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

**cebury** · 10-05-2011, 04:12 PM

Hi Franz,

I read through the entire Sunpower lease and was in the process of writing a long post for people like you and me who are looking to buy, then get proposed a pre-paid lease, looking for the "what's the catch".

I'll assume you've correctly added up all those monthly payments of 63$ with your escalation for 20yrs.

The 20yr does offer you advantages since you won't have to pay for inverter replacement or any other problems. There is the big IF: if the company stays in business and does fix things in a timely manner. Don't count on a "free system" if they go under. Bankruptcy trustees step in and continuing collecting your fees for many cases. Although at that point, they'd be required to honor their requirements under the lease (warrantied support & insurance) you don't know how long that could take before enough people complain to bring a halt to the required payments. If that happens, there may be lease terms that allow them (or whomever purchases the assets of the bk company) to come remove the panels & allow you out of the lease. But imagine how that would go. Anyway, that's all speculation & my own imagination. Just giving you a red flag if you're thinking it'd be free if they go under.

For that reason alone, I'm not favorable on 20yr leases. But that's me.

The other factor: What happens at the end? Simple if you own it. If you lease: what will the FMV price be? IMO should be low and you'll have a buyout option at a reasonable price. OR, if technology changes so much that you'll want newer panels anyway at the end of the lease.

If those two factors work out and everything else goes perfectly in the lease, you win the prize. You got a lower overall price point by quite a bit.

If there is a major snag, you'd find it in the lease agreement. Make sure there are no Power Purchase Agreements. There is a production guarantee. There is a roof leak warranty.

With the lease, you do give up control: can't touch those panels yourself, can't modify your home w/out their permission, if you replace your roof you have to pay THEM to remove the panels and put them back on -- at what rate?, if you have financial trouble and need to file bankruptcy the lease can get messy as you normally agree to protect THEIR property and take (pay for) any legal steps to ensure their property is protected, etc. There are more, but I don't have notes in front of me. These are the terms I've been reading in leases, so yours may/may not have them. I've not read all that many either, people like KRenn, Russ, or Naptown may be able to help further. Just look out for those crazy clauses and ask questions.

About price point: Be sure the monthly lease includes monitoring and insurance. I've seen some that try to make you pay extra and that affects price point.

There are reasons to avoid leasing, but the pre-paid lease from Sunpower is probably the fairest of all (SO FAR). If other manufacturers can hurry up and secure funding, you may be able to get a better deal when that happens b/c of the premium price of Sunpower. But if it doesn't happen fast, it might not happen at all (if;/when another piece of legislation comes).

For the most part, I'm just ignoring Vinnie at this point. As much as someone says "I'm trying to help you" we all have personalities (emotions) and time availability (to really read someone's post before blathering a response) that can interfere with how much help we really are. My personality/time combination isn't compatible with with his. Your choice.

I would think hard about attempting depreciation of that asset b/c you have a home based business. Did you read the other post where I commented on that? If you search for my posts you should find it. But your business may be one of those exceptions I mentioned. If not (and likely not), this shouldn't be a consideration. Now, having the business pay the % (based on floor space) of your $62 monthly lease payment for electrical is a different story; that'd be ok.

Chris

**Ian S** · 10-05-2011, 04:53 PM

Franz, I think it comes down to the fact that the lessor can depreciate the full price of the system quickly and most individuals can't. A chunk of that benefit trickles down to the lessee making the lease very attractive compared to purchasing. As Chris indicates there are some potential issues with leasing. In part that's why I've opted for the prepaid Sunpower lease through a local Sunpower installer here in Arizona. I can buy the system after year 6 if I so choose. The Sunpower lease was a better deal for me than what was offered by RecSolar, SolarCity and Sungevity. You might wish to see who in your area is an elite Sunpower dealer and ask them for a quote.

