Illegal solar leasing tactics

[KRenn]

"Hey folks, pay X amount of money for this prepaid lease, pay 50-100% upfront and then
after 20 years WE GUARANTEE you can buy it for $1-100 dollars."



No. No. Just no. This scheme is popping up in all sorts of places and
it is completely against the letter of the law. What these installers are doing
is combining the benefits of an operational lease along with a capital lease,
basically double-dipping.

They're taking the depreciation AND promising the customer a specific
buyout price which is a big legal no-no. What's going to happen is that
these people who think they're getting the system for $1, or $100, are going
to get a big surprise when the IRS finally intervenes and they are required to
purchase the system at Fair Market Value.

The profile of the companies offering this scam is always the same.

-Local installer.

-Using funds generated from loans or small private investors

-Due to a major cash crunch, they delay installation of the system for as
much as 8 or 9 months, blaming the utility, the manufacturers, the city,
the county, whomever, whatever they think will stick.

-Eventually most of these installers are going to collapse, if you're going
to do a prepaid lease with one of these companies, insist on not paying a
single penny down until the system is installed, a respectable company will
honor your wishes, just know that none of these companies offering this bogus
deal are respectable.

-When these installers do collapse, who's going to honor the warranty and
insurance you've been promised for 20 years? Oh yeah, that's right,
nobody. You've already paid everything up-front to a small-time outfit.


if all this was legit, why can't "real money" companies such as SolarCity,
Sungevity, SunCap Financial and others not all do the same thing? I
wanted to say something because this BS scam is going to wind up as a huge
Ponzi Scheme and give the entire industry a black eye.

If you're signing one of these contracts, just know that the installer is
going to have to sell about 3 or 4 more jobs just to have the cash liquidity to
get yours installed.


Bottomline, if you're getting a prepaid lease and you're paying 50-100%
of the money down, you're being extremely foolish and don't be surprised
when you see that smalltime installer go belly up and your investment
gets set to flame.



/rant over. Just irritated by some of the bogus solar scams I'm
seeing nowadays.


If you're going to do a prepaid lease, ALWAYS ask who is providing the financial
backing for this operation. If the response is mumbled or vague in the slightest,
cut bait and walk away. Never pay a penny more than 15% of the total cost.
If you give them 50-100% of the money right off the bat, without them having done
a thing for you, what do they really need you for, what's to stop them from walking
off with your money and calling it a day.

The same goes for purchase. Never pay more than 10-15% initially, if the installer
balks, then they're a fraud or on shaky financial footing and you need to look elsewhere.

[Sunking]

Kind of old news around here.

[KRenn]

Kind of old news around here.

Probably but I see more and more companies advertising this business
model, hoping to get one more last run of cash infusion before the rebates
fall any further. For some of the newer people, they might not be aware
of some of this nonsense and then there's others who seem to feel that if
something is "in writing", that automatically makes it true.

[bowks]

Thanks

Thanks for the heads up!

[Naptown]

"Hey folks, pay X amount of money for this prepaid lease, pay 50-100% upfront and then
after 20 years WE GUARANTEE you can buy it for $1-100 dollars."



No. No. Just no. This scheme is popping up in all sorts of places and
it is completely against the letter of the law. What these installers are doing
is combining the benefits of an operational lease along with a capital lease,
basically double-dipping.

They're taking the depreciation AND promising the customer a specific
buyout price which is a big legal no-no. What's going to happen is that
these people who think they're getting the system for $1, or $100, are going
to get a big surprise when the IRS finally intervenes and they are required to
purchase the system at Fair Market Value.

The profile of the companies offering this scam is always the same.

-Local installer.

-Using funds generated from loans or small private investors

-Due to a major cash crunch, they delay installation of the system for as
much as 8 or 9 months, blaming the utility, the manufacturers, the city,
the county, whomever, whatever they think will stick.

-Eventually most of these installers are going to collapse, if you're going
to do a prepaid lease with one of these companies, insist on not paying a
single penny down until the system is installed, a respectable company will
honor your wishes, just know that none of these companies offering this bogus
deal are respectable.

