Prepaid lease vs. cash purchase considerations

[Naptown]

Pay off the rest of the lease would not refer to a prepaid lease where the whole thing is paid upfront with no monthly payments.
Do you offer such a product?
If not then the customer pays monthly.
What happens if they sell their house?
What are the terms to transfer the lease?

[Ian S]

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

If you haven't done so already, get a copy of the prepaid lease you'd be signing and read it carefully. Most are actually quite comprehensible but seek clarification if you need to. After all you'll be living with it for a long time. You shouldn't need an attorney but you could also run it by one if you need to. Best in that case to have very specific questions to ask of the lawyer to minimize costs.

[bando]

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.

so it does not specifically mention that the leasing company has the right to leave/abandon the equipment and convey that to the homeowner ?

[Ian S]

so it does not specifically mention that the leasing company has the right to leave/abandon the equipment and convey that to the homeowner ?

From my Sunpower prepaid lease:

If you request that we remove the System, we will do so within ten (10) business days of your request. However, we may choose not to remove the System and if we notify you in writing that we have made such a choice, you will be considered to be the new owner of the System and the System will automatically be conveyed to you AS IS, WHERE IS (and you may be responsible for payment of sales taxes or other taxes, fees or charges, if any, imposed by governmental authorities in connection such transfer of the System).

[bando]

From my Sunpower prepaid lease:

interesting... thanks.

i still find it hard to swallow that there is no upper bound (i.e., "a price not to exceed $___") language on the residual value after 20 years. that's the one thing we just don't know - you never know how much they try to charge. maybe there will be a large second hand market for used panels and they say well they still produce 80% of what they were new so they can still make money selling them.

still haven't decided! didn't know it would be such a hard decision.

[Naptown]

It is IRS rules and who knows what this will be worth after 20 years

[Ian S]

interesting... thanks.

i still find it hard to swallow that there is no upper bound (i.e., "a price not to exceed $___") language on the residual value after 20 years. that's the one thing we just don't know - you never know how much they try to charge. maybe there will be a large second hand market for used panels and they say well they still produce 80% of what they were new so they can still make money selling them.

still haven't decided! didn't know it would be such a hard decision.

Also from my lease:

The purchase option price at the scheduled end of the Lease Term will be an amount equal to its fair market value.

I suppose "fair market value" theoretically has no upper bound but practically speaking I think it likely means pennies on the dollar especially since there is cost involved to remove the system, test it and market and sell it. Who knows, in 20 years, your much needed new roof may have solar built-in anyway!

[frizzlefry]

If I were a betting man, and often I am, there could be a very lucrative business of buying out off lease panels for solar farm or other us such as non profit third world country energy needs. In 20yrs I'd expect a decent FMV value on the panels. As others have noted, a panel producing at least 80% of the rated output is going to be worth something to someone. Their language in the lease gives them an out. They're covering their bases and so should you. Don't take their word that you will get these panels at the end of lease for no cost. I'm expecting this to never happen.

Put on your business hat and you'll have more clarity. By pricing leases slightly lower than purchase cost for the 20yr term, you can bet they'll try to milk as much out of these as possible.

Just my opinion but I've done my analysis from a leasor‘s perspective and it didn't make sense to me.

[russ]

If I were a betting man, and often I am, there could be a very lucrative business of buying out off lease panels for solar farm or other us such as non profit third world country energy needs.

My point of view as well - guaranteed they will sell the systems off as a lot. One last bit of cash on the way out the door for them as in free money. I could easily sell the old panels here in India today and in the future.

Selling them off one by one makes no sense but to sell them as a lot would be easy. Labor in the US will only get cheaper in years to come.

[NRGjason]

I apologize for not getting to this yesterday, I left the office at 5pm and I don't work at home.

Pay off the rest of the lease would not refer to a prepaid lease where the whole thing is paid upfront with no monthly payments.
Do you offer such a product?
If not then the customer pays monthly.
What happens if they sell their house?
What are the terms to transfer the lease?

Great question. I think that there might be a bit of confusion with how this works. Let me try to clarify the best that I can.

This is a 20 year lease. Once you reach year 7 through 20 of the lease, you have the option to prepay the rest of the lease each year.
for example.

Year 7 - pay $13,000 to prepay the rest of the lease
Year 8 - pay $12,000 to prepay the rest of the lease
Year 9 - pay $10,000 to prepay the rest of the lease
Year10 - etc...

Now at year 7 of the lease, you can purchase the system if you want or continue your lease. Then of course at year 20 you have the option to purchase the system as well.


Now, if you were to sell your home, all the new homeowner has to do is pass the credit requirements and the lease can be transferred.
If you the new homeowner doesn't meet the credit requirements, then you will have the option to purchase the system and add the value to your home.

so it does not specifically mention that the leasing company has the right to leave/abandon the equipment and convey that to the homeowner ?

I do not see anywhere in our lease that at the end of the term we can just leave it on your roof. no..
The 3 options that I showed earlier.


I hope that this helps. If you have any further questions, or if I have been unclear at all, please let me know.


Thanks

[bando]

another thing i am starting to wonder is that maybe the bid i received has an inflated purchase price. when we got our first bid, the cash vs prepay lease was only a difference of about $1900.

in this other bid, the difference is $4300-$4700 between cash and prepay, making the decision much harder.

does the prepay lease price come directly from Clean Power Finance or is it set by the solar company? the salesguy made it sound like they punch in the specs and CPF spits out the one-pay price. and then of course the cash purchase price is set by the solar company.


so maybe that means their cash purchase price is inflated and i can negotiate 2-3k off their cash purchase price?

could be wishful thinking but maybe i'll try it.

[Naptown]

Probably not
The prepaid includes things like the 30% and local incentives taken out of the price. After adding that back in what is the difference.
The difference between this and the 1900 on the other one was an inflated lease price.
Some leasing co like Solar City do inflate the purchase price.
The motive for this may be to make the lease look better financially.

[Volusiano]

One thing to consider is that if you have to sell your house before the lease ends, you'll have to convince the prospective buyer to assume the lease for you. So you may lose a good prospective buyer if they don't want to do it.

[Naptown]

One thing to consider is that if you have to sell your house before the lease ends, you'll have to convince the prospective buyer to assume the lease for you. So you may lose a good prospective buyer if they don't want to do it.

Not an issue on a prepaid.
Everything is paid for when completed.

[bando]

yes and in fact if it's prepaid and i sell in 5 years, the new owners get 15 years of "free" electricity.

i wouldn't buy anyway if we didn't think we'd be here for at least 10 years, but i digress ...


Is negotiating not something people do with Solar bids here? or are you just getting multiple bids and taking the one you like the best?