Reading your contractor vs bank loan comparison
Why the advertised rate can be misleading
Contractor or dealer financing often looks attractive because of a low promotional rate, but that rate frequently applies to a larger financed amount than the actual cash price of the system. On a $26,000 system with a 15% dealer fee and a 5.99% promotional rate, the financed amount grows to about $29,900, and the total cost runs about $3,029 more than an independent bank loan at 6.99% with no dealer fee. The cash vs loan savings comparison can help you see how that gap compares to other financing tradeoffs.
What a dealer fee actually is
A dealer fee is a payment the lender makes to the installer for arranging the financing, and it's typically recovered by increasing the total amount financed rather than shown as a distinct line item on your paperwork. This makes it easy to miss unless you specifically compare the cash price against the financed price. The CFPB's explainer on the origination fee explanation covers a closely related concept worth understanding alongside this one.
How to spot a dealer fee before signing
Ask your installer directly whether the financing includes a dealer fee and what the true cash price would be if you paid outright or brought your own financing. The dealer fee impact calculator shows the exact cost this fee adds once you know the percentage. The Consumer Financial Protection Bureau's report on solar financing explains how solar loans are structured and what to watch for.
Why shopping an outside lender is usually worth the effort
Even a brief comparison against a bank or credit union loan, financed on the real cash price with no added fee, can reveal significant savings that the contractor's promotional rate was masking. This doesn't mean contractor financing is always worse, some installers do offer genuinely competitive terms, but it's worth confirming rather than assuming, ideally using the loan APR impact calculator to weigh small rate differences.
What to bring to the comparison
Have the contractor's exact financing terms, including the financed amount and APR, alongside a real quote from at least one outside lender before making a final decision. The numbers, not the sales pitch, should determine which option actually costs less. The total cost including financing fees calculator can help confirm no other fees are hiding in either quote. The rebate application cost-benefit tool is also worth checking before deciding, and the CFPB's issue spotlight on solar financing covers general guidance on these tradeoffs.