Solar loan explained: dealer fees, the real APR and what owning means

A solar loan is borrowed money to buy a system that is yours from day one. You pay a fixed monthly amount for 10 to 25 years and owe nothing at the end. What the industry explains poorly is the dealer fee: a 15-30% charge hidden in the price that makes the “low rate” expensive. Here we take it apart.

How does a solar loan work?

A lender (bank, credit union or specialized finance company) pays the installer and you pay the lender in fixed installments. Per EnergySage marketplace data from the second half of 2025, the median quoted rate was 7.5% and the median term 25 years. There are 10, 12, 15 and 20-year options; the shorter the term, the higher the payment and the less total interest.

The difference from a lease is ownership: the system is yours, the manufacturer warranties are yours, and if you sell the house the system goes with it (paying off the balance or transferring the debt). Owning also means maintenance and monitoring are your responsibility once the installer’s workmanship warranty expires.

What is the dealer fee and why is it not on the proposal?

The dealer fee is what the lender charges the installer for offering you an attractive rate. EnergySage puts it between 15% and 30% of the loan amount, with no industry standard. The installer does not absorb it: it gets added to the system price. That is why the same system has a different “cash price” and “financed price”, and the gap is the fee.

Simple rule: ask for the cash price and the financed price of the same system. If the gap is 20% or more, you are paying a high dealer fee no matter what the rate says. And once financed, the fee is not refunded if you prepay. More on the term in the glossary: dealer fee.

Heads up: the salesperson earns commission on the financed price, not the cash price. It is in their interest that you pick the lowest rate with the highest fee. It is not malice, it is incentive. You have to ask the question they will not.

What was re-amortization and why does it no longer work the same?

Many solar loans were designed in two stages: a higher payment for the first 12-18 months and a lower payment afterward, assuming you would use the 30% federal tax credit to make a large lump-sum payment. EnergySage describes these as “re-amortized” loans; its example is a $52 payment in year one dropping to about $36 for years 2 through 25 after the paydown.

The problem in 2026: the 25D credit ended for systems installed after December 31, 2025, per the IRS. If nobody is refunding you 30%, you have nothing to make that paydown with. And if you do not make it, the payment does not drop: it re-amortizes upward or stays at the high level. Any proposal still showing a “payment after tax credit” is using last year’s template. Read federal solar tax credit 2026 and confirm with your tax preparer.

How do you compare two loan offers?

1. Same system, same components. If the panels change, it is not comparable.
2. Each installer’s cash price. That is the baseline.
3. Financed price and loan amount. The gap versus cash is the effective fee.
4. Monthly payment, term, and total paid at the end (payment × months).
5. If there are two payment stages, what happens if you do not make the paydown.

An 8% loan with no dealer fee can cost less in total than a 4% loan with a 25% fee. The only way to know is to run the total over the full term. If you need help reading the document, use how to read a solar proposal.

When a loan does NOT make sense

• When your score forces a high rate and the monthly payment ends up equal to or higher than the bill it replaces. In that case look at solar subscription or lease and PPA.
• When you plan to sell within a few years and do not want to negotiate the balance with the buyer. Read selling a home with solar.
• When the roof has less than 10 years left. A 25-year loan on a roof that needs replacing in year 8 forces you to pay removal and reinstall out of pocket.
• When you do not want to be responsible for maintenance. Owning has advantages, but it also means the inverter that fails in year 12 is your problem.

What to check before you decide

• Get the cash price and the financed price of the same system in writing.
• Look for the APR, not the nominal rate. If it is missing, ask for it.
• Confirm whether the payment changes in any month and what triggers it.
• Ask whether there is a UCC-1 on the equipment and what it takes to release it when you sell.
• Compare against at least one no-debt structure before signing; the table is in ways to get solar compared.