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Solar Panel Lease- Prepay or Negotiate Purchase?

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  • Solar Panel Lease- Prepay or Negotiate Purchase?

    So about 5 years ago, we stupidly signed up for a lease through SolarCity (yeah yeah, I know). Anyways, it's not a big deal in our monthly finances as it does save us roughly $20-30/month on electricity. However, as I've wised up I've realized that there were a lot cheaper ways to do solar than that and with this lease I now have a liability hanging around if we ever go to sell the home. We have no intentions of selling anytime soon, and best case is we stay in this house for the remainder of the lease and no problems. It's a 6.25kW system, paying $78/month living in the Phoenix area. As I've been reading through my contracts, I don't have a purchase option but I can prepay all lease payments at any time. This would, in effect, remove the financial concerns of the lease from any future buyers as they would not have to make any payments and then in 2034 could decide whether to remove the system or pay for another lease. However, I'm wondering if it may be worth trying to negotiate a purchase deal with Tesla now that I've passed the 5 year mark and the tax credits should all be fully realized. I recognize that would mean I'm probably paying a lot more than necessary for the system, but it would remove the stigma of the lease from my house and ensure that it's a fully owned system. Has anyone ever tried this? I will have the cash in hand (at least to prepay all remaining payments) by the end of the year so it's still a little ways in the future for me but I'd like to plan ahead.

    Edit: no escalator in the payments
    Last edited by daniel13; 04-09-2019, 09:38 PM.

  • #2
    I'd be surprised if Tesla was willing to negotiate a purchase option if that doesn't already exist in your solar lease. You could try calling them and asking. But it would require amending the contract to add in a few relevant provisions (triggering events for the purchase option, such as certain dates or upon sale of the home, procedures for notice when you wish to exercise the purchase option, and calculation of the purchase price, usually done by an independent third party appraiser). As such, I'd be surprised if they want to go through the amendment process with you.

    As for removing the stigma of the solar lease, I would not be too sure that's necessary. There is a lot of comment in this forum and elsewhere on the web about buyers being scared off, etc. But here is an actual research study on the subject from the Lawrence Berkeley National Laboratory: https://emp.lbl.gov/sites/all/files/..._-hk3ESeAFwJYk.

    This study surveyed sellers of homes with third party owned solar (solar leases or PPAs) in the San Diego market. It found that 80% of such homes sold without any reports of buyers being scared off. It's a small sample size and it does suggest that the other 20% had buyers walk away. But it demonstrates that a solar lease is not an automatic deal-breaker for a home buyer.

    What I would do is to have a strategy to sell the home by communicating the benefits of the solar lease to the new buyer. Have a packet of data sheets from the main system components, a summary of the system capacity and other details, and an actual savings calculation relative to what the home would be paying to the local utility. I actually cover how to put together such a disclosure packet in an online course I developed: https://cleanenergycourses.mykajabi....5-fa052adc5fac

    If none of that seems to work, you could go ahead and pre-pay the lease. I don't see how free solar energy plus free system maintenance from Tesla would create any stigma. A really savvy buyer could ask about roof repairs when the system is removed at the end of the term. You could quickly answer the latter by reading the solar lease and confirming Tesla has an obligation to restore the roof to its ordinary condition, except for ordinary wear and tear. Most solar leases contain that provision, and that would require them to patch the roof when they remove the equipment.

    Lastly, if you go that route, I would probably hold onto your money until it gets closer to the time you want to sell. You're saving each month and it sounds like there's no issue making the monthly payments.You could always test the market for selling the home with the solar lease, and then pre-pay it as a backup plan if you see resistance from buyers.

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    • #3
      Thanks for those resources! I appreciate the response- I'm definitely leaning towards the latter option right now of holding onto the money and just making the payments. It gives me the confidence in knowing that I will have the cash to prepay the whole thing at worst case.

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      • #4
        Originally posted by abriori View Post
        I'd be surprised if Tesla was willing to negotiate a purchase option if that doesn't already exist in your solar lease. You could try calling them and asking. But it would require amending the contract to add in a few relevant provisions (triggering events for the purchase option, such as certain dates or upon sale of the home, procedures for notice when you wish to exercise the purchase option, and calculation of the purchase price, usually done by an independent third party appraiser). As such, I'd be surprised if they want to go through the amendment process with you.

        As for removing the stigma of the solar lease, I would not be too sure that's necessary. There is a lot of comment in this forum and elsewhere on the web about buyers being scared off, etc. But here is an actual research study on the subject from the Lawrence Berkeley National Laboratory: https://emp.lbl.gov/sites/all/files/..._-hk3ESeAFwJYk.

        This study surveyed sellers of homes with third party owned solar (solar leases or PPAs) in the San Diego market. It found that 80% of such homes sold without any reports of buyers being scared off. It's a small sample size and it does suggest that the other 20% had buyers walk away. But it demonstrates that a solar lease is not an automatic deal-breaker for a home buyer.

        What I would do is to have a strategy to sell the home by communicating the benefits of the solar lease to the new buyer. Have a packet of data sheets from the main system components, a summary of the system capacity and other details, and an actual savings calculation relative to what the home would be paying to the local utility. I actually cover how to put together such a disclosure packet in an online course I developed: https://cleanenergycourses.mykajabi....5-fa052adc5fac

        If none of that seems to work, you could go ahead and pre-pay the lease. I don't see how free solar energy plus free system maintenance from Tesla would create any stigma. A really savvy buyer could ask about roof repairs when the system is removed at the end of the term. You could quickly answer the latter by reading the solar lease and confirming Tesla has an obligation to restore the roof to its ordinary condition, except for ordinary wear and tear. Most solar leases contain that provision, and that would require them to patch the roof when they remove the equipment.

        Lastly, if you go that route, I would probably hold onto your money until it gets closer to the time you want to sell. You're saving each month and it sounds like there's no issue making the monthly payments.You could always test the market for selling the home with the solar lease, and then pre-pay it as a backup plan if you see resistance from buyers.
        That survey uses data that's at least 6 years old and applies to one market only. In the world of PV where 6 years is a very long time and where all markets and market trends tend to be local, I'd not use such data with confidence to gauge what value, if any, including negative value, a leased system would add or detract from a potential selling price.

        Besides, the world is a lot wiser to leases and the leasing trap than it was 6 years ago.

        I'd add that the sample sizes used in that survey are quite small and probably less than many, if not most researchers would think necessary for validity.
        Last edited by J.P.M.; 04-26-2019, 10:47 AM.

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        • #5
          I think better to negotiate purchase and have really good solar panels and work on them. Like this you know it is yours and no extra worries about next payments

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