**Naptown** · 10-05-2011, 05:25 PM

The purchase price before rebates is 7.23 per watt STC DC
You can do much better than that price with a local installer.
You are getting small low power modules. Now bear with me.
When companies are estimating they generally use unit pricing.
So you are paying for installation for each module. Wattage of a module
doesn't affect the labor to install
So you install 22 185W modules or 16 255w modules. Now the 255's will likely
be larger so there may be a fit on the roof issue.
I can't say anything about your local market but I would be a very rich man if I could
get $7.32 a watt in my market. About $4.95 including enphase inverters is about all I can get
and still be competitive.
That would work out to $20146 before rebates
$14102 after federal and $7112 after local.
The performance guarantee is worthless as the bar is set so low and generally (Tell me if I am wrong)
Any excess production will credit toward too low production first.
Here is a kicker and I am not sure about access laws. But many leases require you to keep trees etc trimmed
so as not to shade the array or you are in default on the lease. So say in 12 years your neighbors trees grow to wherr
they are shading the array. It is your responsibility to keep the array shade free but you don't control the trees.
Can you force your neighbor to cut or trim the trees or prevent them from say adding on to their structure that shades your array?

**vinniethePVtech** · 10-05-2011, 05:59 PM

Originally posted by Naptown

The purchase price before rebates is 7.23 per watt STC DC
You can do much better than that price with a local installer.
You are getting small low power modules. Now bear with me.
When companies are estimating they generally use unit pricing.
So you are paying for installation for each module. Wattage of a module
doesn't affect the labor to install
So you install 22 185W modules or 16 255w modules. Now the 255's will likely
be larger so there may be a fit on the roof issue.
I can't say anything about your local market but I would be a very rich man if I could
get $7.32 a watt in my market. About $4.95 including enphase inverters is about all I can get
and still be competitive.
That would work out to $20146 before rebates
$14102 after federal and $7112 after local.
The performance guarantee is worthless as the bar is set so low and generally (Tell me if I am wrong)
Any excess production will credit toward too low production first.
Here is a kicker and I am not sure about access laws. But many leases require you to keep trees etc trimmed
so as not to shade the array or you are in default on the lease. So say in 12 years your neighbors trees grow to wherr
they are shading the array. It is your responsibility to keep the array shade free but you don't control the trees.
Can you force your neighbor to cut or trim the trees or prevent them from say adding on to their structure that shades your array?

You are the man!! Said it how it is. How ever consumers also aren't realizing the draw backs of depreciation. Most manufacturers/contractors assume depreciation. Consumers however don't. while the consumer/leasee enters into an agreement to buy a system at sn already inflated price per watt. Panels and system within the next 10 years can depreciate/degrade upto 15% in power since first energized. 15% of assumed power loss from install become larger numbers to pay out on a lease.

Previous thread I was expressing that the contractor will do work under a lease for roughly 30% more than what the cost per watt is.
Cebury gets lease at 21%
system depreciation avg. 1.5% per year adjusted cost in CEC AC.
Lease price in intrest and inflated per watt for Cebury is a total of 51% more in cost than upfront purchase.
Depreciated power year to year increase the initial cost paid out on lease.
Consumers on leases do not take into account daily power production, depreciation, environmental impacts that severly adjust lease estimate pricing.lease consumers just look at a gross estimate instead Net estimate.

**Franz** · 10-05-2011, 06:01 PM

Thanks to everyone who's replied already (the usual suspects!).

I clearly need to do several things:

1) Examine the Sungevity lease. (I've only seen the basic info on the website.) For example, they might include a buy option as Sunpower does. I don't know. I need to make sure the LADWP version of the Sungevity lease doesn't contain any obvious gotchas.

2) I need to see what the local installer's bid comes in at. I understand that Sungevity's purchase option is over-priced. They just don't want to sell you stuff and will only do it if they get seriously paid for it. I hope my local guy will come in below Sungevity's price and above Sungevity's quality. (I am aware from previous threads and from my local guy's website, that the lessor companies inflate their per watt prices to get larger incentives, rebates, and depreciation.)

