing/PPA companies typically purchases low cost, standard quality components for use in their systems.

Take a close look at the typical solar lease or PPA quote and you will rarely find any mention of solar panel brand or performance specifications, the inverter brand or performance specifications, or the brand or materials used in the manufacture of the system's mounting racks.
 

Step 2. When providing a solar system purchase quote, the solar leasing/PPA companies will typically mark their system pricing up to nearly double what you can purchase a system for on the open market. The solar lease/PPA salesman will quote you this much higher pricing in an effort to convince you that solar is too expensive to buy and that you would be better served by a lease or PPA.

When it comes to pricing, the bottom line is this: You should never be paying more than $3.00 per watt for a standard tile or composition rooftop installation before incentives. To determine the cost per watt for any system, simply take the quoted price for the system before incentives and divide that price by the DC wattage of the system  Example: Price of system before incentives $15,000 divided by the size of the system 5,000 watts (or 5kW) equals $3.00 per watt. The leasing and PPA companies typically quote their systems at about $5.00 to $6.00 per watt. Which is much too high in today's market.
 

Step 3. The Solar Lease/PPA salesman will then offer their "preferred financing option" a $0 down lease or PPA as an option to their "high" system purchase price.

With exception to retirees or people who otherwise do not pay federal income tax or have a $0 income tax liability, there is simply no such thing as a $0 down solar lease or PPA.

The reason for this is the you are required to forfeit the 30% federal tax credit and any cash rebate that you would have eared if you had purchased your system, to the solar lease or PPA company. This money would have gone into your pocket had you purchased your system instead.*

The 30% federal tax credit and cash rebate is typically no small amount of money either, and can easily exceed $10,000.00 on a moderate sized system.
 

Step 4. The solar lease/PPA salesman will then attempt to convince you to sign their solar lease or PPA contract because they will argue that it makes far more economic sense when compared to their (high) quoted purchase price.

In reality though, when you sign a lease or PPA agreement, when you consider the forfeiture of the 30% federal tax credit and the forfeiture of any available cash rebate and the 20 years worth of lease/PPA payments, and any annual payment escalator, you'll find that you'll end up paying up to three times what you would have paid if you purchased your system instead.
 

Step 5. If the solar lease/PPA salesman's tactics are unsuccessful at this point they will try to convince you to sign by using their imaginary "ace in the hole" added bonus of free maintenance and repairs, free monitoring, and free insurance.

We use the term "imaginary" here because, unfortunately, there is nothing free about any of these bonuses. Remember, add up the 30% federal tax credit, any cash rebate and the 20 years worth of lease payments including any annual payment escalator and you'll find that you're paying so much more (up to triple the cost) for the rental of their solar system, when compared to buying, that it is actually you who will be paying for any monitoring, maintenance/repairs and insurance, not the leasing company.
 

Step 6. Just like visiting your local car dealer, once the car salesman get you in their office their primary goal is to not let you leave without buying a car.

Solar lease/PPA salesmen are aggressively trained not to leave your home until they get your signature on their airtight contract. The leasing/PPA company's pricing is so high that the leasing/PPA salesman knows full well that if you shop their pricing they will lose their sale. Solar lease/PPA salesmen are taught to get your signature on the very first visit to your home.


 

In A Nutshell

Unfortunately, most consumers rarely shop before contacting a solar lease or PPA company, thinking that it will be an easy task to simply say no to the lease or PPA salesman once they're in their home.

Nothing could be further from the truth, most solar lease/PPA salesmen undergo months of specialized training and are experts at overcoming just about any objection that you can imagine. Their entire sales pitch centers on the simple premise that if a solar lease or PPA can lower your monthly electric bill without paying any money out of pocket, then why would you object to signing their contract?

They are trained not to discuss the amount of the 30% tax credit nor the amount of any cash rebate. And they will never disclose the price of their system when it comes to calculating the tax credit. They will only tell you that you don't have concern yourself with the tax credit because they will apply the tax credit to the system so that your cost (high cost) is reduced.

They are also trained never to discuss the option of a $0 down loan instead of a lease or PPA. You will never hear them mention that a $0 down FHA backed loan exists that requires no equity and offers tax deductible interest. Or that some $0 down loans exist that require no collateral whatsoever.

They are also trained to convince you that a solar system requires a lot of maintenance and repairs. (an absolute myth). And that the very few people qualify for the 30% tax credit or that it is difficult to apply for. (another myth that borders on an outright lie)

It's all about a lower payment with no money down. Simple, elegant, but financially deadly in the end for the average income tax paying consumer.

 

Here's How To Protect Yourself Against These Sales Tactics

1. Always demand to see in writing, both the amount of the 30% federal tax credit and any applicable cash rebate that you're forfeiting with the lease or PPA.

2. Always demand to see in writing, the pricing that the solar lease or PPA company will use to calculate the amount of the 30% federal tax credit.

