Solar City info needed

[yankeeboy]

Hi everyone,

Let me start by saying I'm completely new to this forum, and this is my first post, so please forgive me if I posted in the wrong section.

My wife and I just had a salesman from Solar City come out to give us the details on why we should use them for solar power. We had already been contemplating switching over to solar power, but this guy had a well prepared presentation that made it very attractive. I'm hoping I don't end up getting ripped off, so I'm asking for help or advice, on whether I should use them or not.

The company is offering 3 options:

1. Purchase the panels directly from them. They will install them and continue to monitor them for the next 20 years. I never asked the price, because they wanted straight cash, and said they would not finance them.

2. Power Purchase Agreement. This gives us the option to buy the panels after 5 years of being with the company. Again the contract is for 20 years.

3. Straight Lease. This would be for 20 years.

Now the salesman said we have two options for monthly payment.
One would be a Fixed amount per month, it would be based after all the calculations are done, pending the average amount we use for the household.
The second would be a Fee Flexed payment that changes month to month, based on energy consumption.

Like I've read in other post...they would keep the Federal Tax Credit, as this is what pays the installation (or so he says).

Any how, he is suppose to send me an email with an attached file, which explains everything he talked about, but I'd like to hear from some of you guys here. Please let me know what I'm missing here, and what I should keep in consideration before making a final decision. I did tell the guy I would give him an answer by 04/18.

Thanks everyone

[russ]

1) Forget the 18th - any day of the next 6 months is equally good - a salesman wants to set a date so as to facilitate closing the sale.

2) We have no information to guide you with a. Maybe provide the files he sends you and someone can comment.

[Volusiano]

Some people who lease end up having a harder time to sell the house when they need to because some buyers don't want to assume the lease. That's one thing you need to watch out for if you're leaning toward leasing.

It doesn't sound like you're interested in buying because you didn't bother asking for the purchase price. But if I'm wrong and you want to purchase instead of lease, you should get more quotes because Solar City if more interested in leasing so they may not have the best purchase deal for you. My brother considered Solar City for purchase and their quote was not even in the ball park of other contractors' quotes.

Another option they didn't put on the table is a prepaid lease. You pay for the whole thing up front and after 20 year, they may take away the system or if the system is not worth taking down, there's a chance they may leave the system behind for you either for cheap or for free. With a prepaid lease, if you need to sell the house, at least buyers are not required to assume the lease because it's been prepaid.

[Severum88]

Lease and PPA

PM sent. Stay clear of any escalations and make sure you are getting a competitive rate depending on your area.

Severum

[pleppik]

I agree with the other comment that you should get multiple quotes and compare prices. That's true whether you buy or lease.

In addition to potential issues about selling the house with a leased solar array attached, you also need to be wary of leases in general. They can be a good deal (the company doing the leasing has some tax benefits which you, as an individual, don't get), but it's also possible to play financial games with a lease agreement and bump up the cost in ways which aren't obvious.

You should always assume that anything complicated in a lease agreement is designed to benefit the company, not you.

Finally, if you want to do a lease, you should compare the cost of that vs. taking out a home equity loan to pay for the system. A home equity loan has fewer pitfalls, so if the price is close to the same, the loan is preferable.

[yankeeboy]

Some people who lease end up having a harder time to sell the house when they need to because some buyers don't want to assume the lease. That's one thing you need to watch out for if you're leaning toward leasing.

It doesn't sound like you're interested in buying because you didn't bother asking for the purchase price. But if I'm wrong and you want to purchase instead of lease, you should get more quotes because Solar City if more interested in leasing so they may not have the best purchase deal for you. My brother considered Solar City for purchase and their quote was not even in the ball park of other contractors' quotes.

Another option they didn't put on the table is a prepaid lease. You pay for the whole thing up front and after 20 year, they may take away the system or if the system is not worth taking down, there's a chance they may leave the system behind for you either for cheap or for free. With a prepaid lease, if you need to sell the house, at least buyers are not required to assume the lease because it's been prepaid.

The idea of purchasing the panels didn't cross my mind, because I just assume they'd be very expensive, and the salesman said they wouldnt finance, it's only straight cash.

[yankeeboy]

PM sent. Stay clear of any escalations and make sure you are getting a competitive rate depending on your area.

Severum

Can someone explain the escalation portion to me. The salesman made it to complicated that I didn't understand him.

[russ]

Can someone explain the escalation portion to me. The salesman made it to complicated that I didn't understand him.

Not a good sign - make him explain until it is clear - just say you can't sign anything until it is clear.

Escalation refers to annual increases in your power cost over the lifetime of the contract. The leasing company definitely wants this in their favor rather than neutral.

[Volusiano]

The idea of purchasing the panels didn't cross my mind, because I just assume they'd be very expensive, and the salesman said they wouldnt finance, it's only straight cash.

Solar City is more interested in leasing panels instead of selling them to you because they make more money on the leases. So they'd be more inclined to quote you a much higher purchase price to scare you away from even thinking about purchasing. Even if you don't intend to purchase, you may still want to get some more purchase quotes from other contractors just so you know what the realistic purchase price would be, at least to have another data point to compare against the leases.

