Path-Q Solar
How much could financing fees reduce the return from a solar investment?
Answer
Financing fees reduce return by increasing the amount owed without increasing energy production or bill savings. Their effect can be estimated by adding all fees to the project cost, recalculating payment and total repayment, and comparing the resulting cash flow with a no-fee or cash purchase.
Key points
- Include origination, dealer, documentation, underwriting, and other financed charges.
- A fee can be paid upfront or embedded in a higher project price or loan principal.
- The impact is larger when the system's savings margin is small or the loan is long.
- Compare net present value, total repayment, and payback—not just the stated interest rate.
What it depends on
- Fee amount and whether it is financed
- Loan principal, APR, and term
- Cash system price
- Expected production and bill savings
- Ownership period and early payoff timing
Risks and trade-offs
- A low interest rate may be paired with a large fee that reduces the investment return.
- If the property is sold early, fees may not be recovered through savings.
- Comparing offers with different financed prices can hide the fee's effect.
Information you may need
- Cash price and financed price
- Full fee schedule
- Loan disclosure and amortization
- Expected savings and likely ownership period
Your next step
What to do next
Recalculate the solar return using the cash price, financed principal including fees, and total repayment for each offer.
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