20 year Commitment for Solar Lease. Does anyone else think this is a long time?

[SunEagle]

I bought mine with a home equity loan with a 2.9 apr. My monthly heloc payment is less than my prior average monthly electric bill. Just hit the year mark and did my taxes and found ok out I was able to write off the heloc as mortage interest. My accountant said I could write it off every year so I paid zero in interest on it and will for the next 4 years.

Paying zero in interest and being able to list that interest as a deduction for your Fed Tax return are really two different things.

And now with the standard deduction going up I would expect to see less people using the itemized deductions on their tax returns.

[J.P.M.]

You don't seem to understand what it means to "write it off".
It doesn't mean you paid $0 in interest.
It means if you paid $3000 in interest you don't have to pay taxes on that $3000. Which probably means you have ~$1000 less to pay in taxes to federal and state government.
It does not mean you have $3000 less to pay to federal and state gov't.
Now it might mean $1.2k less or $500 less - it really depends on how much you are taxed on those last few dollars of income. (your "marginal tax rate" - as opposed to your average tax rate, which is going to be a lower percentage)

You can look at it as if you're after-tax interest rate has been reduced by your marginal tax rate.
ex: 2.9% interest with a 25% federal tax and 8% state tax is effectively like it's a 1.94% interest rate loan. (2.9% * (100%-25%-8%) = 1.94%)

Right. Another person who doesn't know the difference between a tax deduction and a tax credit.

"write off" is an ill defined, imprecise and usually misused, misleading and confusing term.

[Chillybone]

Hello new member here. We took over a 20 year lease transfer because we fell in love with a home but after reading more into the contract and not saving any money each month we are in quite the pickle.
From just my case if we make enough electricity we would only need to pay the service charge which is 19 bucks to our energy company. Plus the solar panel lease payment and it comes out to more then what we would of paid without solar.

Sunrun also has has refused to help in anyway just stating we signed the agreement so I it

[J.P.M.]

Hello new member here. We took over a 20 year lease transfer because we fell in love with a home but after reading more into the contract and not saving any money each month we are in quite the pickle.
From just my case if we make enough electricity we would only need to pay the service charge which is 19 bucks to our energy company. Plus the solar panel lease payment and it comes out to more then what we would of paid without solar.

Sunrun also has has refused to help in anyway just stating we signed the agreement so I it

Another case of emotion (love) governing logic and information.

Sunrun is one of the bottom feeder national leasing outfits.

Maybe the lease holder (probably not Sunrun BTW) will offer you an early buyout when the lucrative depreciation runs out.

[jryaus]

Installing solar is a pretty expensive upfront investment and electricity prices are pretty low across the country. 20 year leases allow you and the system owner time to recoup that initial investment and then start saving money as electricity prices slowly increase. Yes, 20 years is a long time, but it's actually necessary for you to see any real value from a solar lease - especially with the extra fees tacked on (there's inherent interest built into a solar lease, though installers don't really mentioned that).

Whether or not a solar lease is a good deal is another question. Everyone here says no, and I certainly lean that way as well! Better to check out loans (at least they're more transparent) or paying in cash.

[Chillybone]

sorry double posted. I didn

[Mike90250]

Installing solar is a pretty expensive upfront investment and electricity prices are pretty low across the country. 20 year leases allow you and the system owner time to recoup that initial investment and then start saving money as electricity prices slowly increase. Yes, 20 years is a long time, but it's actually necessary for you to see any real value from a solar lease - especially with the extra fees tacked on (there's inherent interest built into a solar lease, though installers don't really mentioned that).
Whether or not a solar lease is a good deal is another question. Everyone here says no, and I certainly lean that way as well! Better to check out loans (at least they're more transparent) or paying in cash.

LEASE will always cost more/longer payoff because - - - - - You are paying the lease company salary's too, sales droid, secretary, middle manager, upper managers,,,,

[Guest]

I'm a prospective buyer of a house in central California. In a truly stupid move by the sellers RE/MAX agent, the home listing touts solar panels as an amenity, but listed nothing in the disclosures that it is a 20 year lease from SunRun and only on year 4. It's a 6Kw system, and the contract is for $94 per month. We only received the disclosure because we prompted about this just in case, but that was after already sending in our first offer and after they had countered. So needless to say we're already talking price when they drop the bomb of essentially a $16,000 liability. We really like the house, but due to all of the concerns listed in this thread, we really are pissed that we look like the bad guys for basically saying... um, we're not coming up much from our original offer since we just discovered this huge liability. I'm glad to hear these reactions here as they make me feel like I'm not the crazy one thinking that this new information really mucks up the works on this deal. Knowing that I'm stuck with their bad decision, and will have to eat it if I ever end up selling this house, well, that's going to cost them some cash in the selling price. I'm worried they will balk at this, but this thread makes me feel better, and justified if they end up telling us to walk.