3. Always demand to see in writing, some kind of statement that backs the solar lease or PPA company's claim that you're home will be easy to sell with a solar lease or PPA attached to it. This is critical because many home sellers are now posting comments on the Internet complaining of difficulties when trying to sell homes that are tied to a solar lease. 

3. Always add the amount of the 30% federal tax credit and any cash rebate and the 20 years worth of lease payments and any annual payment escalator together to determine your actual lease or PPA cost when comparing to the cost of a purchase.

4. Never, ever sign a solar lease or PPA without comparing your total rental cost to at least 3 separate purchase quotes. And never sign a lease or PPA contract without a review by both an attorney and your accountant.

 


 

A Solar Lease May Sound Great On The Surface, But Take The Time To Do The Math And You'll Probably Change Your Mind In A Hurry.

 

1. When you purchase instead of lease a solar system, it dramatically raises your home's value as soon as you install it. But if you lease a solar system, you've created a debt liability that a potential home buyer will probably not want to assume. What potential home buyer would want to assume a lease on a used solar system that will only save him or her 6 to 15% on their electric bill. And if the potential home buyer wants nothing to do with your legally binding debt or can't qualify for the lease assumption, then you'll have to pay a hefty penalty to break your lease agreement
 

2. A properly installed solar system requires almost no maintenance other than a good rinsing with a garden hose occasionally to remove accumulated dust from the solar modules. Solar modules are covered under a 25 year factory warranty and inverters are covered by a 10 to 25 year factory warranty.
 

3. A solar systems will not only pay itself off in as little as 4 to 5 years, but will continue to make you money over its 30 to 40 year expected lifetime. This is one of the primary reasons why residential solar lease companies want you to let them use your roof.
 

4. Huge cash rebates are available from many states and utilities. Some as high as $2,000.00 per kilowatt. With a solar lease you won't receive a rebate because you are not buying the system. The leasing company will get the rebate because they will own the system that you'll be making payments on for the next 20 years. This is another reason why residential solar lease companies want you to let them use your roof.
 

5. The Federal government is currently offering a 30% tax credit that's currently available for the installation of a solar electric system on your home or business. With a solar lease you won't receive the 30% federal tax credit either because you are not buying the system. The leasing company will get the tax credit because they will own the system that you'll be making payments on for the next 20 years. This is another reason why residential solar lease companies want you to let them use your roof.
 

6. A solar electric system can earn RECs (renewable energy credits) that can be sold to entities that to offset carbon production. With a solar lease you won't earn any renewable energy credits either because you won't own the system. The leasing company will get the renewable energy credits because they will own the system that you'll be making payments on for the next 20 years. This is another reason why residential solar lease companies want you to let them use your roof.
 

Even with today's dramatically reduced pricing (Less that $3.00 a watt before incentives) we understand that there are consumers who simply can't afford to pay cash for a solar system. If that's the case then why not apply for a $0 down FHA solar loan instead of a lease. A zero down FHA solar loan is easier to qualify for than a lease, only a 650 credit score is required, you don't need any home equity and the interest is tax deductible.
 

Or how about a $0 down, no collateral needed, LightStream solar loan that offers an interest rate as low as 4.99%. Best of all both of these $0 down loan programs, allow you to keep the 30% tax credit and any other applicable financial incentives and own your little to no maintenance solar system for a much greater return on investment.   
 

And because you'll get to keep the 30% federal tax credit and any other financial incentives, and your interest is tax deductible and you'll own your solar system instead of renting it, your return on investment with a loan will be far greater than a lease.
 

 

Read the comparisons below and you'll probably find that in the long run, a solar system lease simply does not make financial sense.

 

The Solar Leasing Company Takes All

Benefits/Drawbacks

Solar Lease

Buy Solar

30 % Tax Credit

No 30% Tax Credit to you. The tax credit goes to the solar leasing company because they own the equipment.

Tax credit applies to you because you own the solar system.

 Cash Rebate From Utility Company.

No Cash rebate to you. The cash rebate goes to the solar leasing company because they own the equipment.

Cash rebate is awarded to you because you own the solar system.

Stable Monthly Cost.

Solar lease contracts that contain a payment escalator clause will increase your monthly solar lease payments on an annual basis. An annual lease payment increase of 3.9% each year for 20 years is not uncommon.

Fixed interest payments are available from many sources which can lock in your investment. The US Department of Energy publishes a consumer guide for financing solar systems. Click here to download a PDF version of their guide.

Reduction Of Your Current Electric Bill

A solar system which is currently being recommended by a popular solar leasing company for a $249.00 per month electric bill in Edison territory would reduce that electric bill by $117.00 per month. The lease payment would be $132.00 per month so your monthly savings with a solar lease program would be about $15.00 per month.