[yankeeboy]

I agree with the other comment that you should get multiple quotes and compare prices. That's true whether you buy or lease.

In addition to potential issues about selling the house with a leased solar array attached, you also need to be wary of leases in general. They can be a good deal (the company doing the leasing has some tax benefits which you, as an individual, don't get), but it's also possible to play financial games with a lease agreement and bump up the cost in ways which aren't obvious.

You should always assume that anything complicated in a lease agreement is designed to benefit the company, not you.

Finally, if you want to do a lease, you should compare the cost of that vs. taking out a home equity loan to pay for the system. A home equity loan has fewer pitfalls, so if the price is close to the same, the loan is preferable.

Good point on taking out a home equity loan. I didn't think of that. At this point I was considering option 2 the power purchase agreement, which gives me the option to purchase them after 5 years. However, is it worth buying them, if they will also lose value (like a car), from now to 20 years down the road. I figure 20 years from now, I'd have to commit myself to buy something newer again.

[Volusiano]

Can someone explain the escalation portion to me. The salesman made it to complicated that I didn't understand him.

The escalator is simply a series of bumps in your lease payments over time, I think. It should be detailed out in the lease and the salesman should have explained to you what if is, and if their lease has it or not.

[wanabefree]

The Escalation clause is simply how much your cost will go up per year.

Can someone explain the escalation portion to me. The salesman made it to complicated that I didn't understand him.

Solar City has a standard escalator clause of 2.9% per year. At least that is what the contracts i have seen here in Southern California. I have 2 friends that signed up with them one signed with a starting rate of .15 per kwh the ofter one signed up with a .16 per kwh starting rate . Both have the same escalator clause. I have no idea why there is a difference unless one of them had a more difficult install or needed a Panel up grade.

I signed up with a competitor but was able to get them to freeze the escalator for the first few years but agreed not to make it public who or for how long.

Do your own calculations and decide for yourself if it makes economic sense for you. The main thing if you are going to lease or do a PPA is make sure you have a good roof that will last at least another 20yrs and also how long do you think you will be living there. If you plan on moving in the next 10 yrs I would not Lease.

[Ian S]

Good point on taking out a home equity loan. I didn't think of that. At this point I was considering option 2 the power purchase agreement, which gives me the option to purchase them after 5 years. However, is it worth buying them, if they will also lose value (like a car), from now to 20 years down the road. I figure 20 years from now, I'd have to commit myself to buy something newer again.

You have to realize that this is not at all like a car lease. Think of it more like a business lease of equipment that reduces their expenses and improves their bottom line. 20 years from now the system will still be producing electricity although maybe only 80-85% of what it does when new. At that point it won't be worth much to someone else due to the cost of removing it and re installing it elsewhere but it'll still be worth a lot to you. However, maybe there is some new super duper system available then - who knows? More likely, your roof will need major repair and the system will have to be removed anyway to do that.

In any event, get some other prices. There has been a lot of back and forth here on the pros and cons of leasing vs buying. It really all depends on your own individual circumstances. One thing though, if you think you might move within 5 to 10 years, from a financial viewpoint, it probably doesn't make sense to do solar - either purchase or lease - unless electricity costs are sky high and incentives are huge.

[yankeeboy]

Solar City has a standard escalator clause of 2.9% per year. At least that is what the contracts i have seen here in Southern California. I have 2 friends that signed up with them one signed with a starting rate of .15 per kwh the ofter one signed up with a .16 per kwh starting rate . Both have the same escalator clause. I have no idea why there is a difference unless one of them had a more difficult install or needed a Panel up grade.

I signed up with a competitor but was able to get them to freeze the escalator for the first few years but agreed not to make it public who or for how long.

Do your own calculations and decide for yourself if it makes economic sense for you. The main thing if you are going to lease or do a PPA is make sure you have a good roof that will last at least another 20yrs and also how long do you think you will be living there. If you plan on moving in the next 10 yrs I would not Lease.

Exactly what you said about the 2.9% per year, is what the salesman quoted me. Also starting with .15 per kwh.
I live in southern california & my home was built in the 60's, so my house (which i just purchased 4 years ago) was really never energy efficient.
My annual Southern Edison bill is about $2628, and my monthly average is about $219, with the bill will spike in the hot summers up to around $450. The Edison bill would be around $34 or less, once the panels are installed, and I would pay SolarCity about $130. By the way, for those that know southern california I'm in the hot Inland Empire.

Seems like there's a lot of factors in buying or leasing these panels.

[JCP]

I was in the same boat a few weeks ago. I'm opting to buy outright the panels and finance them through my equity line of credit.

Reasons:
- I don't like the idea of having somebody else property on my roof. I like owning my own stuff
- Once you start getting a few bids, you'll realize that you can probably get a system for close to the price you'd get from Solar City and own it
- With a lease, you can't really choose the type of equipment. It's theirs, they're only selling you the power they produce

On a separate note, the cheapest KW is the one you never consume. In a 50 year old house, I have to assume that there is zero insulation. It may be more cost effective to have the house insulated than putting solar panels on the roof. Definitely not as sexy, but probably a better long term choice.

If you still want to go with Solar City, you can have an option to prepay only a portion of the lease which will guarantee the cost of the KWh for the life of the lease.