A dealer fee is a charge that some loan lenders add to cover the cost of offering the loan product. Rather than charging the installer or homeowner a separate upfront fee, the lender builds the cost into the loan by increasing the starting principal. The result is that the customer finances a slightly higher amount than the actual system cost.
Dealer fees are typically expressed as a percentage and commonly range from 1% to 30%, depending on the lender and loan product. Aurora calculates the dealer fee automatically when you configure it on a financing product.
In this article, we’ll cover:
- How Aurora calculates the dealer fee
- How to add or change the dealer fee
- Incentives apply to dealer fee
How Aurora calculates the dealer fee
When a dealer fee is applied, Aurora uses the following formula to determine the loan principal:
Loan principal = System cost ÷ (1 − Dealer fee %)
Example: A $20,000 system with a 5% dealer fee produces a starting loan principal of:
$20,000 ÷ (1 − 0.05) = $21,052.63
The customer’s monthly payments are based on this higher principal amount, not the original system cost.
How to add or change the dealer fee
The dealer fee is configured in your financing product settings. To access it:
- Go to your account Database.
- Click Financing Products.
- Select an existing loan product or click Add Financing Product to create a new one.
- Open the loan configuration and locate the Dealer fee field.
- Enter the dealer fee percentage provided by your lender.
Incentives apply to dealer fee
Below the dealer fee percentage field, you’ll see a toggle labeled Incentives apply to dealer fee. This toggle is off by default and controls whether the dealer fee amount is included in incentive and tax-basis calculations. This setting controls how the dealer fee is treated in incentive and tax-basis calculations.
When this toggle is on:
- The dealer fee amount is added to the system cost before Aurora calculates incentives (such as the federal Investment Tax Credit) and the tax basis.
- This reflects scenarios where the dealer fee is considered part of the total project cost for tax purposes.
- The customer’s proposal will show incentives calculated on the higher (dealer-fee-inclusive) system cost.
When this toggle is off (default):
- The dealer fee is used only to calculate the loan principal.
- Incentive and tax-basis calculations are based on the original system cost, excluding the dealer fee.
⚠️ The correct setting depends on your lender’s terms and how the dealer fee is treated for ITC eligibility. If you’re unsure, consult your lender or a tax professional.
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