Does anyone finance their panels?

[holeydonut]

So, I think that would make your APY about 4.215%???

Hmmm you're onto something. Assuming willow_hiiller's quote... if the APY was 3.99% it would need to be a 10 year + 7 month loan.

Did Tesla pitch the loan being 10 years (120 payments?) If so then Willy3 is correct; the APY is 4.215% and they buried some points in there with that (e) disclosure.

 

[holeydonut]

To be frank I'm not completely familiar with the differences between APR and APY. I think an APR of 3.99% compounded daily would work out to about 4.07%?

(1 + (0.0399/365))^365 – 1 ?

In simple terms, the APY is a better representation of the value of the financial instrument once you bake in all the shenanigans a lender can trick people. There are too many ways lenders confuse people by requiring up front payments; monkeying with the payoff schedule; screwing with residual value on leases; or otherwise just being sneaky bastards.

So anytime you see a lender advertise APR, your next requirement is to figure out what the APY would be.

The best way to compare financing options (assuming the duration is the same across the options) is to normalize things to APY.

 

[willow_hiller]

In simple terms, the APY is a better representation of the value of the financial instrument once you bake in all the shenanigans a lender can trick people. There are too many ways lenders confuse people by requiring up front payments; monkeying with the payoff schedule; screwing with residual value on leases; or otherwise just being sneaky bastards.

So anytime you see a lender advertise APR, your next requirement is to figure out what the APY would be.

The best way to compare financing options (assuming the duration is the same across the options) is to normalize things to APY.

Hmmm, I wonder if it's possible they estimate the finance charge assuming that I will not use ACH payments. I plugged 4.24% APR into an amortization calculator and it came a lot closer to their estimate. There is a stipulation of a 0.25% APR increase if I don't make automated payments.

 

[Willy3]

View attachment 567670

Wait a second; is your payment $182.49 for 10 years? $182.49 x 10yrs= $21,898. Thats not enough to cover total of $28,716.74 listed in your other post. What am I missing here?

 

[jjrandorin]

Wait a second; is your payment $182.49 for 10 years? $182.49 x 10yrs= $21,898. Thats not enough to cover total of $28,716.74 listed above. What am I missing here?

Maybe the fact that, on most solar loans, they require you to send in the tax rebate as an additional down payment, when you receive it, to c continue to receive pay the same amount?

 

[willow_hiller]

Maybe the fact that, on most solar loans, they require you to send in the tax rebate as an additional down payment, when you receive it, to c continue to receive pay the same amount?

Precisely this. The monthly payment is calculated assuming I put 26% down within the first 18 months of the loan.

 

[holeydonut]

Hmmm, I wonder if it's possible they estimate the finance charge assuming that I will not use ACH payments. I plugged 4.24% APR into an amortization calculator and it came a lot closer to their estimate. There is a stipulation of a 0.25% APR increase if I don't make automated payments.

View attachment 567670

Hmmm this contract is pretty confusing. Any chance you can shoot us the PDF to take a look on your behalf (of course knowing you're getting random internet advice and the ultimate decision to do anything is yours haha).

That footnote language just says your rate/costs would go up if you terminate ACH. It does not explain why the values on the table you originally showed have an APR of 3.99% but imply a 4.215% APY when assuming a 10 year term (120 monthly periods).

Willy3 is right; the language in the footnote you added don't make sense. $182.49 could not be the monthly payment assuming a $23,400 principal financed at 3.99% APR.

It looks like your monthly payments (with ACH) should be around $239.30. Assuming this occurs over exactly 120 months, your APY would be 4.215%.

At this time, it appears to us that Tesla found a way to bury $300 of extra costs to you over the life of this 10 year payment structure.

 

[holeydonut]

Precisely this. The monthly payment is calculated assuming I put 26% down within the first 18 months of the loan.

Huh - if that's the case then the implied APY of your loan actually goes up from 4.215%! This is based on the table you posted implying your total financing costs over the 10 years is $5,316.74.

