I Can't See How Leasing Doesn't Beat Purchasing, Can You?

[cebury]

So let's start over,

Hi Vinnie. Nice to meet you.

I was wondering, since you repeatedly said leases are never worth anyone's consideration-- always buy. If I definitely want Sunpower equipment and willing to pay the extra for the brand since I have limited roof space & like their panels, what do you think of these two options:

Sunpower 6.8kw DC system in Central CA.

Choice 1: $38,000 up-front and I OWN the system on Day1.
I wait for $12k in tax breaks & rebates = $26k NET : $3.82/DC watt

Choice 2: $19,400 up-front and $600 at Year 6 Early Buy out with pre-paid lease: $2.94/DC Watt.
I OWN the system after 6 years.
No tax rebates or incentives, but I don't have to wait for them either.

I own all the power generated under the lease and participate in net-metering. I make no monthly payments. As of the 7th year, I would own the system no matter which choice I select. There was NO markup based on choosing the lease -- that lease was offered separately 2 months later as an alternate financing method if I chose to. Both systems have 10yr warranty and all the options are the same.

What's your opinion?

[cebury]

Your monthly's are based on your PG-E roll back credits, that's considered a PAYMENT. essentially that is your money its just liquid. what are you paying PG-E on avg.?

Or are you telling me you are buying out your lease early. Because really what you are telling me isn't making 100% sense.

AND THE LIGHT BULB GOES ON!!! I almost fell from my chair. And I have a lot of patience for people who fail to understand things.

OMFG VINNIE! Ive been telling you this loudly in many many of my replies directed right at you.
You have finally starting reading the posts.

We don't make any monthly payments, we OWN the system with Early Buy Out after 6 years. There are NO power purchase agreements. None of that. I sound like a dang broken record trying to explain this to you.

You are talking about DIFFERENT leases than we are reviewing. Those are "old style" leases. They are craptastic.

[KRenn]

Oh, and I'm in Arizona so the numbers may be a bit different even if the concept is the same.

Arizona more or less has the cheapest PV prices in the US I think. Prepaid leases can be had for a $1 watt or less in many cases.

[jcg]

I'm also looking at a prepaid solar lease from Sungevity. I have a quote for a 5.64kwH (STC) / 4.91kwh (CEC) system using 24 Sharp 235 watt panels. If I prepay the 15 year lease the system is $14,502 and this would have no monthly lease (as it's prepaid) but still include the full warranty, inverter replacement, maintenance and insurance. Our electricity use is almost always between 1100-1200kwh/month, and we are on the PGE E1 rate plan. This tiered plan has rates of 330kwh @ $.12233 for tier 1, 99kwh @ $.13907 for tier 2, 231kwh @ $.3018 for tier 3 and all additional kwh are @ $.3418.

I figured to get the optimal system size I want to get my tier 1 and tier 2 electricty (which are the 2 low cost tiers) from PG&E, so this is 429kwH. Since we use 1100-1200kwh/mo that means I need to get the remaining 671-771 kwH from the solar system. I used the data from the article below (see link) on page 2 he shows his actual monthly kwh from his 6.1Kwh system (his system in also in Northern CA relatively close to where I live). For all but Oct/Nov/Dec/Jan/Feb his system produced more than 754 kwh, so I figured for the peak months my system would easily cover the 671-771kwH needed. This is a monthly savings of ~$220-$250, and I'm guessing a savings of ~$100/mo for the winter months for an annual savings of ~$2000-$2250. Thus a basic payback of around 6-7 years assuming no increase in rates.

http://www.extremetech.com/extreme/82966-going-solar-one-year-later

Based on this thread I am also going to get a quote from Sunpower, but do these assumptions and calculations look correct?

jcg

[vinniethePVtech]

Oh, and I'm in Arizona so the numbers may be a bit different even if the concept is the same.

So you bought it out to avoid the annual/monthly interest. They are going to handle all servicing for 20 years.
Sounds like that would be almost a deal even with 30% tacked on for labor and material, only because contractor has to maintain the system for 20+ years. Personally understanding the costs associated in solar I wouldn't pay that though. It is however deserving of a mark up. Just make sure you read your states guidelines on the statute of limitations. Even if it is in writing a contractor can back out of an agreement after 10 years, typically manufacturers can too. Its important to read up on your states laws.

