People are accustomed to haggling on the price of a car, but you can negotiate the price of other products and services too. Did you know that you can even haggle the price of a mattress? I’ve never done it, but apparently it’s a thing.
A solar array for your home is a great investment, and there are many incentives that make it an even better deal, but some come in the form of tax credits, which means paying the full cost of the system upfront and then waiting until tax time to get your rebate. Negotiating a price cut would take a little pain out of that.
The invoice price of an average-sized solar system might be around $20,000 or more. (You can check our map to see exactly what your neighbors paid for solar.) This means there may be at least a little wiggle room in the price, but here are some things you should keep in mind.
The profit margins in the residential solar business aren’t that big. Even though the gross price of a system runs into the tens of thousands of dollars, your local solar installer isn’t getting rich.
One of the main reasons are what are called “soft costs”. These are all the non-hardware costs that your installer must pay, which includes obvious things like labor, but also many behind-the-scenes things you might not be aware of such as permitting, supply chain and transaction costs, customer acquisition (ie. sales and marketing) and overhead to keep the lights on.
This leaves about a 9% profit margin on average across the industry, which equates to $1,800 on a $20,000 system. For you the customer, this means you can expect to negotiate maybe a couple hundred bucks off the price, but not thousands. Your installer isn’t making that much money.
If you live in a state like California or Hawaii where home solar is extremely popular, you probably see a lot of trucks emblazoned with the colorful logos of the installers in your area. There are over a thousand solar installer companies in California alone, and they’re all vying for your business.
This means they may have already lowered their prices as much as they’re willing.
On the other hand, if you live in a state where the home solar market is new and growing, you might have relatively few companies working in your area. But that doesn’t mean those companies have free rein to overcharge you, because fewer customers also means lower annual profits for companies.
Bottom line: nobody goes into the home solar business to get rich, and that includes the big national players like Sunrun, which has been financing their operations with debt and regularly reports quarterly losses.
Some of the manufacturers of popular solar panels, including SunPower and LG Solar, operate a national network of licensed dealers that have been trained and approved to sell their products. This is a different type of relationship from one where your installer is simply buying their hardware on the wholesale market.
In a licensed dealer relationship, the hardware prices are most likely fixed by the parent company. This means that if you’re working with a licensed dealer, they have one fewer way in which to lower their costs and pass the savings onto you.
With all that in mind so far, it is often possible to negotiate a lower price with your installer. The best way to do that is to get multiple quotes, which you can do with The Solar Nerd or one of the other services available online.
A solar proposal should include a line item breakdown of the costs (ask if there isn’t one), which will help you fairly compare costs between different companies.
Oftentimes, however, the proposals will have different equipment, making it harder to do an apples-to-apples comparison. This is when it’s helpful to learn a little about solar equipment so that you can understand what’s being offered. Learning the basics of solar inverters is important, and it can also be useful to know how to read a solar panel datasheet, which will help you tell the difference between high-end and low-end panels.
One thing you shouldn’t bother doing is getting a lot of quotes. Sometimes in a quest for the best possible deal, people will seek out 7, 8, or even more quotes. This really isn’t a productive use of time, and will more likely drive you crazy as you pore over the multitude of hardware options and line item prices. Instead, you should focus on the quality of the installer (see below).
One special case to be aware of is when you need financing to pay for your system. Many installers offer deals through a financing partner, and it can be convenient to work with them rather than shopping for financing deals from elsewhere.
However, solar installers don’t usually make much money (or none) on financing, but instead offer it as a convenience to their customers. There are costs associated with financing, such as loan origination fees. If you get financing through your installer that fee may be baked into your invoice price.
To get clarity on the true cost of your financing offer, you can ask the installer to break down the loan costs for you. Or, you can ask for a cash-only price first, and then inquire about financing later.
One thing you should never do is save money by going with a low quality installer. While you might get lucky and have everything work out just fine with your installation, the possible hassles that can result from working with a bad contractor might leave you banging your head on the table. The pain and risk isn’t worth it.
What are some of the hazards? A sloppy contractor might damage your landscaping or leave screws scattered across your lawn, or you might find in a month or two that your roof has started leaking, or that if you need warranty service in a couple years they never return your calls.
If you have multiple quotes with similar equipment but different prices, don’t be afraid to ask a company to match or beat the price of another. Just say something like: “Company A is offering similar equipment at a lower price-per-watt. Can you match it?”
If they say no, just say thanks and accept the price for what it is. Don’t hard bargain the company: remember that the profit margins in home solar aren’t huge, and they probably are giving you close to their best price already.
So good luck with your negotiations, but remember this: when getting solar quotes, your focus should be on finding the best company, not the cheapest price. A good company will be accurate when doing the solar energy projection for your system, recommend high quality equipment at a fair price, and provide reliable warranty service if you need it. Things like that are a lot more valuable than the small amount of money you might save by going with a less reputable company.