-When these installers do collapse, who's going to honor the warranty and
insurance you've been promised for 20 years? Oh yeah, that's right,
nobody. You've already paid everything up-front to a small-time outfit.


if all this was legit, why can't "real money" companies such as SolarCity,
Sungevity, SunCap Financial and others not all do the same thing? I
wanted to say something because this BS scam is going to wind up as a huge
Ponzi Scheme and give the entire industry a black eye.

If you're signing one of these contracts, just know that the installer is
going to have to sell about 3 or 4 more jobs just to have the cash liquidity to
get yours installed.


Bottomline, if you're getting a prepaid lease and you're paying 50-100%
of the money down, you're being extremely foolish and don't be surprised
when you see that smalltime installer go belly up and your investment
gets set to flame.



/rant over. Just irritated by some of the bogus solar scams I'm
seeing nowadays.


If you're going to do a prepaid lease, ALWAYS ask who is providing the financial
backing for this operation. If the response is mumbled or vague in the slightest,
cut bait and walk away. Never pay a penny more than 15% of the total cost.
If you give them 50-100% of the money right off the bat, without them having done
a thing for you, what do they really need you for, what's to stop them from walking
off with your money and calling it a day.

The same goes for purchase. Never pay more than 10-15% initially, if the installer
balks, then they're a fraud or on shaky financial footing and you need to look elsewhere.

I will take issue on the last statement on purchase. Depending on the state in which you operate in there are specific laws licensing etc. Those need to be followed.
I do however agree with you on the rest of your statement.
Another scam I have seen popping up is a rebate scam where a contract is inflated then the owner gets a rebate (on a separate document) To increase the federal and some state credits.
These usually show up on a website and are reported to the IRS and state officials whenever I come across them

[TheDED1]

One of the tactics I've seen here in North Carolina is people promising big rebates from the government but those particular rebates only exist in places like Alaska for example. just like every other business, there's always going to be someone trying to make a quick buck off the uniformed. Go figure why more people aren't on guard more. I totally agree with your post, except maybe the 10% to 15%, because as Naptown said, there's specific laws in different states. If you wanted to do something about this, why not have a thread dedicated to these frauds, and post all of them that come to your attention? There's probably more to doing this on here then that, and there would be room for abuse of course, but it could come in handy. Kind of like a safe guard.

[KRenn]

Bumping this thread, seems like there's been a few more reports of this same leasing scam happening in Arizona.

[djrobx]

I'm currently deciding between purchasing a system or doing a prepaid lease.

What I keep hearing from salespeople is, "At the end of the term, the leasing company will likely leave it on your roof, because it will probably cost more to repair your roof than fair market value of 20 year old panels".

American Solar Direct left a specific amount in the contract (around $3000 for a 3k system).

SunRun's prepaid lease contract says they will hire an independent person to determine FMV.
That leaves me to wonder what FMV of 20 year old solar panels will end up being. From a technology perspective, 20 years is an eternity.

In my case, for a 4.8k system, the prepaid lease saves me at least $6000:

Prepaid lease: $12k

Purchase: $16k
20 years of insurance: $2k ($100/yr, per my insurance co - gotta love CEA earthquake insurance)
Inverter replacement: $????

I've done some comparison shopping, and the cash purchase price was almost identical between the highly rated vendor that's offering the lease (REC solar) , and another local highly rated vendor (Pacific Blue Solar) .

So if I go with the lease, I am hedging a bet that that FMV will be $6000 or less at the end, and enjoying some of the benefits (not having to wait for rebates, full maintenance, output guarantee).

[s.xavier]

Leasing is a tricky business and there is value to it for those with limited resources but it is important to understand how the numbers work out.

I normally looking at leasing at how you would lease a car. leasing a car allows you at some point in time purchase the old car or sign onto a new lease car. financially the numbers never work out for leasing unless you value having a new car for the duration of the lease as more valuable. And more importantly i guess your financial constraints...

