Best way to finance solar?

[insaneoctane]

What options have you guys found to finance your solar Installations?
I'm looking at a 5% 10 year equity loan. I've got amazing credit but I am not happy with how even a 5% loan pushes out my Roi... do most installers offer any better options? any ot advice?

[Sunking]

Do not finance. Only way is with cash. Otherwise you just set yourself up for a 200 to 500% increase in electric bills. For example let's say you pay 12-cents per Kwh and on average use 1200 Kwh month. So your monthly electric bill with all taxes and charges will be about $170/month.

Now let's say your yearly average solar insolation is 4.2 Sun Hours, which is the national average. That would require a 12 Kwh solar system to net zero usage. A 12 Kwh system installed after all rebates and incentives will run you around $40K. A 10 year term @ 10% interest will cost you $528/month plus a $25/month service charge from your Power Company. You just went from paying $170 month to the POCO to paying the bank and POCO $553/month or a 325% increase in your electric rate locked in for 10 years. Can you say screwed?

Take that same $40K and invest it in a 7% mutual fund and in 10 years you collect $81,000. Or you can withdraw $233/month forever enough to pay your electric bill and $63 worth of groceries every month, and your kids get $40K cash when you kick the bucket. That is how money works my friend.

[insaneoctane]

Do not finance. Only way is with cash. Otherwise you just set yourself up for a 200 to 500% increase in electric bills. For example let's say you pay 12-cents per Kwh and on average use 1200 Kwh month. So your monthly electric bill with all taxes and charges will be about $170/month.

Now let's say your yearly average solar insolation is 4.2 Sun Hours, which is the national average. That would require a 12 Kwh solar system to net zero usage. A 12 Kwh system installed after all rebates and incentives will run you around $40K. A 10 year term @ 10% interest will cost you $528/month plus a $25/month service charge from your Power Company. You just went from paying $170 month to the POCO to paying the bank and POCO $553/month or a 325% increase in your electric rate locked in for 10 years. Can you say screwed?

Take that same $40K and invest it in a 7% mutual fund and in 10 years you collect $81,000. Or you can withdraw $233/month forever enough to pay your electric bill and $63 worth of groceries every month, and your kids get $40K cash when you kick the bucket. That is how money works my friend.

If I understand your logic, why would you ever install solar? Rather than use cash to install, you could invest at 7%...wouldn't that approach be better than investing in solar energy????
IMO: Getting 7% on $40k is hard to do and rising energy costs are eating most of your interest/dividends away...just sayin'

Still looking for finance advice

[Sunking]

IMO: Getting 7% on $40k is hard to do and rising energy costs are eating most of your interest/dividends away...just sayin'

Electricity prices have been going down since 2008 and expected to keep dropping national. Across the nation prices are down some 13%, and as much as 27% here in TX. In 2007 I paid some 13.1 cents, toady 9.6 cents.

[bonaire]

I had a thread about this recently. The real problem with solar where you finance to buy it is the new payments really negates any savings and you end up paying more to "go green". It's not financially smart. I also listen to Dave Ramsey podcasts and I hear a lot of financially dumb people who have finally seen the light. You can always try a HELOC.

I paid cash for my system and yes, agree fully, that if I invested the money in a high yield corporate bond fund or good yielding stock, I could pay my electric bill from the yield alone. It's a fact that poor people who must finance money to get things need to stop doing that and save up to buy those things.

Start with why do you want solar PV? Then, figure out if you can make savings by conservation means instead. Can you put devices in the home on timers? Can you cancel subscriptions or gym memberships to save money? What else can you do to match the implied savings of solar?

Getting 7% is not hard to do. Getting 5% is easy to do. Of course, you pay taxes on dividends. My mom didn't want to make too much on investments because she would have to pay more taxes. That kept her from being very wealthy. My investments are up over 9% YTD. Many people who aren't wealthy don't believe that they can get there or have other excuses.

Power companies have cut rates over the last two years. Except in s. cal. And a few other spots. Prices will rise but far slower than solar installers try to "sell" you on. If your electric rates are below .15/kWh there is no real reason to get solar other than to feel good. Feeling good is fine and many people pay top dollar to feel good by going on vacations, buying expensive liquor and cigarettes, buying hot cars, etc. it's up to you

If you want solar to save money, buy Dave Ramsey's total money makeover book. Then invest wisely and conserve and change lifestyle. Solar PV is more of a hobby than a way to save money. Like any hobby, many find out the actual costs long after getting hooked into it.

