The Real Cost of Zero-Interest Solar Finance

The "zero interest" promise — what it actually means

You've got a solar quote in front of you. Maybe a battery, maybe a full system, maybe both. The salesperson points out a finance option attached to the quote — "zero interest", "interest free", "no interest ever". On a project that costs as much as a small car, that sounds like a genuinely good deal.

It's worth pausing on the question, though. If the lender isn't charging you interest, who is paying for the cost of lending you the money? Lenders aren't charities. Someone, somewhere, is paying.

The short answer is that in most "zero interest" solar finance arrangements, the cost has already been built into the price of the system you're being quoted. You will pay it. You just won't see it on your loan paperwork.

This isn't necessarily illegal, and in some narrow cases it can still be the right option for a particular buyer. But it's almost never as cheap as the marketing implies — and the way the cost is structured makes it very hard for the average homeowner to spot.

This piece walks through how the model works, what Australian regulators and industry experts have said about it, the questions to ask before you sign, and how to think about a "zero interest" offer alongside more traditional finance.

How merchant-funded interest-free finance works behind the scenes

In a typical "zero interest" solar finance arrangement, there are three parties: you (the homeowner), the installer, and the finance company. The mechanic looks like this.

The finance company markets a "zero interest" loan to consumers. To make money on that loan, it charges the installer a percentage of every financed sale. This charge is variously called a merchant fee, a service fee, or a vendor fee. It's paid up front by the installer to the finance company, usually deducted from the amount the finance company eventually settles to the installer.

Solar installer margins are thin. Most installers can't simply absorb the merchant fee out of their own profit. So the fee gets added to the system quote — the price the homeowner sees and signs.

The homeowner reviews the quote, signs up for "zero interest" finance, and starts making weekly or fortnightly repayments against the inflated quoted price.

The finance company collects the merchant fee from the installer at the start of the deal, then collects the loan repayments from the consumer over the next several years (plus any disclosed account-keeping fees, establishment fees, and late payment charges). The "zero interest" promise is technically accurate — but the cost has already been recovered through the price markup.

Why this matters even when it isn't hidden

The merchant fee arrangement isn't necessarily concealed in any legal sense. Finance providers are required to disclose fees and charges that the consumer pays directly to the lender. But the commercial arrangement between installer and lender — the merchant fee — sits outside the consumer credit relationship and isn't typically disclosed on the loan documents.

The practical result is that a homeowner shopping for solar has very little way to know whether the quote they've been given is the genuine system price or a marked-up version designed to absorb the merchant fee. Unless they explicitly ask for a cash price, and unless the installer is permitted to give one, the markup remains invisible.

What Australian regulators and industry reviewers have said

This pattern isn't a secret to Australian regulators. It's been examined in detail, and the percentages involved are publicly documented.

In 2019, the Australian Securities and Investments Commission (ASIC) presented evidence that solar installers offering Buy Now Pay Later finance products were inflating system prices by between three and forty-seven per cent, with the markup corresponding to the merchant fee the installer was paying the finance company.

In the same year, the Australian Competition and Consumer Commission (ACCC) ran a pre-decision conference on the New Energy Tech Consumer Code that included extensive discussion of the same issue. The minutes of that conference recorded the finding that "BNPL products result in inflated purchase prices for solar systems. There is insufficient margin on the solar product to cover the 20-30 percent merchant fee which applies to BNPL products, as such retailers inflate the price." The ACCC noted that consumers may not be able to detect this price inflation.

Independent industry reviewers have observed similar numbers. SolarQuotes — a long-running Australian solar comparison site with no commercial relationship to any of the finance providers — has stated that solar businesses offering Buy Now, Pay Later options typically pay between fifteen and twenty-five per cent of the system cost to the finance provider, and that margins are thin in the solar industry, so the consumer ultimately bears that cost.

So the practice is well documented. The exact percentage varies by finance provider, by loan term, by product type, and by how aggressive the installer's pricing is. But the structure is consistent across the category. A "zero interest" loan that funds a solar system is rarely as cheap as the headline implies.

