A homeowner wants a $12,000 panel upgrade and service rebuild. You offer financing. They pick the 12-month no-interest plan. The lender funds the job, keeps a 9% dealer fee, and wires you $10,920.
You just paid $1,080 to close that job. That’s roughly nine hours of a two-man crew’s billable time, gone before anyone picked up a tool.
Sometimes that’s the best $1,080 you ever spent. Sometimes it’s a discount you handed to a customer who was going to sign anyway. The difference is arithmetic, and most contractors never run it.
How dealer financing actually works
You sign up with a consumer lender — GreenSky, Wisetack, Hearth, Acorn, Service Finance, or whatever your supplier or software pushes at you. The customer applies on their phone, usually in two minutes. If approved, the lender pays you and collects from the customer.
The customer’s rate and your fee are two different numbers, and they move in opposite directions.
The cheaper the plan looks to the customer, the more it costs you.
Typical structure, and these vary by lender, by your volume, and by the customer’s credit tier — go get an actual rate sheet before you plan around any of this:
| Plan the customer sees | Typical dealer fee you eat |
|---|---|
| 12-month 0% deferred interest | 7–10% |
| 18-month 0% | 10–13% |
| 60-month reduced APR (6.99%) | 10–15% |
| Standard APR loan (12–20%), customer pays interest | 0–4% |
| Pay-in-4 / short-term installment | 3–6% |
The pattern: when the customer pays no interest, somebody pays it, and that somebody is you. When the customer pays market interest, the fee drops close to nothing — but a 17.99% APR offer closes far fewer jobs than “no payments, no interest for 12 months.”
Also watch for the pieces that don’t show up on the headline rate:
- Monthly or annual platform fees ($25–$99/month on some programs, whether you fund a single job or not).
- Approval rates. Soft-pull prequalification is standard now, but a chunk of your customers will still get declined or approved for less than the job costs. A $12,000 job approved at $7,500 is a job you now have to re-scope.
- Funding timing. Most pay within a few business days of a signed completion certificate. Some hold back until the customer confirms completion — which means a slow-responding customer is a cash flow problem. If you’re running tight, read the 13-week cash flow sheet before you bet on fast funding.
- Chargeback and dispute language. Some agreements let the lender claw back funds on a customer complaint. Read it.
The break-even question
Financing pays when it wins you jobs you would otherwise have lost. It loses when it just discounts jobs you’d have closed anyway.
So the question isn’t “does financing cost 9%?” It’s: how many extra jobs does financing have to win before the fee pays for itself?
Here’s the setup. Say your average financed ticket is $12,000 and your gross margin on that work is 35% — $4,200 of gross profit per job.
A 9% dealer fee on $12,000 is $1,080. That comes straight off the top line, so it comes straight off gross profit. A financed job earns $4,200 − $1,080 = $3,120.
Now assume you run 20 jobs in that size range per quarter. Without financing, you close 10 of them.
| Scenario | Jobs closed | Gross profit per job | Total gross profit |
|---|---|---|---|
| No financing | 10 | $4,200 | $42,000 |
| Financing, 12 of 20 close, all finance | 12 | $3,120 | $37,440 |
| Financing, 13 of 20 close, all finance | 13 | $3,120 | $40,560 |
| Financing, 14 of 20 close, all finance | 14 | $3,120 | $43,680 |
Lifting your close rate from 50% to 60% — a real, meaningful improvement — still leaves you worse off if every single customer uses the financing. You need roughly a 70% close rate to break even in that version.
That’s the trap. If financing becomes the default on every quote, the fee eats more than the lift.
Why it usually works out better than that table
The version above assumes 100% of customers finance. In practice, they don’t. Most shops that offer financing see somewhere between a quarter and half of eligible customers actually use it — the rest pay cash or card because they already had the money.
Rerun it with 40% uptake and a close rate that goes from 10 to 13 of 20:
| Count | Profit each | Subtotal | |
|---|---|---|---|
| Cash/card jobs (60%) | 7.8 | $4,200 | $32,760 |
| Financed jobs (40%) | 5.2 | $3,120 | $16,224 |
| Total | 13 | $48,984 |
Against $42,000 with no financing, that’s $6,984 more gross profit per quarter — roughly $28,000 a year. That’s the real case for financing.