$15.00 per month ? Why would anyone let these people climb on their roof for a couple of days, drill lots of holes, install all of that equipment, be legally bound to a solar lease for up to 20 years on equipment that they won't own in the end, all for a savings of only $15.00 per month ? We're not exaggerating, you can visit the solar leasing websites and use their online lease calculators to see the numbers for yourself.

When you purchase a solar system, you own the system. So unlike a lease, when you finish paying off your loan you're done, that's it. 

The money that your system will save you on your electric bill will have increased over time because electric rates will rise and this non-taxable income will go right into your pocket year after year, decade after decade.

Consequences or benefits when selling your home.

If you cannot get your home's buyer to qualify for the solar lease (Remember your home's buyer must have excellent credit to qualify for the lease) or if your home's buyer is not interested in assuming a lease on the solar system then you are obligated to the lease. You cannot break the lease without financial consequences.

Homes that are sold with a solar system included in the purchase price can sell for more money than homes without a solar system. Since you bought the solar system, you own it and you can do whatever you want. You can move the system to your new home or you can sell the system as part of the home's sale which will improve your home's sale price and it's marketability.

Tax Benefits.

With a solar lease, you not only give up the 30% federal tax credit worth thousands of dollars but you'll also give up any available state tax credits as well. And when it comes to your 240 monthly lease payments, from a tax benefit standpoint, their basically worthless. Simply put, you cannot write off lease payments as a tax deduction.

When you purchase a solar system with a $0 down solar loan or PACE (Property Assessed Clean Energy) loan, the interest on you loan payments are tax deductible. This benefit alone will yield a far better return on your investment when compared to a solar lease.

System upgrade.

When you lease a solar system, you will not be allowed to upgrade or modify the solar system for the entire term of the lease contract. This basically means that you will be stuck with the same old solar technology for that entire period of time. Imagine what your home will look like at year 13 when compared to your neighbors who purchased their systems and have sold their systems and upgraded to the latest, sleekest looking technology while you have 7 more years to go before you can upgrade.

When you purchase your solar system, even with a zero down solar loan instead of a lease, you can do with it what you wish. You can sell the system at any time and upgrade to the latest technology if you want with no penalties what so ever.

Solar System Ownership/Equity After Completion Of Financing.

After paying 20 years of lease payments, you will have zero ownership and will have no equity in the solar system. You will have the option, of extending your lease payments, you may also buy the system even though you've been paying for it for 20 years or you can have the solar leasing company remove the system from your roof. (Ouch, how will they match all of that 20 year old roofing material ? Who say's that they'll even try.)

After you complete the financing of your solar system, it will continue to produce free electricity for many years to come. In fact the solar panels typically come with a 25 year warranty and have a life expectancy of more than 40 years.

Inverters which have a 10 year warranty, have a life expectancy of 12 years. Inverters constitute a relatively small percentage of the overall solar system cost and are expected to drop in price over the life of your system. 

Backup Power During A Power Failure.

Again when you lease a solar system, you will not be allowed to upgrade or modify the solar system for the entire term of the lease contract. Your leased solar system is designed to turn itself off during a power outage, even when the Sun is shining. So no matter how much the weather worsens and no matter how frequent power outages become, you will not be allowed to add a battery backup unit to your leased solar system or you will be in violation of your lease contract.

When you own your solar system, even if you financed it with a $0 down solar loan instead of a lease, you can purchase your system as a battery backup grid tie solar system from the start or you can add a battery backup kit to your grid tie only system any time you wish.

Renewable Energy Credits (RECs).

No Renewable Energy Credits to you. The Renewable Energy Credits go to the solar leasing company because they own the equipment.

Renewable Energy Credits apply to you because you own the solar system.

System Maintenance.

No System Maintenance When You Lease A Solar System. That's a good one ! What maintenance ?

That's the beauty of owning your own solar system. A properly installed solar system needs virtually no maintenance other than a good rain or a rinsing off every few months of accumulated dust on the solar panels with a simple garden hose.

Benefits/Drawbacks

Lease Solar

Buy Solar

 

 


INVESTMENT BANKERS ABSOLUTELY LOVE SOLAR LEASES

Bankers, you've got to love them. If anyone can conjure up a way to make a ton of money on a low risk, little to no maintenance investment and walk away still owning the solar system that a consumer has made 10 to 20 years worth of lease payments on, it would be a banker.

 

If you're Considering A Solar Lease Click Here To Read This Article First

 


 

 


 

Judge for yourself, when it comes to benefits, it appears that the solar lease program company is the clear winner. In our opinion, If you want the most from your experience with  solar energy then owning your system, especially at today's record low prices gives you the most benefits.

Hey, itís great to go green, but with up to a 75% reduction in pricing in the last few years before incentives, and new solar incentives popping up all over the country, why not go green and put a lot of extra green in your pocket by owning a solar system instead of leasing.

 

A PREPAID LEASE WILL COST YOU MORE

 

 

 

 

 

Copyright 1997-2013 Solar Home, Inc. Solarhome.com