Anyone looking to see how much money they'll save by going solar has likely encountered online ads touting loans at incredibly low-interest rates.
Some outfits will even tempt you with an offer of interest-free financing.
If you express any worries about how such a low rate could even be possible, they may try to soothe your mind with some vague remarks about government incentives.
Should you ever find yourself in such sadly all-too-common circumstances, it would behoove you to take an exceedingly close look at the fine print before signing anything.
Because it’s a sure bet that all the money you'll save on interest will get more than canceled out by some very exorbitant but equally well-hidden “dealer fees.”
A dealer fee is just some fixed percentage of the amount you’re borrowing that gets added to the principal as a surcharge.
Sometimes, they're referred to by some other name like "origination fees," instead.
But, regardless of how they're labeled in the fine print, lenders will usually claim such surcharges are necessary to pay for "processing costs."
Dealer fees aren’t unique to the solar industry. They’re frequently tacked on to more conventional loans as well.
Whether or not dealer fees always amount to a predatory business practice is a matter of opinion that we won't attempt to settle here.
But there’s no question unscrupulous lenders are using hidden dealer fees to scam people looking to reap the financial benefits of going solar.
Booming industries attract shady characters
Dealer fees on credit cards and other conventional loans -- whether justified or not -- are usually pretty minimal -- generally falling somewhere between one and five percent of the principal.
But nothing attracts shady characters like a booming industry. And over the past decade, unscrupulous outfits have been cropping up offering solar loans with hidden dealer fees that run as high as a jaw-dropping 30%.
That allows them to bait homeowners looking to reap the financial benefits of going solar with rock-bottom interest rates using a simple but highly effective two-part strategy.
Keep quiet about the enormous surcharge written into the contract that will wind up costing you way more money than their low APR will save.
Hope you don't look too closely at the fine print.
Paying 10% interest would cost less
A 5-year $20,000 loan advertised as “zero-interest or low interest” may sound too good to pass up.
But if the fine print contains a 30% dealer fee, then that “no-interest” loan is going to wind up costing you another $6,000 over its five-year payback period.
That's over $500 more than the interest you would have paid on the same loan even if you were getting charged 10%.
Given that the expected lifetime of your solar system will be 25 to 30 years, solar power is likely to be an investment that's hard to beat even at normal interest rates.
That's why the industry is booming.
Solar power may be new, but swindlers have been around as long as mankind itself.
So, if you’re being offered an APR on a solar loan that sounds too good to be true, it doesn't take a genius to realize that it probably is.