BTW: My local guy is Jim Jenal at Run on Sun. His very informative blog is <http://runonsun.com/html/founderBlog.html>

3) I need more quotes. I have a conversation scheduled with SolarCity and with another local installer who's been doing it for years.

If a local installer an even approximate Naptown's estimate of $7112, then buying makes much more sense that Sungevity would lead one to believe (imagine that!). It makes sense even knowing I'd have to monitor and maintain the system myself, for three reasons. 1) I live in LA where the danger of snow, ice, lightning, animals, etc., is very low, 2) the purchased system would be, as Naptown is suggesting, a higher quality and longer-lasting one, probably giving me service beyond the 25 years enPhase guarantees its inverter, and 3) the purchased system could be altered, added to, etc.

One question: Naptown writes, "The performance guarantee is worthless as the bar is set so low and generally (Tell me if I am wrong) Any excess production will credit toward too low production first."

I'm not sure exactly what you're getting at, but I've been told by Sungevity and the local guy that LADWP credits my production monthly by simply subtracting my total production in kWh from my usage in kWh. What this means is that I'll never pay second or third tier electricity rates. This is good for me and is the same deal I'd get whether leasing or buying. LADWP does not do PPAs and does not make selling to the grid at all attractive for residential customers.

Naptown asks, "Can you force your neighbor to cut or trim the trees or prevent them from say adding on to their structure that shades your array?

I believe the answer is, yes, in California. But, luckily for me, this is not a factor in my case.

Thanks again, everyone. I'll report back with my local bid.

Franz

**Naptown** · 10-05-2011, 06:26 PM

Originally posted by Franz

One question: Naptown writes, "The performance guarantee is worthless as the bar is set so low and generally (Tell me if I am wrong) Any excess production will credit toward too low production first."

I'm not sure exactly what you're getting at, but I've been told by Sungevity and the local guy that LADWP credits my production monthly by simply subtracting my total production in kWh from my usage in kWh. What this means is that I'll never pay second or third tier electricity rates. This is good for me and is the same deal I'd get whether leasing or buying. LADWP does not do PPAs and does not make selling to the grid at all attractive for residential customers.

Naptown asks, "Can you force your neighbor to cut or trim the trees or prevent them from say adding on to their structure that shades your array?

I believe the answer is, yes, in California. But, luckily for me, this is not a factor in my case.

Thanks again, everyone. I'll report back with my local bid.

Franz

To address the two issues I raised here. They will give you a performance warranty that says the system will produce x # of KWH per month or year usually declining over the life of the system. Here first year I would expect that system to produce about 5000KWH hours a year first year. Their performance warranty is say for 4000KWH per year. So say a module goes out in year three and the system has produced 15,000KWH for the first three years and only produces 9000KWH in the fourth year. So they pay you for lost production? No because the over production of the first three years will offset the loss in year 4. They generally set the bar very low on this point to avoid a warranty issue.

Access laws are good just check that they are indeed there and enforceable.

**Ian S** · 10-05-2011, 06:35 PM

Originally posted by Franz

One question: Naptown writes, "The performance guarantee is worthless as the bar is set so low and generally (Tell me if I am wrong) Any excess production will credit toward too low production first."

I'm not sure exactly what you're getting at, but I've been told by Sungevity and the local guy that LADWP credits my production monthly by simply subtracting my total production in kWh from my usage in kWh. What this means is that I'll never pay second or third tier electricity rates. This is good for me and is the same deal I'd get whether leasing or buying. LADWP does not do PPAs and does not make selling to the grid at all attractive for residential customers.Franz

Naptown is correct and is referring to the performance guarantee from the lessor like Sungevity. They keep track of your over-production compared to the minimum guaranteed amount and use it to offset any under-production. It makes the performance guarantee little more than a marketing gimmick but one that's pretty commonly used.

