SanJoseGreenHome.com

Alright folks, it’s here!  A solution that gives access to solar power even to the most cash strapped green minded suburbanites and… it’s brought to you by the very people who delivered to us the sub-rime mortgage debacle.  It’s called a “residential solar lease” which is a “no money down” program that can get you electricity cheaper than what you cash out to PG&E on monthly basis.  Sounds familiar? 

The idea is simple; instead of buying your panels by dishing out thousands of dollars upfront you lease them for “one low monthly fee.”  You win, the solar company wins, environment is happy.   So what’s not to love?  How about a 15 year contract, a 3.9% increased payment every year and our Wall Street friends who have their fingers all over this sweet deal? 

On the surface, this sounds like a viable option for many home owners.  It solves an expensive problem of purchasing the panels outright for around 27,000 dollars (average 1,700 sq. foot home).  It works a bit like a car lease where home owners sign a deal that locks them in for 15 years with the option of extending their lease or buying the panels at the end of the contract.  With a solar lease, your monthly payments can be around $110 which, according to the service providers, will normally be around 15% less than your PG&E bill.  Are you sold yet?

After all, the way these companies and even our media like to paint it – it’s a no brainer deal.  SolarCity, which is based right here in our backyard of Silicon Valley, is one of the very well financed operations that is the first to start aggressively market this contract for home owners all over Bay Area and western states.  SunRun is another similar co. based in San Francisco.

Who really finances these deals?  Banks on Wallstreet of course.  And there’s serious money to be made… “Investors historically expect seven percent to eight percent, which includes the tax benefits and a slice of profit during the life of the fund,” wrote Green Tech Media about the amazing profits being squeezed out of the residential solar market. “Now they want ten percent or more.” 10 percent?!  It sure reinforces how much some of these schmucks really care environment or our dirty energy crisis.

So before you jump on the band wagon, let’s look at a bigger picture and examine this “best new thing after sliced bread” from all angles: 

Pros:

1. Easy access to solar without high initial costs.
2. With growing energy costs, this caps your electric bill for the next 15 years.
3. Reduced monthly payment than what you would pay PG&E. 

Cons:

1. 15 year contract which is not easily transferrable if you decide to sell the house.  (According to Solar City: “If you sell your home before the end of the lease, you can transfer the lease to the new owners if they qualify with excellent credit, or you can prepay the lease and add it to your home asking price.”  That’s 700 and above FICO score.)
2. Not for everyone.  If your electric bill does not exceed $110 this program makes no sense financially.
3. You never own the solar panels.  In fact you will have to either return them after 15 years or purchase them from the solar company at the end of the lease. 
4. Your payments are actually going to go up 3.9% every year.
5. You are not the one who gets the rebates for the purchase of solar panels.
6. You maybe going off of the PG&E’s grid but you’re sure are tied into Wall Street’s grid.
7. Many Home Owner’s Associations will not allow this. 

 
Now at a first glance, this deal sounds very appealing but if you really look, this scheme makes no financial sense.  Why?  Because you are simply better off buying the panels by financing your payment.  You save big time this way!  

Perhaps, your biggest conniption should be with the fact that it’s not you who gets the subsidies and rebates, it’s the solar company!  By paying lease payments throughout the life of the contract you become a cash cow owned by the solar company.  While they get the panels for the fraction of the cost you end up paying a full price and then some.  Doesn’t this just kill your mojo? 

Here’re some numbers to demonstrate this.  This scenario considers a 3.9% increase in your yearly payment throughout the 15 year tem lease:  

1^st  Year Monthly Payment:  $110.00        Total per Year:  $1,320.00

5^th Year Monthly Payment:   $128.18        Total per Year:  $1,538.16

10^th Year Monthly Payment:  $155.08       Total per Year:  $1,860.96

15^th Year Monthly Payment:  $187.74       Total per Year:  $2,252.88 

Total Investment for the life of lease:       $26,217! 

Ladies and gentlemen, $26,000 is what an average 4KW solar system would cost you today without the 40% rebates that are currently generously offered to you by the state and federal government.  

Why lease when you can buy them?  

It’s obvious; your best bet is to find a solar company that will give you a good price and a good payment plan.  Put a couple grand down and buy the panels yourself. Your monthly payments would still be lower than PG&E’s bill and they would stay the same till the loan is paid off.  Once you’re done with your payment plan, you OWN that panels.  When all will be said and done, your total investment will be closer to $17,000. 

And if you’re strapped on cash, can not afford a down payment and that “0% down” sounds so appealing then it may be a good idea to avoid this dismal deal altogether.  We’ve seen this bank  trap before, haven’t we? 

I’m not against Wallstreet.  Being a Realtor, it is very clear to me that we need the banks to extend credit to qualified home buyers and keep small businesses going.  Wallstreet is an intrinsic part of this economy.  It’s just some of the financing deals that they cook up are so dangerous.  This whole solar lease hype is starting to smell like another credit bubble that’s going to enrich the banks and eventually blow up on the rest of us anyway. 

I know you want to save the planet.  Me too.  But let’s not let the big boys take advantage of our sentiment.

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