“Buy Now, Pay Later” Solar Tricks And Traps
By Finn Peacock – Chartered Electrical Engineer, Ex-CSIRO, Founder of SolarQuotes.com.au
Last Updated: 2nd Aug 2024
You can have solar installed on your home with a Buy Now, Pay Later (BNPL) “0% interest payment plan” and pay nothing up-front – but should you?
Australia’s solar rebate, which is actually a point-of-sale discount, is still really generous. However, it can remain challenging to find the cash needed to buy a power bill-busting solar system.
In recent years, “Buy Now, Pay Later” (BNPL) finance has sprung up everywhere and proved to be a pretty popular way of getting solar panels installed without having to find the cash upfront.
How Does BNPL Work In Solar Power Sales?
It’s pretty straightforward.
BNPL providers enter into arrangements with solar retailers, who then offer a “0% interest payment plan” in their marketing and during the sales process. When a customer expresses an interest, there’s a pretty quick (and IMO, at times slack) pre-approval process by the BNPL provider that can take just minutes. Once pre-approved, you’re good to go.
Aside from paying off the system over 6 months to 60 months depending on the arrangement, there’s usually only a monthly account keeping fee (e.g. $1.50 a week). And, of course, late fees if you should miss a payment – but these are often capped.
Sounds pretty good so far, right? But …
0% Interest? Really?
The marketing of BNPL products hinges on the so-called “0% interest payment plan” – and it really irks me. While it may be technically correct and legal, it clearly implies that the finance is almost zero-cost compared to a loan with a realistic interest rate.
There is no such thing as a free lunch, and that applies to any sort of financing.
The Truth About Most 0% Interest Schemes
Solar businesses offering “0% interest payment plan” options typically pay 15-25% of the system cost to the BNPL provider.
So if they were charging you $10,000 for a solar power system, they would have to pay $1,500 to $2,500 of that to the BNPL provider to give you that 0% interest deal.
For some solar installers, that could leave no profit margin.
So what do they do? They add the cost of finance to the price. Now the $10,000 system is $12,000.
But there’s a big problem.
The BNPL operator must be able to imply that their finance is at no-cost to the consumer for 2 reasons.
- Because their only marketing hook is that the finance is 0% – implying that the consumer is paying no penalty for not having the cash.
- If the cost of the BNPL finance is ‘a cost of doing business’ for the retailer – the BNPL operator can claim it is not a financial product and avoid all that pesky financial regulation stuff.
So the BNPL operator prohibits the retailer from advertising or quoting systems at a higher price with 0% finance.
The retailer can offer a discount for cash if you ask, but they can’t add a premium for 0% interest.
So what happens?
Either the retailer breaks the rules, or they put up their prices for everyone, or they have special product bundles that they only offer with 0% interest.
Can you see how the industry ties itself up in knots to imply that 0% finance is free or low-cost?
That’s why I hate it!
The bottom line is the cost of these “0% interest” payment plan deals is ultimately borne by those purchasing systems – and often not just on Buy Now, Pay Later sales.
BNPL Solar Raises Prices For All
So, as you have now learned, when solar businesses want to offer BNPL, among the *many* conditions imposed by the BNPL provider is the retailer cannot offer and advertise cheaper prices for cash-only.
The savvy cash customer will know to haggle on system pricing. But depending on how the business has spread the cost of their Buy Now, Pay Later obligations, there may not be much wriggle room for negotiation.
Dodging *Proper* Government Oversight
It’s these sorts of shady conditions and the general nature of Buy Now, Pay Later “0% interest” payment plans that enable BNPL providers to avoid the same regulatory oversight as conventional credit providers. They aren’t currently required to hold a credit licence, nor subject to observing consumer protections under the National Consumer Credit Protection Act 2009.
The other major issue – as repeatedly reported by major welfare and consumer groups – is buyers being approved for these payment plans who simply can’t afford them. And at times, dodgy solar companies have conned Australians into buying incredibly overpriced crap systems that don’t suit their circumstances under these plans.
In June 2022, Federal Financial Services Minister Stephen Jones said Buy Now, Pay Later providers should be regulated like other suppliers of credit services – and I totally agree with him.
There was some talk a few years ago of this happening, but the BNPL sector saw the writing on the wall and banded together to come up with an industry-devised Code Of Conduct in an effort to keep proper oversight at bay. After some tweaking, this Code was approved by the Australian Competition and Consumer Commission (ACCC).
This is a case of the fox watching over the hen-house as the Code is severely lacking. For example, it only obliges BNPL providers to assess if a borrower can make the first payment; not subsequent payments.
BNPL’s time away from proper scrutiny and oversight is hopefully coming to an end. In the meantime …..
Should You Avoid Installers Offering BNPL?
I find the whole “0% interest payment plan” approach of Buy Now, Pay Later as it currently stands unsettling.
I’ve had BNPL providers approach me, wanting to offer their finance products via SolarQuotes. But given the nature of SolarQuotes – very different to that of installers – the terms and conditions were just horrid. And if it’s bad for SolarQuotes, then it’s bad for the many thousands of Australian solar buyers who trust my service and the information it provides.
While I have a low opinion of BNPL providers as they currently operate, that opinion doesn’t extend to (all) solar installers offering 0% interest payment plans. Many great solar businesses do. It’s a case of consumer demand – if these businesses don’t offer BNPL, they’ll lose sales.
A Caveat – Government-Funded No-Interest Finance
Some state governments—such as Victoria—offer genuine, taxpayer-subsidised, no-interest finance for part of the purchase price. For example, in VIC, the interest-free solar loan is only $1,400.
Other Solar Finance Options
Buy Now, Pay Later “0% interest” payment plans aren’t the only way to get solar panels on your rooftop without any up-front cash outlay. Discover more solar financing options here – you’ll be better informed, and better protected.
But …
I can still help if you are set on going ahead with a 0% interest payment plan approach to solar power.
My service can connect you with good solar installers, many of whom – due to customer demand – offer BNPL options as well as more transparent finance. They will provide you with a quality installation and system tailored to your circumstances; backed by the SolarQuotes Good Installer Guarantee.