Quiz: Practice what you've learned by reviewing this leasing promotion. Do you understand every single bullet?

Understanding the promises in a solar lease
This text is from Real Goods’ website. Real Good is a solid company, so I don’t expect that we'll see anything shady. But this IS good practice – just to confirm that you’re now an informed solar lease shopper.

Starting in the upper left:

Why Own Your Own Solar Power System?

  • Pay the lowest available electricity rates.
    Yes - because solar eliminates your highest tiers first. If you find yourself paying $10 or $20 a month, it's the cheap tier-1 electricity.

  • Get an expected internal rate of return (IRR) of 10-25% on your investment.
    We haven’t discussed internal rate of return, but it's considered to be the fairest way to compare investments that have different expenses and incomes over their lives.  The problem with IRR: it's difficult for many to understand.

  • Receive rebate money sooner and all at once.
    This bullet is a bit confusing, but we know that, if we lease, we don’t get the rebates, so… it’s fine.

  • The average system pays for itself in 5-8 years and electricity is FREE after that.
    I think that this is a bit aggressive of a promise.  I would have said that, in the best situations, the installation can pay for itself in 5-6 years, and the average system pays for itself in 8-11 years.  But there’s no question that you will enjoy decades of free electricity.

Why Use the PowerSavings Plan?

  • Start saving instantly with $0 down** and a lower electric bill.
    True, and we understand how this works.  you can agree to a no-money down lease, and, once the system's working, your lease payment plus remaining electricity bill will be smaller than your electrical bill was before.

  • Flexible payment terms.
    I'm not sure what RealGoods means here, but we've examined the different inputs to a lease, and the flexibility is clear - you can select combinations of down payment and escalator to control our monthly payment.

  • Lock in your power rate for the next 20 years.
    Actually this is a bit of a misstatement, since what you’re locking in is the lease rate.  And while the leased system will typically supply most of your electricity, you will be buying the remainder of your power from your utility, at whatever rate they happen to be charging 20 years from now.

  • We take complete care of your system.
    Yep – When you lease a system, it’s their responsibility to maintain it.

  • Make a large environmental commitment without a large financial one.
    Yes – we’ve skipped-over the environmental advantages of going solar, but it IS the right thing to do for the next generation.

 

Now: the lower portion:

Understanding the promises in a solar lease

 

Let's look at it line by line: Understanding the promises in a solar lease
We already have covered how a lease can have zero down, or as much as $5,000. (Though in the purchase column, I would have written $10,000 - $50,000+, since few solar installations come in at $10,000…)


Understanding the promises in a solar lease
We’ve discussed this.  The benefit of the lease is not overstated… It simply indicates that you will save something.


Understanding the promises in a solar lease
No sure what Real Goods means here, but a fair interpretation would be that both buying and leasing benefit from rebates, etc. (But the rebate is buried in the lease rate, so you never actually see it.)


Understanding the promises in a solar lease
We mentioned that a lease is just a financing method for the same system you might get if you purchased. So the years of power are identical, and over 25. (Actually, since the lease is for 20 years, and there’s nothing that says that you get to keep the system, Real Goods probably have listed 20 years for the years of power provided under the lease.  But we discussed how there’s likely no market for old panels, and that owners should expect lease companies to abandon old equipment…


Understanding the promises in a solar lease
We mentioned that a lease includes all maintenance required for the period of the leases, and we indicated that central inverters are not expected to last the length of the lease. And Real Gopods has used “10 years” under the purchase column, since that’s the guarantee that comes with most central inverters.


Understanding the promises in a solar lease
I think this claim is a bit… weak, since with a lease, you don’t own the system. And since you don’t own it, why should you need to insure it? (Actually, I’ve seen lease agreements that require you to list the solar power system on your homeowners’ policy, even though the lease company states that they’re insuring it. This is not a big issue to me, since listing a $20k solar installation on a $500k home shouldn’t change your insurance rates…


Understanding the promises in a solar lease
This is the same issue as inverter replacement. With a lease, they own the system, and they maintain it. With a purchase, you own it, but California law requires that the installer provide a ten year warranty for the installation to qualify for the state rebate.


Understanding the promises in a solar lease
All leased systems are installed with online monitoring (requiring you, the homeowner, to have broadband internet.) Lease companies need monitoring, since they are guaranteeing a certain level of production. Not all purchased systems are sold with online monitoring, but perhaps RealGoods really recommends it.


Understanding the promises in a solar lease
As noted, a performance guarantee is part of every lease. That’s because the lease company does not want homeowners to think that the lease payment is optional.  It’s not. If the system breaks, the payment is still due. Your protection is the performance guarantee.


Understanding the promises in a solar lease
A solar panel system definitely increases the value of your home. That’s because part of a home’s value is based on the cost of ongoing ownership. If you have free electricity, someone will pay more for your home. The buyer’s decision should be to quantify the present value of the future stream of benefits, and they clearly do - a few studies have shown that buyers actually pay a premium for a solar-equipped home ABOVE what it would cost to simply add solar to a similar home.


Now assuming that this same “increased home value” applies to leases seems a bit of a stretch. Isn’t this like saying that the BMW being sold with the house adds value … but you have to continue paying the lease? Perhaps the easiest answer is to look at the escalator you selected.  If you agreed to a low escalator, ten years after the installation, the new owner is clearly getting a deal with the solar lease. If you agreed to a high escalator, the contract may be a bad deal for the new owner, requiring you to lower your home price enough to make-up for it.


Understanding the promises in a solar lease
We discussed how buyout options are important, and how understanding the cost of escaping the contract is just as important as whether there is an escape. In my eyes, a buyout option makes it much easier to sell your home.


RealGoods’ buyout option is interesting, in that it specifies 6 years.  That’s because the special depreciation benefit that companies enjoy by owning your solar panel system lasts 6 years.  For the RealGoods lease, I would want to know what the terms are (in other words, is it fair?). I would also want to know that I could use the buyout option at other points during the 20 years.


Understanding the promises in a solar lease
We’ve discussed how a high credit score is required to get a lease. That little dash in the purchase column is misleading, as it makes a purchase seem painless.  A purchase requires tens of thousands of dollars, ready and waiting. The upside: IF you have the cash, a solar installation is one of the best risk-adjusted investments available.

If you understand the information above, you're ready to review any solar lease handed to you.

next page:  Understanding a solar Proposal

Should I Lease a Solar Panel System?
 
Who Should I Lease From?
 
Are Some Leasing Companies Better than Others?
 
Leasing versus Buying
 
How Much Can I Save if I Lease Solar?
 
Explain the Different Variables in a Lease
 
The Escalator Trap
 
Can I Sell my House, if I have a Solar Lease?
 
So... Should I Get Solar, Using a Lease?
 
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Quiz: Can you explain this solar lease promotion?
 
Understanding a Solar Proposal
 
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Assorted Lease Companies' Web Pages:
 
- BrightGrid
 
- Solar City
 
- Solar Universe
 
- SunCap Financial
 
- Sungevity
 
- SunPower
 
- SunRun
 
- Vivint Solar
 
 

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