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Dealer Fees: The Dark Side of Solar Loans

Quick Read

  • Dealer fees are a percentage of a projects cost added onto the initial loan amount to lower the loans APR. They can be as high as 25% of a projects’ cost. A few hours worth of time to apply for a legitimate loan can save literally thousands of dollars.

Full Article

Many solar clients seek financing with their solar projects due to the sheer size of these projects.  Many, when investigating, are being solicited with what appears to be extremely low interest-rate loans with exceptionally low payments.  Some of these loans being as low as .99% for 25 years. Sounds great, doesn’t it? 

But there is a catch-a caveat called “dealer fees.” These fees are boasted as a one-stop solution for solar financing. Dealer fees are disguised as an investment with a low monthly payment, but actually are more expensive than traditional loans. Knowing how to recognize a treacherous loan can help you avoid getting tricked by a dishonest company.

Simply stated, a Solar Dealer Fee is a percentage of the loan added onto the total principal of the loan. A typical dealer fee is 15-25% of the projects cost, which is added to the total loan amount.

This is done to reduce the Annual Percentage Rate (APR) to make the loan seem more favorable compared to a traditional solar loan. This is very similar to paying points on a mortgage, something that was done a lot during the mortgage boom of the early 2000s. 

To put that in perspective, a $30,000 loan with dealer fees would have an additional $7,500 in fees on top of the original total sum of the loan.

These loans are built to mimic existing traditional loans but with a lower APR, a slightly lower monthly payment, but a longer payment period and a larger total cost to the customer.  

Dealer fee loans are designed to be initially very attractive due to their low APR’s and monthly payments. However, when we take a closer look, we can see loans with dealer fees actually cost more money in the long run.

How to Avoid Dealer Fees

Financiers that use dealer fees rationalize these enormous fees to customers with more dishonesty, often stating that dealer fees are “the only way to finance solar,’ “it’s an industry norm,” or that it “makes the financing process simpler.” None of these statements are true. When in reality working with either private lenders or a credit union can take as little as 2-3 hours to get approval for a solar loan.   

Don’t be fooled by these solar lenders telling you it’s their way or the highway. As a customer you should be informed on what works best for your individual situation. Dealer fee loans are as simple as an online application done within minutes, while credit unions typically require income documentation, which a couple of hours longer. Sure, a quick application may be more convenient, but we can all agree that taking a little more time to avoid paying thousands of dollars is worth it.

At Kasselman Solar, you are assigned a Project Manager that walks you through the financial process, keeping it as simple as possible. We work with independent credit unions, banks, and private lenders so that our customers can be comfortable in the investment that is their solar system. Let Kasselman’s 75+ years of reliably serving New York give you the peace of mind in your journey and investment into solar.

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