You would assume that throwing a large 26% federal tax credit cash at them within the first 18 periods would lower your total lifetime interest. But instead, you're somehow paying the same total interest equal to someone else paying 4.215% APY linear cash payments over the 10 years ($239.30 per month).

When I have time later today I'll see if I can estimate what your APY is assuming you make a large cash payment on month 18.

 

[willow_hiller]

Huh - if that's the case then the implied APY of your loan actually goes up from 4.215%! This is based on the table you posted implying your total financing costs over the 10 years is $5,316.74.

You would assume that throwing a large 26% federal tax credit cash at them within the first 18 periods would lower your total lifetime interest. But instead, you're somehow paying the same total interest equal to someone else paying 4.215% APY linear cash payments over the 10 years ($239.30 per month).

When I have time later today I'll see if I can estimate what your APY is assuming you make a large cash payment on month 18.

Past a certain point, this is just an academic exercise for my personal situation. I'm using the financing as a bridge loan until I can receive my tax credit, after which point I'm planning on paying the remaining balance. No extra fees for early repayment, and I'm estimating that all told I'll pay about $400 in interest for the privilege.

It's possible that these numbers are all up-in-the-air because of the 18 month rebalance. The (e) footnote just states "(e) Estimated."

 

[Willy3]

Precisely this. The monthly payment is calculated assuming I put 26% down within the first 18 months of the loan.

. Thanks

 

[holeydonut]

Past a certain point, this is just an academic exercise for my personal situation. I'm using the financing as a bridge loan until I can receive my tax credit, after which point I'm planning on paying the remaining balance. No extra fees for early repayment, and I'm estimating that all told I'll pay about $400 in interest for the privilege.

It's possible that these numbers are all up-in-the-air because of the 18 month rebalance. The (e) footnote just states "(e) Estimated."

I understand this may be "academic" for you since you plan on paying off the loan early, but I think anyone lurking in this thread regardless if they pay off the solar in the first 18 months should be interested. This is not going to be a quick and easy to digest comment... sorry.

And as with all things online - you should consult with someone that you pay and actually has a fiduciary with you to get things right instead of relying on random internet advice


So let's start with the numbers that absolutely have no fudge:
A) Your array value today is $23,400
B) Your lifetime finance charges should you do this deal over 10 years (120 months) will be $5,316.74
C) Total payments if you did this deal over 10 years will be $28,716.74.
D) The APY of this assuming linear payments is 4.215%


What I understand you're paying:
1) Tesla is having you pay $182.49 a month... easy enough.
2) Let's agree for now that Tesla requires you pay 26% of the $23,400 on the 18th month as well (your rebate). So this would be a payment of $6,084. It sounds like this is a requirement per your loan structure.
3) So after your 18th month of recurring monthlies + paying the one time 26%, you would have paid $9,368.82 into the total loan.


You'll need to confirm from Tesla what would be the anticipated payoff quote at this time assuming you made all these payments. Here's why:


i) You're saying you're expecting to pay $23,400 system cost + $400 privilege money
ii) So by your math, you would expect your payoff after 18 months to be ($23,400 + $400 - $9368.82) = $14,431.18

But my suspicion is Tesla will tell your the payoff amount will be higher after 18 months.

Consider there's a buyer for an identical system as yours but this Jane Doe decides to ride out this loan for the 10 year life. Jane is going to pay $5,316.74 of total interest EVEN AFTER having made that 26% cash payment in period 18.

Tesla wants to get their $$$. And as jjrandorin says, they have already factored in the requirement to pay 26%. That means for Tesla, a large portion of the 26% goes to future interest, it does not go straight to principal.

So if you want to pay off this loan after period 18; it's totally possible the payoff quote after period 18 is going to be something higher than you expect. The difference is not a "prepayment penalty" at all. it's simply the monkey business shenanigans that a lender can do with the amortization schedule and remaining principal balance.