That being said, if we get the price down and end up taking over the lease, we do have some contract language that sounds like a buyout is possible. The "minimum cash purchase price" in the contract lists year 4 buyout price of $16,600. These days that seems pretty close to the cost of a new system less the tax credit, right? At year 5 it drops a fair bit and I think they give an early buy out provision at that 5 years. That is listed in the contract as a minimum purchase price of $12,300, so I suppose if there is a buyout option at year 5, there's no sense in doing it at year 4. Better to pay out the monthly fees for another year to get to that buyout period over considering a buyout now at 16,600. This whole thing is such a mess. The lease does include field servicing of the system and performance guarantees. And the "minimum" in the buyout purchase price is a little sketchy, not sure if it could actually end up being more expensive. The owner did pay upfront $3000 to lock the pricing, so at least the payment it won't go up annually. I just hope the sellers are googling "selling a home with a solar lease" and finding these types of discussions and realizing that this is a real liability for their home value to force a buyer into their lease contract. My concern is they still will be telling themselves that "but they'll save money on electricity! why don't they want this?". And I DO want solar, but that's what I thought I was getting before I realized it was never theirs to sell. Blech. What a mess. At least I know what I'm getting in to if this deal goes through.

Sorry for the first post venting. But thanks for having such a frank discussion about the typical leasing values out there. It's definitely helpful to hear out!

[Ian S]

I'm a prospective buyer of a house in central California. In a truly stupid move by the sellers RE/MAX agent, the home listing touts solar panels as an amenity, but listed nothing in the disclosures that it is a 20 year lease from SunRun and only on year 4. It's a 6Kw system, and the contract is for $94 per month. We only received the disclosure because we prompted about this just in case, but that was after already sending in our first offer and after they had countered. So needless to say we're already talking price when they drop the bomb of essentially a $16,000 liability. We really like the house, but due to all of the concerns listed in this thread, we really are pissed that we look like the bad guys for basically saying... um, we're not coming up much from our original offer since we just discovered this huge liability. I'm glad to hear these reactions here as they make me feel like I'm not the crazy one thinking that this new information really mucks up the works on this deal. Knowing that I'm stuck with their bad decision, and will have to eat it if I ever end up selling this house, well, that's going to cost them some cash in the selling price. I'm worried they will balk at this, but this thread makes me feel better, and justified if they end up telling us to walk.

That being said, if we get the price down and end up taking over the lease, we do have some contract language that sounds like a buyout is possible. The "minimum cash purchase price" in the contract lists year 4 buyout price of $16,600. These days that seems pretty close to the cost of a new system less the tax credit, right? At year 5 it drops a fair bit and I think they give an early buy out provision at that 5 years. That is listed in the contract as a minimum purchase price of $12,300, so I suppose if there is a buyout option at year 5, there's no sense in doing it at year 4. Better to pay out the monthly fees for another year to get to that buyout period over considering a buyout now at 16,600. This whole thing is such a mess. The lease does include field servicing of the system and performance guarantees. And the "minimum" in the buyout purchase price is a little sketchy, not sure if it could actually end up being more expensive. The owner did pay upfront $3000 to lock the pricing, so at least the payment it won't go up annually. I just hope the sellers are googling "selling a home with a solar lease" and finding these types of discussions and realizing that this is a real liability for their home value to force a buyer into their lease contract. My concern is they still will be telling themselves that "but they'll save money on electricity! why don't they want this?". And I DO want solar, but that's what I thought I was getting before I realized it was never theirs to sell. Blech. What a mess. At least I know what I'm getting in to if this deal goes through.

Sorry for the first post venting. But thanks for having such a frank discussion about the typical leasing values out there. It's definitely helpful to hear out!

Be careful, the opportunity for a buyout may only be if the property is sold i.e. you may not be able to do it any time you want. If you are unsure of what the lease terms dictate, you should have a lawyer explain it. My SunPower pre-paid lease had buyout valuations for every year for 20 years but there was only one "early buyout" date where the owner could exercise the buyout without a sale of the house. At least your lease payment is locked in but I would also confirm that. Those escalator clauses are a real rip-off that sound innocuous but over 20 years of increases really hurt. Lots for you to consider and I know many here would just say walk away but it might be worth working with the seller to get them to buy the system out so you own it. That way, assuming you are unlikely to remain in the house for another 15 years, you won't be in the current sellers' position when you go to sell the home and have those same headaches all over again! Just out of curiosity, what is the buyout amount at year 15? In my prepaid lease, the buyout amount increased dramatically in the later years.