The whole thing turns on two levers:
- Uptake rate. The lower the share of customers who use financing, the better your economics. You want it available, not pushed.
- Incremental close rate. Financing has to actually win jobs you’d have lost. If you can’t point to specific jobs that closed because of it, it’s a discount.
The one-line version
Fee cost per quarter must be less than incremental gross profit per quarter.
- Fee cost = (financed jobs) × (ticket) × (fee %)
- Incremental gross profit = (extra jobs closed) × (gross profit per job)
With 5 financed jobs at $12,000 and 9%: $5,400 in fees. At $4,200 gross profit per job, financing has to win you 1.3 extra jobs that quarter to break even. Two extra jobs and you’re ahead.
That’s a number you can actually track. Not a feeling.
Should you just build the fee into your price?
Lots of contractors raise prices 3–5% across the board to cover financing. It works, with caveats.
If you’re at $12,000 and you add 9%, you’re quoting $13,080 to everyone — including the cash customers who get no benefit. That’s a real risk of losing price-sensitive work. If you add 4% as a blended cover (figuring only 40% finance), you’re closer to honest: 40% × 9% = 3.6% of revenue goes to fees, so a 4% price lift roughly neutralizes it.
Before you do this, read how to raise your prices 15% without losing your good customers — the mechanics of a price increase matter more than the percentage.
Two legal notes, and these are genuinely state-and-card-network specific:
- Surcharging financed customers (quoting $12,000 cash, $13,080 financed) is restricted in some states and by some lender agreements. Several dealer contracts explicitly forbid charging financed customers more than cash customers. Check your agreement and your state AG’s guidance.
- A cash discount framed the other way (“$13,080, less 4% for payment at completion”) is generally treated differently from a surcharge, but again — your lender agreement governs. Ask your rep in writing.
When financing genuinely earns its fee
It works best when:
- Your average ticket is above roughly $5,000. Below that, most homeowners put it on a card and the fee buys you nothing. The pay-in-4 products at 3–6% can make sense for $1,500–$4,000 tickets.
- The work is urgent and unplanned. Failed sewer line, dead HVAC, burned panel, storm roof. Nobody budgeted for it. Financing converts “let me think about it” into a signed contract today.
- You sell tiered options. Financing and good-better-best quoting are a strong pair. “The premium option is $340 a month instead of $280” moves people up a tier more reliably than any discussion of total price.
- You can hand off the application. Two minutes on the customer’s phone at the kitchen table. If it takes a 20-minute call to your rep, nobody finishes it.
It works badly when:
- Your work is planned, budgeted remodeling where customers already have a HELOC or cash set aside.
- Your average ticket is under $3,000.
- You’d use it to avoid collecting a real deposit. Financing isn’t a substitute for a deposit structure — on many programs you get nothing until completion, which is worse for cash flow than a 30% deposit.
The sticker-shock alternative that costs nothing
Before you sign a dealer agreement, try the free version: phase the job.
A $12,000 panel-and-rewire splits into a $4,500 panel now and $7,500 of circuits over the next two visits. Same total revenue, no fee, and the customer gets the budget relief they were actually asking for. It costs you some mobilization efficiency — call it 5–8% in extra trips and setup — which is still less than a 9–13% dealer fee.
Phasing doesn’t work on everything. You can’t half-replace a roof. But on service upgrades, bathroom work, landscape builds, and anything modular, ask before you reach for the lender.
Your next step
Pull your last 20 quotes over $5,000. Mark the ones you lost, and next to each loss write the actual reason the customer gave you. Count how many said some version of “can’t afford it right now” versus “went with someone cheaper” or “decided to wait.”
If three or more died on affordability, request rate sheets from two lenders and run the break-even above with your real average ticket and your real gross margin. If one or zero did, financing would be a fee on jobs you were already winning — and your close-rate problem is somewhere else, probably in follow-up.