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Sunpower Lease Early Buyout Question

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  • Sunpower Lease Early Buyout Question

    Hello,

    I'm almost at my 7 year anniversary of a Sunpower Lease where they give me an option to purchase the lease outright and have a question on what to expect. A few posts on this forum have buyouts that seem pretty low (less than $1,000).

    It looks like they accelerate the depreciation on their books for the first seven years. On my original proposal it shows a depreciated value at year seven of $10,750 (original value is $35k), but the subsequent years the depreciation slows to just a couple hundred dollars a year. My assumption is that they front load depreciation for tax purposes and at year seven my solar system becomes more a liability than an asset to them.

    Does anyone have any experience with the early buyout option? What was your buyout price vs. their estimated depreciation price?

    If my buyout is truly over $10k, I'll keep the lease and the warranty that comes with it. But if they come back with a price of around $1,000 to get out I'll exit the lease and assume the warranty.

    Last edited by LukeD; 08-06-2018, 12:05 PM.

  • #2
    This reply is a little late, but in case you're still interested -

    You're right about the depreciation being front-loaded. The tax laws allow the owner of a solar system (here, the company that is leasing it to you) to accelerate the depreciation of the asset over less than the full useful life (5 years instead of the total useful life of the solar system of 25 or more years). Hence, the depreciated value will decline more rapidly over the first 5 years and then more slowly in later years.

    I can't provide any data on other buyout prices. But I'm fairly certain you're not going to get a price much below the ~$10K value in your original proposal, because otherwise, the leasing company would have their tax credits at risk. Under applicable tax laws, the seller cannot sell you the solar system for less than the "fair market value." Otherwise, the tax authorities could treat the lease as actually a sale of the system to you, and hence, the leasing company would lose the tax credits (since they only belong to the owner of the system). Everyone wants to avoid this, but many customers want a sense for how much the buyout is going to be when they sign the lease. Many leases and PPAs address this by saying that the buyout price is the greater of the fair market value or a set price that is written into the lease or PPA. Here, I'm guessing your lease uses the depreciated asset value as the amount set forth in the lease. Hence, that is likely to be the price you settle on unless you go through the process of obtaining an appraisal of the fair market value.

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    • #3
      Thanks, yes you are correct. The buyout was the residual value on the contract of $10,750 + tax.

      I ended up writing the check... I figured 13 more years of $161/mo or $1,932/yr for the next 13 years is $25k. So I saved more than half of that. My total purchase was about $25k which included the first 7 years of lease payments with no money down.

      Personally I think would still be carrying forward those tax credits due to my tax situation if I had purchased it in the beginning. So the lease ended up being a good option for me. Now I'm about 95% covered by the panels. SWEET!

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