[Ian S]

The advice given so far is too general to be of much use. It all depends on your individual circumstances: location (for solar insolation), your utility, pricing structure of electricity, incentives available, your financial situation (tax bracket, mortgage, equity, etc.), the local market, solar players involved locally, construction costs locally, etc. You might consider a prepaid lease from one of the national players. That's what I did despite the poo-pooing from the peanut gallery around here and it's shaping up to be one of the best investments I ever made - somewhere in the range of 15%/yr over the 20 year period tax free! Now I admittedly hit the sweetspot: Arizona sun, good incentives and exceptional pricing of my Sunpower lease so your deal might be less attractive.

[bonaire]

I just came back to add what Ian just said. Look into a solar lease with solar city, sunpower or others. It will vary based on location. But I believe the savings will be better in areas which have more sun and higher electric costs, like S. Calif. versus Oregon or Michigan.

Also, use the savings you may find to increase your long term investments and savings account. I will also offer this. I will pay for insane octane to go to Financial Peace University if you sign up for it. It is something you do as a pay it forward kind of thing and I'd like to offer it to you, just PM me a note and we'll set it up. It's a $100 fee and I am feeling like making the offer to you.

[russ]

That's what I did despite the poo-pooing from the peanut gallery around here and it's shaping up to be one of the best investments I ever made -

That is what is nice with Ian - Whatever he does he declares is best and wisest - at least by his definition.

[Sunking]

It's a $100 fee and I am feeling like making the offer to you.

You can get it at much lower cost from many Churches. Around here $45/pp or $65/family.

[bonaire]

It's definitely a family thing to do. Especially good for kids. I hope to put my son through it before he goes to college in the fall.

[SoCalsolar]

Sunking is wrong bonaire is wrong

Sunking is wrong bonaire is wrong in your case because you do live in CA and your prices are increasing over 5% a year last year, this year, and next year definately and likely forever but we have great weather, high gas prices, and bad air quality. Financing is a no brainer when you get your payment lower than your existing SCE payment. Its called an instant ROI which is especially nice if you can use somebody elses money to do it with. The first response by King is so far off in your case regarding sun hours I won't address it. Bonaire should fire his financial adviser knowing that the DOW is up 9.87% for the year. The DOW is the measurement of mediocrity in the investment world. All that being said you ought to be able to write off some portion of the interest. In your case with a relatively small bill unless you really like the house and plan to be there for 10+ years I wouldn't go solar and 5% is a good rate to finance solar at but you would still be outlaying more money per month than you are paying now unless you can get your out of pocket down to about $14,000. If you still feel like you need solar call a few local dealers and ask them if they can install a 5kW DC system for $19,000 and offer 0% financing for the 30% tax credit for one year (your finance payment and remaining electric bill ought to be just about what you pay now). Tell them the type of roof you have (comp, tile, etc), azimuth (direction of roof faces) and specs on your main electric panel (spaces, main max, etc). If they can they will if they can't they won't.

[Ian S]

That is what is nice with Ian - Whatever he does he declares is best and wisest - at least by his definition.

Well, Russ, it's hard to argue with the numbers: $6729 one time upfront payment resulting in ~$1200/year lower electric costs for 20 years. Even that's assuming - conservatively -that rates stay the same and ignoring Arizona Public Service's long history of significant rate increases.

Now, is a great deal like that currently available to the OP? Probably not, but (s)he needs to consider all possibilities in the context of their individual situation to determine if solar makes sense for them.

[Sunking]

It's definitely a family thing to do. Especially good for kids. I hope to put my son through it before he goes to college in the fall.

Ramsey's secret has been lost today. It use to be common knowledge. The secret to wealth is to live below your means and stay out of debt. When you allow yourself to go into debt, you have enslaved yourself.

[Ian S]

The secret to wealth is to live below your means and stay out of debt. When you allow yourself to go into debt, you have enslaved yourself.

I actually agree with you on something. OMG, a pig just flew by!

[SharpT]

What options have you guys found to finance your solar Installations?
I'm looking at a 5% 10 year equity loan. I've got amazing credit but I am not happy with how even a 5% loan pushes out my Roi... do most installers offer any better options? any ot advice?

Another option for some is to self-install with cash..... forget financing....

Start small if low on cash... I just installed a 6 panel 1.4kWhr system with around a 20-25%/yr ROI.... ) against my Tier3/4 $0.32/kwh rates.

In a few years I can easily add on to the system, maybe put in another 6 panels if rates continue to rise. I used microinverters, so adding on up to 17 for my system is pretty straightforward. And the initial install includes most of the fixed costs (new breakers in main panel, AC disconnect, most of the conduit and #10 from array back to the main panel, and the $500 communication box). Will just need to pay the $300 permit fee each time, so each expansion needs to keep that in the costs and ROI calcs...

Of course each person has their own variables to consider. I'm in high rate part of the country, good sun-hours, and 20 degree composition roof installation, and enough "handyman" skills to be successful.

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SharpT