I think you should double check and get in writing your payoff amount will be $X after you make successful payments and also pay the 26%.

 

[willow_hiller]

Tesla wants to get their $$$.

The loan provider is Mosaic. Tesla is getting their money up front, so they don't really care about what Mosaic does.

Found some more language in the fine print related to prepayment, but I don't think this language anticipates someone attempting to pay off the loan within 18 months:

"Prepayment Before Automatic Re-Amortization. On or before the 18th month from the Loan Start Date, you may make any prepayment on the loan at any time without penalty. These prepayments (if any) will be taken into account when the loan automatically re-amortizes, and the monthly loan payment amount will be adjusted in order to ensure the loan is fully repaid by the Maturity Date. Depending on whether you are in default on the Loan Agreement, the adjustment to the monthly loan payment amount may result in an amount that stays the same, increases, or decreases (but in no case will it equal less than $35)."

"Prepayment After Automatic Re-Amortization. After the loan automatically re-amortizes on the 18th month from the Loan Start Date, you may still make any prepayment on the loan without penalty. These prepayments (if any) will not impact or result in an adjustment of your monthly loan payment. Instead, and assuming you are not in default under the Loan Agreement, the prepayments may result in repayment of the entire loan earlier than the Maturity Date."

So it sounds like they're really not anticipating someone paying off the loan within the first 18 months. Or even paying it off to the point where the monthly payment would be less than $35. But what happens if you do prepay before automatic re-amortization to the point where your payment would be less than $35? Surely they cannot charge you $35 a month for 10 years anyway; this is a loan, it has a balance. Once that balance goes to $0 they cannot legally charge you any more. I assume they'd be forced to change the maturity date at that point to match $35 per month.

And this is something that all loan providers deal with. I'm making extra payments on my mortgage as well, which is shortening it from 30 years down to 15, so my bank is missing out on 15 years of interest payments there, but there's legally nothing they can do about it.

 

[holeydonut]

The loan provider is Mosaic. Tesla is getting their money up front, so they don't really care about what Mosaic does.

...

And this is something that all loan providers deal with. I'm making extra payments on my mortgage as well, which is shortening it from 30 years down to 15, so my bank is missing out on 15 years of interest payments there, but there's legally nothing they can do about it.

Your mortgage lender provides a clear amortization schedule (it's even printed up and you probably had to initial/sign during closing that you saw it). So I agree, with that lending product they anticipate some prepayments, and someone like you making extra monthly payments can have strong confidence/evidence that those extra payments are going into principal. I think the amount of home lending tricks over the years has necessitated this level of scrutiny and paperwork.

Based on your solar contract implying an APY of 4.215% (over 10 years), I highly suspect they are assuming a significant portion of that 26% payment is going to interest instead of to principal. In the end, this is up to you. If you are confident that you're able to pay this off and fall into the financing company's trap. then you're good to go.

Just keep in mind there's a reason Greensky actually got an IPO and VC money keeps pouring into Mosaic even though there are tons lots of clean energy customers thinking they will pay their loans off early and come out ahead.

 

[Southpasfan]

What is likely happening (the best way to understand it) is there are two loans.

(1) One is for interest only on the assumed principle payment based on the tax credit to be paid in month 18.
(2) The other is standard amortization over ten years for the balance.

(3) Its re-amortized into "one" loan if you don't make the assumed principal payment.

(1) plus (2) account for the $189 per month.

I am not sure how the stated rate ends up higher (although it has happened to me on numerous car loans and I basically just did not bother with the math)

This is how car leases are structured to end up as "cheaper" than buying the car, although in the case of a car the "assumed principal" payment is turning in the car at the end of the lease. Until you do that you pay interest on the assumed residual value and full amortization on the rest.

 

[holeydonut]

What is likely happening (the best way to understand it) is there are two loans.