And oh BTW, that minimum buyout price? You might want to ask them about any "fees" with the buyout. SunPower nicked me for an extra $200 fee that as far as I can establish, was never mentioned in the lease.

[Kendalf]

I would want to get that minimum purchase price for year 5 guaranteed and in writing before making any final deal on the house. In terms of the system price, even the 5 year buyout price is still higher than what you would pay for a new solar system (after deducting the federal tax credit).

Assuming you buy out at year 5, and that it is a full 12 months before that occurs, the amount you would be paying for the system is $12,300 + $94*12 = $13,428.

A brand new solar system with high efficiency Panasonic panels and SolarEdge inverter+optimizers (just using this because that's the equipment I got for my recent purchase) should cost under $3.00/W, and perhaps closer to $2.80/Watt. Assuming the higher $3.00/W, this would be about $18,000, and deducting the 30% federal credit it would cost $12,600 for a brand new system.

Now if you really love the house, then this cost may be inconsequential years down the line. But you should certainly use those numbers as leverage when discussing the sale price of the home. The only risk is that someone who is ignorant of the terms of the lease on the solar panels may swoop in and purchase at the price offered by the current owners, but then they will have the headache of the lease to deal with.

[Ian S]

Now if you really love the house, then this cost may be inconsequential years down the line. But you should certainly use those numbers as leverage when discussing the sale price of the home. The only risk is that someone who is ignorant of the terms of the lease on the solar panels may swoop in and purchase at the price offered by the current owners, but then they will have the headache of the lease to deal with.

Yes, that would definitely be a concern. There are many who wouldn't comprehend the pitfalls of taking over a solar lease.

Here in Arizona (APS territory), existing solar installations were grandfathered when new less solar friendly rate schedules were implemented. I don't know how it's done in Cali but here at least, I believe there is an advantage to acquiring a home with an existing grandfathered system as opposed to buying a home then installing a brand new system subject to the new rate schedules and fees.

[Guest]

As a Realtor in Phoenix, Arizona, my experience has been that solar system leases cause major delays on selling a home, and usually result in a lower final sales price. Even in a good seller's market, the amount of buyers who will be interested in seeing your home will dramatically be affected by a solar lease. Either be willing to discount your home or pay off the lease. Also, I've seen people reply on posts that you can add "the value of the solar panels" to your home once you pay them off. The price you pay for the panels and the Market Value of your home are two different things. You may pay $16,000 or $20,000 to buy out a solar lease and own the system, but only be able to add $5,000 to the price of your home. Buyers are not running out to buy homes with owned solar panels,even if they save on electric. Many appraisers are also not educated on how to add value for owned panels, so there are cases when $0 was added for owned panels. Not in my experience, but from other agents' experiences!

[TAZ427]

As a Realtor in Phoenix, Arizona, my experience has been that solar system leases cause major delays on selling a home, and usually result in a lower final sales price. Even in a good seller's market, the amount of buyers who will be interested in seeing your home will dramatically be affected by a solar lease. Either be willing to discount your home or pay off the lease. Also, I've seen people reply on posts that you can add "the value of the solar panels" to your home once you pay them off. The price you pay for the panels and the Market Value of your home are two different things. You may pay $16,000 or $20,000 to buy out a solar lease and own the system, but only be able to add $5,000 to the price of your home. Buyers are not running out to buy homes with owned solar panels,even if they save on electric. Many appraisers are also not educated on how to add value for owned panels, so there are cases when $0 was added for owned panels. Not in my experience, but from other agents' experiences!

Yeah, I wouldn't lease a system period. Anything that you can have a lien put against your home is a barrier to being able to sell it. As for value, it does a bit depend on area, but I'd still say it's like a pool, don't ever expect to get near what you put into it. Maybe 1/4 of the cost will be added towards your home value, but don't depend on that, and if there's a lien on your house, like you've stated, expect the home value to actually drop.

[Sunking]

Please do it and allow me to set it up. I will get the Gold Mine and you get the Shaft. When it comes time to sell, I get a big fat check at closing you get to write.

[TAZ427]

Please do it and allow me to set it up. I will get the Gold Mine and you get the Shaft. When it comes time to sell, I get a big fat check at closing you get to write.

Well as long as you've got cousin Elon to bail you out when your company is going under...