Why it has been hard to regulate

The merchant fee arrangement is a commercial agreement between installer and finance company. It's not a fee paid by the consumer to the lender. Consumer credit disclosure rules — which require lenders to disclose interest rates, fees, and charges to borrowers — don't generally reach commercial arrangements upstream of the consumer.

Australia's BNPL Code of Practice and various reform proposals have circled this issue for years. The fundamental tension is straightforward: the cost is real, the consumer ends up paying it, but the disclosure framework was built to regulate what the consumer is charged directly, not what is built into the price of the underlying product.

The fees you'll still pay even with "zero interest"

Beyond the price markup, "zero interest" solar finance products typically also charge the consumer directly for the privilege of using the loan. These are usually disclosed up front and aren't hidden — but they undercut the "zero cost" impression created by the headline.

Common examples include a weekly or fortnightly account-keeping fee, charged for every repayment period across the life of the loan. A one-off loan establishment or set-up fee, sometimes payable at first repayment. And late payment fees if a scheduled repayment is missed, generally capped per year under industry codes.

Each individual fee is small. Across a five- to ten-year loan term, the weekly or fortnightly account-keeping fee in particular can add up to a meaningful sum. Whether it ends up being significant depends on the loan size and the term — but it's real, and it's paid by the consumer on top of the already-marked-up system price.

The phrase "zero interest" can quietly become "zero interest plus several hundred dollars in fixed fees, plus several thousand dollars baked into the system price".

Why you may not even see a cash price

One of the less-discussed aspects of merchant-funded solar finance is that the arrangements between installer and finance company often include contractual terms restricting how the installer is allowed to price the system. In particular, many such arrangements prevent the installer from openly advertising or offering a cheaper cash-only price.

The effect is that even if a homeowner wanted to pay cash up front, they may be quoted the same price the finance customer is paying — because the installer is contractually limited in how much they can discount.

Industry reviewers have noted two common workarounds installers use to manage this. The first is to spread the BNPL cost across all sales, cash and financed alike, so there's little or no margin available to negotiate a cash discount. The second is to create specific "payment plan" product bundles that simply aren't available to a cash buyer at all, making a direct comparison impossible.

Savvy homeowners know to push back during the quoting process and explicitly ask, "what is the cash price for this exact system?". Most homeowners don't know to ask, and many installers aren't in a position to answer plainly even if asked.

Genuine government rebates and interest-free schemes — how they differ

Not every "interest-free" or "no-cost" solar offer involves a hidden merchant fee. Several Australian government programs are structurally different — they are taxpayer-subsidised, the discount or interest waiver is real, and there is no inflated quote behind it. Where you qualify for one of these, it will almost always be the cheapest option for the portion it covers.

The Cheaper Home Batteries Program

The federal Cheaper Home Batteries Program, in effect from 1 July 2025, provides an upfront point-of-sale discount of approximately thirty per cent on eligible home battery installations. It applies to usable battery capacity between roughly five and one hundred kilowatt-hours, claimable on the first fifty kilowatt-hours, and is administered through the Clean Energy Regulator under the Small-scale Renewable Energy Scheme. The discount is applied by the accredited installer when you purchase, so the homeowner doesn't see it as a separate refund — it comes off the system price.

This is a genuine subsidy. It is not recovered through a merchant fee, and the installer is not contractually restricted from telling you what the system would cost without it. The federal government's energy.gov.au page lists current eligibility criteria, capacity limits, and how the discount stacks with other state-based programs.

State-level solar battery rebate and no-interest loan schemes

Some state governments also operate solar battery rebate programs or no-interest loan schemes for solar and home battery purchases. The terms, eligibility caps, and availability vary significantly — schemes open and close as funding allocations are exhausted or refreshed. Western Australia's residential battery scheme is one example currently open; Victoria's earlier interest-free solar loan scheme has closed to new applications.

The key structural point is the same as the federal program: these schemes are funded by the relevant government, not recovered through a markup on your system quote. If you qualify, the offer is real.

How the rebate interacts with financing

A common question is whether to take a "0% interest" finance plan to cover the portion of your system not subsidised by the rebate. The answer is the same as it would be for a system without any rebate. The merchant-funded 0% plan still carries the markup; a transparent personal loan or green loan against the post-rebate cash price will, in most situations, work out cheaper for the remaining balance.

