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Solar Loan Dealer Fees

Solar Loan Dealer Fees: What to Know and How to Avoid Paying Too Much for Solar

When you’re getting prices for solar panels from companies nearby, make sure to ask how much it would cost if you pay all at once (cash price) and how much it would cost if you pay in installments (financed price). Sometimes, these two prices are different because of an extra charge called a “dealer fee.” The financing provider costs the solar panel installation this fee to begin the payment plan.

From what we’ve seen, dealer fees for solar panel payment plans can be quite big, especially when the interest rates for the payment plans are high. But it’s not always a bad thing to have a dealer fee. Actually, having a fee on a solar payment plan can still be a smart choice when you think about how much the entire payment plan would cost over past time related to the total cost of buying electricity from the power company.

Let’s examine the rationale behind dealer fees, the categories of payment arrangements that include them, the typical fees you might encounter today, and a comparison of the costs of payment plans with and without dealer fees.

Unveiling the Essence of Dealer Fees: Their Purpose and Significance

When considering the incorporation of solar panels into your residence, you embark upon a path that not only promises eventual fiscal frugality but also contributes to the conservation of our environment. However, the prospect of an upfront lump sum payment might pose a challenge for certain homeowners. Traditional financial institutions seldom extend their monetary assistance to such endeavors. Nevertheless, in the mid-2000s, visionary groups recognized that supporting individuals in their adoption of solar panels could concurrently advance the cause of renewable energy while yielding profitable returns.

In the present day, prominent financial conglomerates similar Mosaic, Sunlight Financial, Goodleap, Dividend Financial, among others, proffer credits tailored for owners seeking to embrace solar technology. Their assessment considers not only the potential pecuniary benefits that solar panels may bestow upon homeowners in the years ahead but also acknowledges those with less-than-ideal credit scores or relatively modest property valuations.

To mitigate risks associated with extending these loans, financial enterprises levy a remuneration from the entities responsible for the installation of solar panels, often referred to as “dealers.” This remittance ensures a measure of repayment for the loans disbursed. Consequently, this fee is appended to the loan obligations of homeowners who avail themselves of solar panels.

Analogous to the notion of “paying points” in mortgage arrangements, the dealer fee serves to reduce the prevailing interest rates attached to solar loans. Notably, an augmented dealer fee translates to a proportionate reduction in the applicable interest rate.

The Landscape of Dealer Fees in Today's Solar Market

Information we gathered from our beginning of 2023 Photovoltaic Industry Survey revealed the typical terms of large enterprises’ solar loans:

  • They lasted for about 25 years.
  • There was a fee, called a dealer fee, which was about 25%.
  • The interest rate, which is like an extra payment, was around 3.99%.

But remember, this info is good to know, but it might not be what you can get right now. Recently, homeowners told us at SolarReviews about prices they got. Some had a big 51% difference between the full price and the payment plan price for a solar system. Also, in the middle of 2023, credit unions were giving loans for solar systems that don’t need collateral, and these had an interest rate of about 7.99%.

It’s really hard to give a report about all the fees and interest rates that solar companies are offering now, for a few reasons.

First, the rates keep changing because of how the market is doing, and the big group that controls money (the Federal Reserve) changes the interest rates too. Second, every company that gives loans has many types of loans, each with different time lengths, dealer fees, and interest rates. But they don’t have to tell us what these are. Third, the companies that give solar loans make special deals with each solar installation company they work with.

You could ask different companies in your area for quotes on solar panels that all use the same loan company, and each company might give you different options.

When you’re looking at these offers, it’s important to compare them. This helps you decide if a solar quote is good for you. Also, don’t forget to ask the company how much the panels would cost if you paid all at once. This aids in calculating the dealer charge and determining whether you can get a better price elsewhere.

Do Dealer Fees Diminish the Viability of Solar Investments?

When you’re thinking about getting solar panels, it’s smart to ask the company for both the price if you pay all at once and the price if you pay in parts (financing). This helps you compare these prices to what your bank might offer you. It’s like thinking about how good of an investment the solar panels are and trying to make the most out of it.

Examining the monthly payment required is one approach to contrast various solar loans. The payments made every month on a loan with a 25% dealer fee and a 3.99% annual percentage rate are in fact less than those made on a loan without no fee and a 7.99% interest rate if you apply the average statistics we discussed before. This implies that the overall cost can still be more favorable for you even if there is a dealer fee.

How to choose the right solar installation for you

When you’re checking out different ways to pay for solar panels, the best choice depends on what matters most to you.

A solar loan with a dealer charges fewer payments per month can be the best option if you intend to live in your house for a long period. Even if it means paying more every month for a while, you might prefer a loan with a smaller main amount if you plan to sell your house or refinance the loan in the coming years.

But remember, all of this might not be so important if the big money group (the Fed) decides to lower interest rates in the next year or so.

The big thing to keep in mind is: don’t just pick the first option. Look at different offers from various solar companies. See both the full payment and the payment plan offers. And consider loans without solar loan dealer fees, like the ones from Clean Energy Credit Union. When you compare these companies based on the stuff they give you, the cost, how you can pay, and what other people say about them, you can get solar panels that will work for many years and save you a lot of money over time.

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