Although solar has become more accessible over the last decade, if you’re looking to put solar on your home, you may want to look at financing options. lots of companies advertise loans with exceptionally low payments and interest rates. The only catch: exorbitant dealer fees.
What are solar dealer fees?
Often presented as an unavoidable cost of solar financing, dealer fees can be more expensive than traditional loan fees, and can be as high as 40% of the project’s cost. Dealer fees are paid from a solar installer directly to the financing company, so these added costs are typically rolled into the costs of all projects, much like the expected 3% transaction fee for using credit cards at a convenience store.
Let’s say a company would normally charge $10,000 for a solar system, without any dealer fees. If they sell that same system and want to keep their same margin after paying a 35% dealer fee, they would need to charge the customer $15,384 for the exact same system!
These dealer fees are therefore used to subsidize the exceptionally low interest rates/monthly payments that drew you to the loan in the first place. The result: you could be paying up to a 50% markup on your solar system.
Our advice is to consider how much you are saving with solar after including the cost of financing.
Can I avoid solar dealer fees?
It depends on your solar installer. Most companies are not allowed to charge different prices for financed vs. cash systems, so even if you attempt to pay cash, your upfront cost may already be inflated to offset the cost of other financed systems (much like paying cash at a convenience store vs. paying with a credit-card). They may offer you some discounts, but they likely won’t disclose how much their dealer-fee costs are.
At Virtue Solar, we do not use financing products that have dealer-fees, so your system price is not marked-up to cover any added financing expenses.
We encourage you to research and compare as many solar loan options as possible that will fit your personal needs and always negotiate terms and fees with your lender before signing. Consider managing your out of pocket expenses with the increased value of your solar system (as a tool to generate energy and income) with the total cost of the system plus financing.
When do solar dealer fees make sense?
Something to keep in mind is that even with high dealer fees, loans can make sense over the long term if they have a very low interest rate. But the error that a lot of people make is getting a low interest rate, with a high dealer fee, and then paying it off early.
If you are intending to pay down the loan prior to taking it to term, then you are almost certainly better off with a 0% dealer fee and a higher interest rate.
What are some alternative financing options?
Assuming your solar installer does not include dealer fees as part of their normal cost, you can finance your system with the following options, and avoid dealer fees:
- Home Equity Line of Credit (HELOC)
- Loans from your local credit union
