Three Friends

Joe, Bobby and Sam all grew up together in the same suburban town. While each had their own approach to life, over the years they have remained close friends. They all live within five minutes of each other, are married and have kids in little league sports together.

Joe prides himself on being independent and takes a no-nonsense approach to life. Not only does he shop for the best deals, but he also researches everything and always comes to an informed decision.

Bobby is the type of guy that knows a good deal when he sees one. However, different from Joe, he tends to be more cautious and sometimes he is hesitant to trying new things. Both are successful in life, but perhaps Joe has made a few better financial decisions.

Sam, like many people, likes to think of himself as a conservative spender; he only buys things when he needs them. Consequently, that means Sam often waits until the last minute or when something is broken, causing him to rush out to buy things with little or no time to research and spend more money.

One day, a couple years ago, a young man came around the neighborhood offering a great new product to save money on gasoline costs. He called it “Pump Your Own.” It turned out, in that region, there was a deep oil reservoir that was open to public access to the residents of the town. The product was a well and pump that would convert the oil in the earth into refined gasoline that you could use in your automobile; hence you could “Pump Your Own” gasoline. It had a 25-year warranty and all the maintenance was included. The only regulation set by the town was that you could only use what your family needed and could not sell or supply it to others. At the time, gasoline was just under a dollar per gallon and not a huge burden to most families. The young man pitching the “Pump Your Own” system explained how oil prices had been steadily rising and that indicators showed they would increase at even higher rates in years to come. The cost for the system was around $20,000. However, to help homeowners, the government was offering tax incentives and rebates in conjunction with a $0 down loan program.

The young salesman met with Joe, Bobby and Sam individually and presented his system. All three had young families at the time and could not afford to make an unwise financial decision. On one hand, buying gas was a given, and it was probably a given that gas prices would go up. On the other hand, even with no money down, and about $10,000 in year one incentives, it was still seen as “new” or just perhaps different. Of the three, only Joe decided to take the plunge and go with the “Pump Your Own” program.

Meanwhile, Bobby and Sam fell subject to the ever-fluctuating market prices and found themselves forking over a larger portion of their paycheck each month to fill their gas tanks. Around this time a local gas station owner came up with a brilliant idea he called a “Fixed Lease.” He made a deal with the town to allow him to drill his own well and refinery for sale to the public. However, he would sell the gasoline as long-term lease with a fixed price. Customers would lock in a gasoline price slightly cheaper than market averages. However he also offered two distinct advantages: one, his prices would not go up with time, and two, he actually gave all his clients a new car (part of the bargaining agreement with the town). Because his costs were upfront and dramatically lower then buying and reselling fuel, and because he had clients locked in for multiple year agreements, he stood to make good money. His clients would save thousands of dollars off the price of fuel and got a brand new car to boot!

Joe of course, was getting his gas for free, and had no interest in this “fad,” as he called it, but in fact, it was widely popular. Bobby and Sam were both intrigued with the concept of fixed fuel costs with no money down. After careful consideration, Bobby took advantage of the deal and got a brand new car with a low fixed gas price for years to come. Sam actually wanted to do it, but told the gas station owner he would “think about it.” And you know how that goes. Eventually the option just passed him by. Shortly thereafter, gas prices skyrocketed over 100% to over $2.00/gallon, and within years of that, to over $3.00/gallon. Depending on international events, the price even hovered close to $4.00/gallon at times. Fuel became a hot topic nationwide, and most were at the mercy of ever-rising costs.

After many years had gone by, one evening over drinks and a ballgame, the three friends discussed their choices. Bobby and Joe argued about who had made the better decision, while Sam kept quiet knowing that his indecision was nothing to be proud of. Bobby argued that he bet on the sure thing, and had virtually no risk. Joe countered that for the last 15 years he had not spent a penny on gas and not only recouped his money, but had saved serious cash. After the argument became heated and rose to the level only true friends can attain, they decided to settle it objectively.

They asked an accountant friend to crunch the price of gas comparing Joe’s decision to install the “Pump Your Own” system, to Bobby’s choice of the “Fixed Lease.” The results were astonishing! Joe’s “Pump Your Own” system, with the tax incentives and rebates coupled with gas savings, paid itself off in just five years, and over 15 years saved Joe over $30,000. Bobby’s “Fixed Lease” between getting a new car and paying lower prices at the pump, saved him nearly $20,000 in the same time frame. For Sam, he basically spent thousands of dollars a year more then his friends for the same gasoline. Sam often wondered why Joe and Bobby had larger TV’s and seemed to take a few more vacations than his family, and now he knew why.

Conclusion:

This story is hopefully an obvious analogy to solar. While the ideas offered were meant to resemble current solar programs, I tried to use some creative liberty, while maintaining the integrity of the concepts. The “Pump Your Own” program represents owning your own solar system, although with two big difference. Massachusetts has been installing solar panels for over 25 years, and since 2010, has had the nation’s #1 solar incentive program. With current government tax incentives and rebates the typical solar system is paid off in just 5 years and saves the home owner tens of thousands of dollars over the years. The “Fixed Lease” program represents a solar lease, where you have solar panels installed on your house for no cost. You buy your electricity at a fixed rate from the solar panels at a lower cost than you are currently paying the utility. Over time, a solar lease saves you thousands of dollars. I hope this story will help you make a better decision about whether solar is right for you. If you have any questions or for more information on solar, please feel free to give me a call at 617-564-3159.

Sunny Regards,
Brad

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