Leasing will always be more profitable position for the company issuing the lease and should be the case because they assume the risks.

If you have the financial resources then investing in your home without leasing is probably the way to go but you're in a better position to determine that. Leasing will provide cost savings but the schedule breakeven will be different but useful for those with limited financial means.

I'm currently deciding between purchasing a system or doing a prepaid lease.

What I keep hearing from salespeople is, "At the end of the term, the leasing company will likely leave it on your roof, because it will probably cost more to repair your roof than fair market value of 20 year old panels".


In my case, for a 4.8k system, the prepaid lease saves me at least $6000:

Prepaid lease: $12k

Purchase: $16k
20 years of insurance: $2k ($100/yr, per my insurance co - gotta love CEA earthquake insurance)
Inverter replacement: $????

I've done some comparison shopping, and the cash purchase price was almost identical between the highly rated vendor that's offering the lease (REC solar) , and another local highly rated vendor (Pacific Blue Solar) .

So if I go with the lease, I am hedging a bet that that FMV will be $6000 or less at the end, and enjoying some of the benefits (not having to wait for rebates, full maintenance, output guarantee).

[russ]

I believe you have to consider that they will remove the setup at the end of the lease.

Saying they will most likely leave it is salesman's talk - nothing more.

[djrobx]

The lease agreement says I can buy it out at FMV. Anyone got opinions on what FMV of 20 year old solar panels might be?

If they're working and producing increasingly-expensive electricity they could be worth quite a lot. But on the other hand, this is technology, and technology tends to depreciate like a rock. This is tough!

I got another proposal for a 5K system purchase for $23k ($14k after tax rebate).

[s.xavier]

The lease agreement says I can buy it out at FMV. Anyone got opinions on what FMV of 20 year old solar panels might be?

If they're working and producing increasingly-expensive electricity they could be worth quite a lot. But on the other hand, this is technology, and technology tends to depreciate like a rock. This is tough!

I got another proposal for a 5K system purchase for $23k ($14k after tax rebate).

It is quite difficult to calculate the FMV especially at this point. The equation will be tricky and it depends on your depreciation schedule and future output which is another value that needs to be determined... You should look at the leasing contract and payment options to perform a cost analysis.

hmmm 5kW system for 23k? take a look at this 5kW solar power package

There are a ton of solar energy systems out there now so review a few and go with the best value/performance if you head outside of leasing.

[Naptown]

It is quite difficult to calculate the FMV especially at this point. The equation will be tricky and it depends on your depreciation schedule and future output which is another value that needs to be determined... You should look at the leasing contract and payment options to perform a cost analysis.

hmmm 5kW system for 23k? take a look at this 5kW solar power package

There are a ton of solar energy systems out there now so review a few and go with the best value/performance if you head outside of leasing.

Cost of equipment only is not a fair way to gauge or compare to an installed system with permits warranties etc.

[s.xavier]

Cost of equipment only is not a fair way to gauge or compare to an installed system with permits warranties etc.

Well i was looking at a startup point... solar systems are complex but a good start for beginners in my opinion.

warranties, regs, environmental factors can get pretty heavy for even an expert so you can just imagine for a beginner.

[djrobx]

Well, I decided to purchase the panels directly. I cannot accept "Fair Market Value", it's just too vague, and it's all over the place in SunRun's contract.

Upon further reading, they have an option at the end of the 20 year lease to "buy" power that the panels produce at the greater of .15c per kwh or 10% less than my utilities base tier. That's really not so bad and at least that's concrete, but I'd be kicking myself if that's $1500+ per year, when I'd have it for free had I just spent a couple extra grand today.

The salesman again swore up and down that there's just no way that SunRun would spend the high amount of money required to remove the panels if I told them I was done. I think he really believes this. But I'm skeptical that a lease owner would just walk away from a system with 30k+worth of energy making potential. At the end of the day, it's the contract that I'm signing that matters, and it says nothing of the sort. I'll have to insure and maintain my system, but buying vs. renting has worked well for me so far, so I'm going with it.