Other than that you pay a little extra but you get servicing. Just as long as you avoid the interest payments you will do fine.

I don't get why you would just purchase up front rather than the lease agreement and save 30% on labor and material and still hold the contractor accountable for atleast 10years of warranty service as statute of limitations calls out for. That is essentially the best deal for you and you are protected as a consumer under your state laws and guidlines, and there is no charge for that.

If you purchase the system, contractor installs, it may not be the best deal as you cannot come after the contractor for warranty, you are accountable,unless you can prove negligence upon install.

If you allow the contractor to mark up accordingly for time and material at 10% the contractor becomes accountable for system up to 10 years, but only has to follow the minimum guidelines the manufacturer suggests. which is the way it should be. this is the biggest bang for your dollar as far as accountability is between contractor,installation, warranty.

If you lease, the contractor builds the system takes 30%, then bank charges you interest, "unless you buy out early in your case". Since the amount is above 10% a contractor must have a sales license for that state to charge 30% on top of labor and material. There will be contingencies in place that back up warranty past the 10 year statute of limitations, even with those clauses and contingencies however 30% may be a greater risk in payment as tehre is no such thing as 100% guarantee.

[Ian S]

Oh, and I'm in Arizona so the numbers may be a bit different even if the concept is the same.

[Ian S]

Or are you telling me you are buying out your lease early.

Yes, in effect, I'm buying it out before it ever starts.

[Ian S]

Lease vs Purchase
Lets use something other than mystery solar panels. Like a car lease. You select a car. You pay monthly - about the same as purchase payments. You have mileage penalties, scratch & dent... all sorts of "conditions". At the end, you walk away, and have nothing, except you had 3 years in a fancy ride. Lease company sells the car and makes more $$ If you did a purchase, you have a car YOU can sell or do whatever with, or drive another 3 years w/ no payments. Maybe a lease works ok for a business expense, but for a ordinary person, it's just money that's gone with nothing in the end.

And I'm not a salesman, so I can't spin it as well as they do.

Except that solar panels are not like cars. Solar panels produce something that either the individual can use to offset electricity he or she would otherwise have to buy from the utility or in the case of net metering actually sell back to the utility if excess is produced. And that applies if you purchase a system or lease it. If at the end of 20 years, you don't own the solar PV system who cares as long as you've had the monetary benefit of it? Yes, there will be a residual value of the solar system. The question is what will be the value after 20 years of the difference between the initial out of pocket initial investment in a prepaid lease versus an outright purchase? In my case I'm looking at about $7500 less out of pocket by going prepaid lease vs purchase. In 20 years at 5% annual return, it'll be worth nearly $20,000. That's bound to be enough to purchase a new state of the art system with warranty, improved efficiency, etc., etc. And with the Sunpower lease, I can purchase it after year 6 and still be some $6,500 ahead than if I had purchased it initially.

[vinniethePVtech]

What monthly payments?!!! I have none to make. Nada. Zilch. Zero. Not a penny. One up front payment of about a buck a watt. That's it. In exchange for 20 years of electricity production.

Your monthly's are based on your PG-E roll back credits, that's considered a PAYMENT. essentially that is your money its just liquid. what are you paying PG-E on avg.?

Or are you telling me you are buying out your lease early. Because really what you are telling me isn't making 100% sense.

[KRenn]

Lease vs Purchase
Lets use something other than mystery solar panels. Like a car lease. You select a car. You pay monthly - about the same as purchase payments. You have mileage penalties, scratch & dent... all sorts of "conditions". At the end, you walk away, and have nothing, except you had 3 years in a fancy ride. Lease company sells the car and makes more $$ If you did a purchase, you have a car YOU can sell or do whatever with, or drive another 3 years w/ no payments. Maybe a lease works ok for a business expense, but for a ordinary person, it's just money that's gone with nothing in the end.

And I'm not a salesman, so I can't spin it as well as they do.