(1) One is for interest only on the assumed principle payment based on the tax credit to be paid in month 18.
(2) The other is standard amortization over ten years for the balance.

(3) Its re-amortized into "one" loan if you don't make the assumed principal payment.

(1) plus (2) account for the $189 per month.

I am not sure how the stated rate ends up higher (although it has happened to me on numerous car loans and I basically just did not bother with the math)

This is how car leases are structured to end up as "cheaper" than buying the car, although in the case of a car the "assumed principal" payment is turning in the car at the end of the lease. Until you do that you pay interest on the assumed residual value and full amortization on the rest.

Yup, it's likely the am-schedule is much more complicated on this than your traditional 30 year fixed home mortgage. I still think anyone looking to do the "pay off early" option should understand what the payoff amount will be for the period they expect to pay off the loan. That's the best way to confirm whether or not they're paying what they think they're paying.

 

[All In]

I understand this may be "academic" for you since you plan on paying off the loan early, but I think anyone lurking in this thread regardless if they pay off the solar in the first 18 months should be interested.
...

Just a lurker chiming in to say I appreciate the details from willow_hiller and the responses from holeydonut and others. I just picked up a 2020 Model S Performance last month. Researching a home charging setup has me ready to put an order in for panels and power walls.

 

[willow_hiller]

Just a lurker chiming in to say I appreciate the details from willow_hiller and the responses from holeydonut and others. I just picked up a 2020 Model S Performance last month. Researching a home charging setup has me ready to put an order in for panels and power walls.

Let us know if you need a referral code for an extra $100 rebate!

It's hard to find daily-compounding amortization schedules, so I put together a quick one for the first 18 months. The loan starts when a disbursement is made to Tesla, and the first payment isn't due until 3 months after that point. So even before your first payment is due, you owe about $233 in interest, which is greater than the first payment. It does seem like the minimum payment is enough to pay down some principal, but by the time you hit month 18, about half of what was paid (and a quarter of the tax credit) had gone to interest:

I'm glad I'll be able to collect my tax credit within the first ~6 months of the loan and pay it off then.

 

[holeydonut]

Let us know if you need a referral code for an extra $100 rebate!

It's hard to find daily-compounding amortization schedules, so I put together a quick one for the first 18 months. The loan starts when a disbursement is made to Tesla, and the first payment isn't due until 3 months after that point. So even before your first payment is due, you owe about $233 in interest, which is greater than the first payment. It does seem like the minimum payment is enough to pay down some principal, but by the time you hit month 18, about half of what was paid (and a quarter of the tax credit) had gone to interest:

View attachment 567833

I'm glad I'll be able to collect my tax credit within the first ~6 months of the loan and pay it off then.

Hmm, I'm not sure how you are splitting out the payoff estimate without calculating principal balance after each period. But hopefully you're only out a few hundred bucks interest after 6 months, and all of your mega prepayment in 6 months all goes to paying off the principal.

As you're probably aware, lenders hate people like you haha.

We also have to hope the IRS isn't shut down then with a COVID crisis like it was in March 2020...

 

[willow_hiller]

Let us know if you need a referral code for an extra $100 rebate!

After saying this, I realize you said you're a Tesla owner yourself. You can of course refer yourself, but we don't 100% know the outcome yet: Use my own referral code?

 

[willow_hiller]

Has anyone spoke to Mosaic about down payments yet? Spotted this in my contract, which makes me wonder about the ability to make principal-only prepayments:

"To the extent permitted by applicable law, all payments or prepayments will be applied first to our fees, then to costs and expenses payable to us under this Agreement, including any costs or expenses that we incur related to enforcement of this Agreement as further described in Section 10 (“Remedies”) below, then to accrued interest and then to unpaid principal in the inverse order of maturity (last to first)."

I sent them a quick email asking about down payments or principal-only prepayments, and I'll update the thread when they get back to me, but curious if anyone knows right now.