The argument in this article isn't that all "zero interest" is suspect. It's that privately-funded merchant-funded plans usually are. Government-funded rebates and loan schemes are a different category — and where they're available, they should be your first port of call.

How a traditional loan compares — in principle

If you set the marketing language aside, the structural comparison between a "zero interest" solar finance product and a traditional personal loan or green loan is relatively simple.

A traditional loan charges an interest rate that is visible, disclosed on the loan paperwork, and used to calculate your repayments. The rate offered depends on factors like the loan size, the term, and your credit profile — but it's all visible before you sign. The cost of the loan is transparent. It is the interest rate plus any disclosed fees.

The system you're financing is priced separately. Whatever you negotiate with the installer for the cash price of the system is the amount you finance. The total cost of the project is the cash price of the system plus the cost of the loan.

A "zero interest" product, by contrast, blends those two costs together. The interest rate is set to zero, and the financing cost is recovered through the price of the system. The total cost of the project is the marked-up system price plus the consumer-facing fees on the loan.

Whether the traditional structure or the merchant-funded structure ends up cheaper for a given homeowner depends entirely on the numbers — the merchant fee being charged, the rate on the alternative loan, the term, the loan size, and how willing the installer is to discount for cash. Sometimes the merchant-funded product genuinely is the cheapest option. Often it isn't.

The only honest way to know is to compare both.

Five questions to ask before you sign

Five practical questions you can ask any solar or battery installer before signing a finance arrangement.

What would this system cost if I paid cash today?

This is the single most important question. If the installer can answer it, you have a benchmark. If they can't or won't, you have a useful piece of information about how their pricing is structured.

What is the system price if I finance through your in-house plan?

The difference between the cash price and the finance price is, in effect, the merchant fee being passed on to you. It tells you exactly what the "zero interest" arrangement is actually costing you.

Is the finance company charging you a merchant fee on this sale?

Most reputable installers will answer this honestly. The answer tells you whether the structure described in this article is in play. If the answer is yes, it doesn't mean the installer is doing anything wrong — they're using a finance product that exists in the market and is allowed under current rules — but it does tell you the cash-versus-finance comparison is worth doing.

Can I bring my own finance?

If you can pay the cash price and arrange a personal loan or green loan independently, you remove the merchant fee from the equation. Not every installer accommodates this, and not every system size justifies the effort. But it's worth asking.

What ongoing fees does the loan charge?

Even on "zero interest" products, the weekly or fortnightly account-keeping fees and establishment fees are part of the true cost. You need to know what they total across the full term of the loan.

Bottom line — when zero-interest solar finance makes sense, and when to compare

Merchant-funded zero-interest solar finance isn't necessarily a poor product. For some buyers, it works out reasonably well. For example, those who would otherwise pay credit-card interest, those who don't have access to or appetite for a separate loan application, or those who genuinely value the simplicity of an integrated finance-and-installation process.

But it's rarely the cheapest option, and it's almost never as cheap as the "zero interest" headline implies. The cost is real. It is paid by the consumer. It is built into the price of the system, recovered over the life of the loan, and supplemented by disclosed weekly or fortnightly fees.

For any solar or battery project of meaningful size, the honest position is straightforward. Get two prices. Ask for the cash price of the system, separate from any finance arrangement. Then compare the total cost of paying that cash price plus a traditional personal or green loan against the total cost of the bundled "zero interest" offer. For neutral consumer information on personal loans in Australia, the federal government's Moneysmart service is a sound starting point.

If the bundled offer is cheaper, take it. If it isn't, you've just saved yourself a meaningful sum on a long-term purchase.

How Treadgold Finance can help

At Treadgold Finance, we work with more than forty lenders across Australia, including providers of personal loans and green loans suitable for solar panel and home battery purchases. We don't work for the installer and we don't earn a merchant fee — our role is to find the consumer the most appropriate loan against the cash price of whatever they're buying.

If you've been quoted a "zero interest" finance option as part of a solar or battery project and you'd like to understand how it stacks up against a traditional loan on the cash price of the same system, we're happy to walk through both with you. There's no obligation — just a clearer picture before you sign anything.

Get in touch when you're ready, and we'll help you compare your options properly.

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