**KRenn** · 10-05-2011, 06:42 PM

Rule of Leasing #1-Never, EVER sign up for a lease with an escalator. The leasing company is already making money on the deal, the escalator is just there to screw you. Find a SunCap, SunEdison or SunPower dealer in your area to get a better deal. You will generally pay slightly more for a monthly lease with no escalator but that will only last until year 2 or 3, and then you're saving substantially more down the road. Adding an escalator to a monthly lease can mean an additional $5000-12000 over 20 years.

In anycase, I'd still get a quote from a dealer with one of the previously mentioned companies as pricewise they're going to be extremely competitive and generally offer better quality equipment. As far as prepaid's go, I haven't seen anyone yet that can match what SunPower currently has going.

**KRenn** · 10-05-2011, 06:44 PM

Originally posted by Ian S

Naptown is correct and is referring to the performance guarantee from the lessor like Sungevity. They keep track of your over-production compared to the minimum guaranteed amount and use it to offset any under-production. It makes the performance guarantee little more than a marketing gimmick but one that's pretty commonly used.

The performance guarantee is a marketing gimmick. The numbers are set so low that your system would have to be severely malfunctioning to ever reach levels that low which the leasing companies are clearly counting on. The average person can't look at a 5kW system and reasonably predict production based on equipment, climate and orientation. Don't let the "production guarantee" factor into your decision one way or another.

**Franz** · 10-05-2011, 06:59 PM

Gang,

Thanks for the clarification, Rich. I had misunderstood you. I thought you were talking about my relationship with LADWP. You were actually explaining my relationship with Sungevity. I also thought the guarantee would apply to production during each billing cycle or at least annually. If they compute the production averaged over the life of the lease, and set the bar low, that's clearly a gimmick. I'll look into that, as they have no incentive to keep the system working after year five or so (as required by law for rebates) except that guarantee. Well, and integrity, but I am not counting much on that.

Their language on the website is:

Sungevity Solar Lease Performance Guarantee
Sungevity will guarantee, in writing, that your system will generate the designated amount of electricity. In the unlikely event that your system under-performs, we will either increase your system size or pay you the difference every year. Best of all, you get to keep any over-production that your system may generate.

The "designated amount of electricity" must surely be 6014kWh/year, as that's the only amount they refer to. But perhaps in the contract it will be a percentage of that.

As for escalating lease costs, I agree they're not so great as they eat up much of the escalating electricity costs. In fact, the lease escalation is guaranteed while the electricity rate escalation is not. In my case, I'd prepay the lease, so this wouldn't affect me.

I'll see if SunPower does leases in my area and, if so, get a bid. Perhaps their system is one that (maybe with micro-inverter) I'd be more inclined to buy after 20 years (or six).

Thanks again, everyone. In all my googling in search of good PV information, I have found nothing even remotely as helpful as this website and its forums.

Franz

**KRenn** · 10-05-2011, 07:39 PM

Originally posted by Franz

Gang,

Thanks for the clarification, Rich. I had misunderstood you. I thought you were talking about my relationship with LADWP. You were actually explaining my relationship with Sungevity. I also thought the guarantee would apply to production during each billing cycle or at least annually. If they compute the production averaged over the life of the lease, and set the bar low, that's clearly a gimmick. I'll look into that, as they have no incentive to keep the system working after year five or so (as required by law for rebates) except that guarantee. Well, and integrity, but I am not counting much on that.

Their language on the website is:

Sungevity Solar Lease Performance Guarantee
Sungevity will guarantee, in writing, that your system will generate the designated amount of electricity. In the unlikely event that your system under-performs, we will either increase your system size or pay you the difference every year. Best of all, you get to keep any over-production that your system may generate.

The other issues with Sungevity are no-buyout option and a really weird prepaid-lease transfer process. While other companies have improved their offerings, Sungevity still seems to be perpetually stuck in late 2009/early 2010.

The "designated amount of electricity" must surely be 6014kWh/year, as that's the only amount they refer to. But perhaps in the contract it will be a percentage of that.

