To avoid hidden fees in solar financing contracts, carefully review these key aspects:
1. Dealer Fees and Loan Principal Markups
Check for undisclosed “dealer fees” (also called platform/lending fees), which are often 10%-30% of the cash price. These fees inflate the loan principal (e.g., a $30,000 system becomes $37,500), but aren’t included in the APR.
Action:
- Compare cash price vs. loan principal – Ensure the contract explicitly separates the solar system’s cash price from financing fees.
- Demand full fee disclosure – Reject contracts that lump fees into the principal without itemization.
2. Federal Tax Credit Assumptions
Beware of “net cost” claims that deduct the 30% federal tax credit upfront. Many contracts assume eligibility, but not all buyers qualify.
Action:
- Verify tax credit disclaimers – Ensure bold statements about tax credit dependency are present, not buried in fine print.
- Calculate true costs – Ignore “net cost” projections; focus on the actual principal + interest over the loan term.
3. Payment Structure
Watch for balloon payments or repayment terms requiring a prepayment (often 30% of principal) tied to the tax credit. Missing this prepayment can spike monthly payments.
Action:
- Identify prepayment clauses – Confirm if payments will rise after a specific date unless you prepay.
- Calculate worst-case payments – Assume you won’t receive the tax credit and review re-amortized payments.
4. Savings Claims
Scrutinize promises like “eliminate energy bills” or guaranteed savings. Actual savings depend on location, system efficiency, and utility policies.
Action:
- Request production estimates in writing – Ensure they account for local weather and net metering rules.
- Cross-check utility rates – Calculate breakeven timelines using current (not inflated) energy cost projections.
5. Contract Language and Disclosures
Non-English speakers: Ensure contracts match the sales pitch language. Some companies provide English-only contracts after non-English presentations.
Cooling-off periods: Verify right to rescind details (typically 3 days federally). Avoid contracts that waive this right.
Final Checklist:
- Itemized fees (no hidden markups)
- No ambiguous “net cost” assumptions
- Fixed payment structure without surprise prepayments
- Realistic savings projections
- Translated contracts if applicable
For alternatives, consider credit unions or local banks that charge lower/no dealer fees.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/what-should-i-look-for-in-a-solar-financing-contract-to-avoid-hidden-fees/
