Financing dealer fees: what they really cost you

What a dealer fee is

When a customer finances a job through your lender program, the lender pays you the job price minus a fee. That fee, often called a dealer fee, merchant fee or buy-down, is how the lender pays for offering low or zero interest to the customer. Standard fixed-rate plans usually carry small fees or none; promotional plans with zero or deferred interest carry larger ones, and longer promotions cost more than shorter ones.

Because the fee is taken before you are paid, it is easy to overlook. It does not appear on the customer’s invoice or in your job costing unless you put it there, which is exactly why many owners underestimate what financing costs them.

The basic math

1. 01

   Find the fee rate for the plan

   From your lender’s current rate sheet. Fees change, so check it quarterly.

2. 02

   Multiply by the financed amount

   The fee applies to the amount financed, not just your profit.

3. 03

   Compare with gross profit on the job

   Divide the fee by the job’s gross profit to see what share of your profit the lender takes.

4. 04

   Total it monthly

   Add up fees across all financed jobs by plan, and compare with the sales those plans produced.

Example: a fictional $12,000 system replacement with a 40% gross margin earns $4,800 in gross profit. On a standard plan with an Example 2% dealer fee, the fee is $240, or 5% of gross profit. On an 18-month 0% promotion with an Example 9% fee, it is $1,080, or 22.5% of gross profit. On a longer promotion with an Example 14% fee, it is $1,680, or 35% of gross profit. Same job, same price, very different outcomes.

Why promotions cost more

A zero-interest promotion means the lender earns no interest from the customer for the promotional period, so it collects its return from you up front. The longer the promotion and the lower the rate, the higher the fee. Deferred-interest plans can carry lower fees than true zero-interest plans, because the lender expects some customers to pay interest after the promotion ends, but they are also harder for customers to understand and more likely to cause complaints.

Ask your lender for the full rate sheet and work out where each plan sits against your margins. Many owners find that one or two plans account for most of their fees, and that offering a slightly shorter promotion would cover most customers at a much lower cost.

How not to pass fees on

The tempting fix is to quote financed customers a higher price than cash customers. Be very careful. The Consumer Financial Protection Bureau’s 2024 report on solar financing described lenders building fees, commonly called dealer fees, into the loan principal, with hidden fees typically ranging from 10 to 30 percent of the cash price and sometimes exceeding 50 percent^[1]. The report gave an example of a $30,000 cash price becoming a $39,000 loan principal because of a $9,000 fee^[1], and found that lenders typically did not include those fees in the total cost of credit they presented^[1].

A cost that only credit customers pay can look like a finance charge, and finance charges have disclosure rules. If you want any price difference between cash and financed customers, get your lender’s and an attorney’s sign-off first. The simpler path is one price for everyone.

Pricing financing in honestly

1. Measure your financing mix: the share of revenue financed over the last year, by plan.
2. Calculate the average fee cost as a percentage of total revenue, not just financed revenue.
3. Treat that percentage as an overhead cost, like card processing, and recover it in your price book across all jobs.
4. Choose plans that keep the average manageable: favor shorter promotions or standard plans for smaller tickets.
5. Re-check quarterly, because fee schedules and your financing mix both change.

Example: if a fictional company finances a quarter of its replacement revenue at an average Example fee of 8%, financing costs about 2% of total replacement revenue. Building that 2% into replacement pricing for everyone covers the cost without a separate price for financed customers.

Advertising the payment, not the fee

Customers see the monthly payment, not your fee. If you advertise it, the rules on credit advertising apply. Under Regulation Z, stating the amount of any payment, the number of payments or period of repayment, any down payment, or the amount of any finance charge triggers disclosure of the down payment, the repayment terms and the annual percentage rate^[2]. Use the lender’s approved disclosures and keep them next to the payment figure, not in a footnote.

Is the fee worth it?

Financing often pays for itself by turning “we’ll patch it for now” into a full replacement, or a basic option into a better one. Many customers cannot pay large bills from savings: in 2025, 63% of US adults said they would cover a $400 emergency expense completely with cash or its equivalent^[3], and 56% of surveyed homeowners faced budget issues on maintenance projects^[4]. The question is not whether to offer financing but which plans, at what cost, and whether the extra jobs and larger tickets outweigh the fees.

• Track close rate on estimates where financing was presented versus not.
• Track average ticket for financed versus cash jobs.
• Track fees paid by plan each month.
• Compare the gross profit from jobs that likely would not have happened without financing with the fees paid on all financed jobs.

Where fees hide in your books

Because the lender deducts the fee before funding, many bookkeeping setups record only the net amount received as revenue. That makes financed jobs look like lower-priced jobs and hides the fee entirely. Record the full job price as revenue and the dealer fee as a separate expense line, by plan. Then your job costing shows the true margin on each financed job, and your monthly reports show what financing costs the business.

Do the same on the sales side. If advisors or techs earn commission on the job price, decide whether the dealer fee comes out before commission. Whichever you choose, write it into the pay plan, because commission on the gross price encourages advisors to steer customers into the most expensive plan for you.

Small tickets and short plans

Financing is not only for system replacements. Short same-as-cash plans can help customers with larger repairs, such as a compressor or a sewer line, where the bill is unexpected but not enormous. Check the fee on these carefully: some lenders charge a minimum fee or a higher percentage on small amounts, which can make financing a modest repair cost more than the repair earns. Set a minimum financed amount if the math does not work below it.

Questions to ask your lender

• What is the dealer fee for each plan, and how much notice do you give before changing it?
• Are there monthly program fees or minimum volumes?
• When are we funded, and what can delay funding?
• What happens to the fee if a loan is cancelled or refunded?
• What disclosures and ad wording are we required to use?
• How are customer complaints about the work handled?

Example: trimming the plan menu

Example: a fictional HVAC company finds that a long 0% promotion accounts for most of its dealer fees, even though most customers using it pay off in under two years. It replaces the long promotion with a shorter one and a standard fixed-rate plan, trains advisors to present the standard plan first for smaller tickets, and tracks results monthly. Financed sales stay roughly level, while fees as a share of revenue fall noticeably. For the customer-facing side, see offering consumer financing.