As for escalating lease costs, I agree they're not so great as they eat up much of the escalating electricity costs. In fact, the lease escalation is guaranteed while the electricity rate escalation is not. In my case, I'd prepay the lease, so this wouldn't affect me.

I'll see if SunPower does leases in my area and, if so, get a bid. Perhaps their system is one that (maybe with micro-inverter) I'd be more inclined to buy after 20 years (or six).

Thanks again, everyone. In all my googling in search of good PV information, I have found nothing even remotely as helpful as this website and its forums.

Franz

The other issues with Sungevity are no-buyout option and a really weird prepaid-lease transfer process. While other companies have improved their offerings, Sungevity still seems to be perpetually stuck in late 2009/early 2010.

**cebury** · 10-05-2011, 08:24 PM

Originally posted by KRenn

The performance guarantee is a marketing gimmick. The numbers are set so low that your system would have to be severely malfunctioning to ever reach levels that low which the leasing companies are clearly counting on. The average person can't look at a 5kW system and reasonably predict production based on equipment, climate and orientation. Don't let the "production guarantee" factor into your decision one way or another.

I hate it when I don't click Submit. I had written a long post after my original and it's still sitting here. The info is now old as they have clarified the production guarantee. I DO factor the production guarantee in, but ONLY to this extent: if you are comparing against a quote from another installer that refuses to guarantee it (in California with our Solar Rights laws that force neighbors to cut or remove trees that interfere with residential solar) then avoid that installer.

But they are right, the leases will set the production lower than they know it will produce and then on years where it exceeds production, it gets "stored in acct" to offset against years where it's not.

I did not comment in the initial thread about your costs, because in my reply I was describing how you should get at least two more quotes. Two different vendors it not enough IMO. You could get two very different prices even from Sunpower Elite installers.

**Ian S** · 10-05-2011, 08:26 PM

Originally posted by KRenn

The other issues with Sungevity are no-buyout option and a really weird prepaid-lease transfer process. While other companies have improved their offerings, Sungevity still seems to be perpetually stuck in late 2009/early 2010.

Sungevity was the first I got a quote from but, after additional quotes, didn't look so competitive even with an iPad thrown in. The prepaid is the way to go with a lease but if you really can't do that for whatever reason look for a company that will eliminate the escalator clause when you put in $500 or more up front. At least one of my quotes - I think Solarcity - had that feature.

**cebury** · 10-05-2011, 08:42 PM

Oh I and still don't understand WTH Vinnie is talking. It starts out making sense to me, then he loses me when he jumps to conclusions and starts throwing his % figures around.

If I pay Sunpower $19k TODAY or $36k TODAY (then wait for the other 12k in tax/rebates, eq=$26k) on a product that I own in 7 years (under both options, lease or buy), WTH does decreased output have to do with anything? At year end 6, I've paid $19k vs. $26k and I own the exact same system. Any decrease / depreciation of power will be happening whether it's leased or paid and affects BOTH prices equally. There is NO payment structure based on Watts. I don't pay them per watt and there aren't PPA and not even any interest accruing. I still think he is applying what goes on his leases vs. pre-paid ones. But either way, be sure YOUR lease doesn't have those funny things built-in.

Now a vendor were trying to convince me to buy a different panel manufacturer because their panels don't degrade as fast, that's a different story. But we'd be in the same loop again if that installer then offered me two choices: buy or pre-paid lease.

Naptown is right, the gotcha I should've mentioned is those 20yr leases might try to throw in junk/old panels they can't get rid of. If the $ per watt DC (before any rebates) is over $7.00 it IS too high for CA. That is WAY too high of a cost, basically the margin between my quotes and yours is too extreme. Some people don't care, as "long as they produce that kwh". But in reality, if you priced that exact system out on a purchase from another vendor, it'd probably be much much cheaper -- if you could even find it.

Sunpower is offering the same technology, paid-up front or leased.

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

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

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