You do realize that quite a few of these leases have 100% buyouts after 6-7 years, right? I've seen quotes that allow for a buyout of $2000 on a system that cost $10,000 prepaid, and to have purchased that system, you would have paid in the neighborhood of $17,000 after all rebates/incentives. 7 years down the road, both people will own their respective systems except one will have paid $5000 more for the privilege.

[Ian S]

Its still a lease. the numbers and percentages get moved around to show different monthly payments.

What monthly payments?!!! I have none to make. Nada. Zilch. Zero. Not a penny. One up front payment of about a buck a watt. That's it. In exchange for 20 years of electricity production.

[KRenn]

Ian, you can also buy Sunpower panels from NON Sunpower dealers. Well, maybe better said, from non-dedicated "Elite" dealers. They inflate their prices to the non-elite dealers. Three different installers offered me the choice of Sunpower OR other Chinese panels. The Sunpower only dealers prices were much, much lower. As in $1300-$1800 per kW DC lower for the exact same panels. I was told they'll sell the panels to any installers (in-turn, customers) willing to pay that higher rate.

After saying all that, was the purpose of your post trying to clarify the confusing line from vinnie.

As far as I know, all Sunpower dealers pay the exact same amount. Each dealer decides how much they need to charge for the equipment but all pay the same for the equipment, regardless of volume or elite/premier..etc....status.

[Mike90250]

Lease vs Purchase
Lets use something other than mystery solar panels. Like a car lease. You select a car. You pay monthly - about the same as purchase payments. You have mileage penalties, scratch & dent... all sorts of "conditions". At the end, you walk away, and have nothing, except you had 3 years in a fancy ride. Lease company sells the car and makes more $$ If you did a purchase, you have a car YOU can sell or do whatever with, or drive another 3 years w/ no payments. Maybe a lease works ok for a business expense, but for a ordinary person, it's just money that's gone with nothing in the end.

And I'm not a salesman, so I can't spin it as well as they do.

[vinniethePVtech]

Well, maybe this is the source of confusion. IIRC, PPA stands for Power Purchase Agreement. That is not what I'm talking about. With my upfront single payment (prepaid lease), I'm entitled to every kWh of electricity my system produces for 20 years unless I decide to buy out the lease earlier.

Its still a lease. the numbers and percentages get moved around to show different monthly payments. The end result is the contractor wants 30% and the bank wants its high interest. Lease agreements may work for a small group of people, this small group is typically sole proprietors and corprate filing 1040's that get the real benefits of leasing, as the interest is a write off.

The way solar was suppose to work was to buy a system per watt until the investment could pay itself off in under 5 years or BETTER. If not the ROI is not worth it because when you look at the reports of economic inflation, the rising cost of energy. In order to pay out for the energy you are still paying a locked in return on bank interest. I don't get why people do this. In california alone the rise in electrical utilities spikes 6% on average. In 5 years alone that's 30% more than what your initial return started off from the time of energizing the system. The united states is averaged to to spike 25% in energy cost over the next 10 years.

Leases do not explain to the consumer, The rising costs of energy when you get into an agreement. They just explain CEC AC wghich doesn't really mean anything because that number depriciates annually as the cost of energy goes up annually. Couple that with your interest payments, and you will never be able to buy your lease out on an affordable level. They are put in place so you will continually make payments, the bar is set very low.

[Ian S]

I don't see what the confusion is, PPA's are a set price on selling power between the contractor and the bank.

Well, maybe this is the source of confusion. IIRC, PPA stands for Power Purchase Agreement. That is not what I'm talking about. With my upfront single payment (prepaid lease), I'm entitled to every kWh of electricity my system produces for 20 years unless I decide to buy out the lease earlier. What I produce vs what I consume is entirely between me and my utility via a net metering arrangement. After the lease starts and I've made my single payment, I have no more payments to the contractor or bank or anyone else besides the utility - and only then if I consume more electricity than I produce - for the duration of the lease. I'm not involved with who gets the tax credits or rebates or depreciation benefits: I pay a set amount upfront - no additional payments unless I opt to buy out after year 6 - and I have the full benefit of what the system produces for 20 years.