Why is a payment plan cheaper, such as for a Solar Panel Installation?

Can you help explain why my quote for installation is higher if I choose to pay cash upfront instead of using their payment plan

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Hi @tank, welcome to the community and your interesting first post. It potentially applies to any payment plan, rather then purely for a solar system purchase. I have changed the title slightly as there may be other members who have stories about other payment plans where the upfront cost offered is cheaper with a payment plan.

Does the payment plan have interest or penalties if payments are not made (or made on time)?

If this is the case, I suspect that they try and make a payment more attractive upfront as they know they will continue to make money from the customer for some time after the installation.

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Thanks, appreciated

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I thought it may have something to do with energy provider/installer getting a double whammy from green energy certificates or such?

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It’s the same as the department stores that advertise “No interest repayment over x months”. If you negotiate while offering immediate payment you will always get a lower price. The difference is to make up for the real cost of the ‘no-interest’ offer.

It would be better termed ‘concealed interest’ repayments. Given that interest rates are low at the moment the difference is not huge. Should interest rates rise considerably you can expect such repayment schemes to become proportionately more expensive or to cease being offered so easily.

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Many repayment schemes revert to much higher interest rates after the ‘interest free’ period if the cost has not been repaid, and yes, it is correct that most have a service fee per month attached to the offer that is like a concealed interest rate. Even some BNPL (Buy Now Pay Later) schemes have this monthly fee attached. Some of these interest free are in reality Credit Cards eg Harvey Norman’s use of the Latitude Go Credit Card that has an account service fee of $8.95 per month applied.

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The above posts are germane, and depending on who funds the payment plans and how the relationship is structured, eg if the solar company is essentially selling a loan, they usually get a good commission.

Simplified and imprecise terminology but it should explain a possibility. It is likely both aspects intersect to promote what seems to be a counter-intuitive practice.

$product_price + $profit = $business_bank_deposit
lower $product_price + lower $profit + $commission from selling a loan = larger $business_bank_deposit

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The ‘green energy certificates’, IE STC’s (small-scale technology certificates) have been included as an item on the quotes we previously received. Their value does vary.

We had quotes now old from Origin, and looked at more recent offers for a solar PV/battery upgrade. The quotes were not the lowest we received. One might say they were a premium quote. There have been several alternatives over time offering an attractive feed in tariff as part of the package.

Aside from the various possible reasons for the deals being as they are, is it also important to get the best package for your needs?

We have installed solar PV at 2 properties. We took the time to get multiple quotes. It pays to set out each offer and if possible do your own sums as to the costs and savings. We found that after allowing for interest costs by redrawing on a home loan it was still cheaper to go direct to several known local suppliers than the electricity retailer. Whether today some retailers see a benefit in gaining new customers, they may be far keener to offer competitive solutions, interest free terms or otherwise.

If however one does not have easy access to low cost finance, signing up to a deal to install solar PV with one of the electricity retailers may be a good option, or the only viable option.

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Thanks everyone for your valued comments

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