Solar Dealer Fees: The Markup That Never Reaches Your APR

Two numbers, and the gap the lender kept

You were sold solar panels. Somewhere in the paperwork you were sold something else too: a fee the lender tucked into your loan balance that did not buy a single panel, and that nobody at your kitchen table mentioned out loud.

The industry has plenty of names for it: dealer fee, program fee, lending fee, finance fee, platform fee, original issue discount. The CFPB uses the plainest one. It is a markup the lender adds to the loan principal on top of what the installer actually gets paid. In the CFPB’s own example, a project with a $30,000 cash price and a $9,000 fee produces loan documents showing a principal of $39,000 plus interest. The lender remits $30,000 to the installer and keeps the $9,000.

You then pay interest on that $9,000 for the life of the loan.

How big does it get? The CFPB found these fees typically run 10 to 30 percent of the cash price and can exceed 50 percent, and that some lenders’ markups increase the loan principal by 30 percent or more above the cash price. Michigan’s attorney general alleges that on the Climax Solar deals the dealer fees, platform fees and similar charges averaged more than 27 percent of the amount financed.

How they kept it out of your rate

If you have looked at your loan and thought the numbers cannot possibly add up, you are reading it correctly.

A fee disclosed as a cost of credit has to show up in what you are told about the cost of borrowing. A fee folded into the principal gets treated, in the paperwork’s telling, as part of what you borrowed. That is the whole trick. The CFPB found that lenders frequently bake dealer fees into the loan principal but often do not indicate that these fees are a markup from the total cash price, and that typically they do not include the hidden fees in the total costs of credit they present to consumers.

One homeowner laid out the arithmetic for the CFPB better than most articles do. Their lender charged 26 percent of the total system cost as an upfront fee, then quoted an interest rate of 1.99 percent and an APR of 1.99 percent for a 25-year loan. As they put it, mathematically that cannot be possible when there is a 26 percent upfront fee. They were right, and the low advertised rate did exactly the job it was put there to do.

What it costs you, on an average system

Work it with the CFPB’s own average project cost of about $25,000 and a 30 percent dealer fee. The rate below sits inside the 1 to 7 percent band the CFPB found on solar-specific loans, and the arithmetic is ours.

	No dealer fee	30 percent dealer fee
Cash price of the system	$25,000	$25,000
Dealer fee added to principal	$0	$7,500
Loan principal	$25,000	$32,500
Monthly payment, 2.99 percent, 25 years	$118	$154
Total paid over 25 years	$35,527	$46,185

The fee is $7,500. Over the life of the loan it costs you $10,658, because you pay interest on it for 25 years. Same panels, same roof, same production. The extra money bought the lender’s cut and nothing else.

Minnesota’s attorney general put the aggregate version of that number in a complaint: roughly $35 million in hidden fees collected from Minnesota consumers since 2017 on nearly 5,000 loans, with most of those fees increasing borrowers’ costs by 15 to 30 percent, and borrowers paying up to 54 percent more by financing through those lenders than they would have paid another way.

The tax credit they built your loan around

Many of these loans were designed around a check the lender expected you to send. The CFPB found it is commonplace for a solar-specific loan to re-amortize to a higher monthly payment at the 19th month unless the borrower makes a substantial prepayment first, frequently 30 percent of the principal, which was the size of the federal Investment Tax Credit.

That design worked against homeowners even when the credit existed. The credit arrives only after you file for the year the system was installed. It is nonrefundable, so a household with little federal tax liability gets little or none of it. And a homeowner nobody told about the prepayment expectation gets hit with a payment jump they never planned for.

It is worse now. The IRS says the Residential Clean Energy Credit is not available for any property placed in service after December 31, 2025. If a salesperson is still pricing a 2026 installation off a 30 percent credit, the prepayment that loan depends on has no funding source at all, and the higher payment is the one you will actually owe.

Find your own number

You do not need anyone’s permission to do this, and you do not need to pay anyone. Sit down with two documents: the installation agreement and the loan agreement.

Find the cash price. It is on the installation contract, sometimes called system price, contract price, or total project cost. If the installer never gave you one, write that down, because it matters. Treasury tells buyers to ask directly whether there is a lender fee included in the loan, how much it is, and what it is for. You can ask the same question after signing.

Find the amount financed. It is on the loan documents, labeled principal or amount financed.

Subtract. The gap is your dealer fee. Divide it by the cash price to get the percentage, which is the number that goes in your complaint.

Check for the second version of the trick. The CFPB describes a common practice of showing the loan principal in small gray type and a “net system cost,” the principal minus a presumed 30 percent tax credit, in large bright type. If the number the salesperson kept pointing at is smaller than the number on your loan, that gap is the presumed credit. It was never a discount.

Look for the Holder Rule notice. If your contract carries the notice required by 16 CFR 433.2, stating that any holder of the consumer credit contract is subject to all claims and defenses which the debtor could assert against the seller, with recovery capped at amounts you paid, then the finance company cannot simply wash its hands of what the installer told you.

Make them answer for it, cheapest first

1. File the complaints. Free. Your state attorney general first, then the CFPB and the FTC. Treasury’s advisory routes solar consumers to exactly those offices, and the record shows why: Minnesota’s case, Michigan’s case and Connecticut’s investigations all grew out of complaint volume. Include the two numbers, the percentage, and the date you signed. This costs a stamp, and it is the only step in this whole category that has ever produced restitution at scale. The lenders are counting on most borrowers never taking it.

2. Get refinance quotes. Free to ask. The dealer fee is already in the principal and no refinance will remove it. What a refinance can change is the rate and the term you carry it at. Treasury notes plainly that you are not required to use the financing offered by the salesperson and might get a better deal from your own bank or credit union, and that advice holds just as well after the fact. Compare the all-in cost of a consolidation or personal loan against what you are paying now. If the panels stay, the balance is ordinary debt, and you are free to shop it.

3. Then a lawyer, if the file supports it. Disputed or forged signatures, a promise about tax credits made to someone with no tax liability, or documents you were never given a copy of are the facts that turn a complaint into a case. Michigan’s complaint alleges financing companies continued to service, collect, report, assign or enforce loans even after consumers reported disputed signatures, deceptive sales practices, failed inspections and unsafe conditions. If that describes your file, it is worth an hour of an attorney’s time.

Take the steps in order, and do not pay a cancellation company to do step one. Filing a complaint takes twenty minutes, and nobody needs a percentage of your loan to do it for you.

This is general information, not legal advice. Whether your fee was properly disclosed turns on your documents and your state’s law, so put the contract and the loan agreement in front of an attorney licensed in your state before you decide what you have.