Home equity vs dealer financing
The comparison most homeowners never get shown.
The promotional rate your customer is offered is funded by a dealer fee, and that fee comes out of your margin or gets added to their price. A home equity line carries no dealer fee to you at all. The trade-off is honest: dealer financing is faster at the kitchen table, and it ties the customer to you. On larger tickets, the fee is usually the bigger number.
| Home equity line (HELOC) | Dealer / point-of-sale financing | |
|---|---|---|
| Cost to the contractor | No dealer fee. | A dealer fee, commonly several percent of the ticket, deducted at funding. |
| Where the fee lands | There isn’t a dealer fee. | Your margin, or the customer’s price. It is rarely itemized. |
| What the customer compares | The APR, origination fee, recording costs and monthly payment in the loan offer. | The promotional rate, the rate after it ends, and any deferred-interest terms. |
| Amount available | Depends on the homeowner’s equity, credit score, existing liens and debt-to-income. | Set by the finance company, sometimes below a full renovation budget. |
| Repayment terms | Shown in the offer the homeowner receives. | Varies by program, often with promotional or deferred-interest periods. |
| Timing | Funds are sent after signing and any rescission period, then typically arrive in 2–3 business days. | Often minutes at the kitchen table. |
| Ties the customer to you | No. Funds go to the homeowner, who pays you directly. | Yes, which is genuinely useful for closing. |
What the dealer fee costs you
Point-of-sale programs fund their promotional rate with a dealer fee, commonly several percent of the financed amount, deducted when the loan funds. It is rarely itemized for the homeowner, so it lands in one of two places: your margin, or the price you quoted.
| Project | Dealer fee at 5% | What that is |
|---|---|---|
| $15,000 bathroom | $750 | Absorbable on a small ticket |
| $60,000 kitchen | $3,000 | A meaningful share of the job’s profit |
| $120,000 whole-house | $6,000 | Usually more than the cost of a second crew day |
| $250,000 ADU | $12,500 | A line item worth restructuring the deal over |
Illustrative at a 5% dealer fee. Actual fees vary by program, term and promotional structure — ask your finance partner what the fee is on each plan you offer.
Send the homeowner to a home equity line instead and that fee does not exist. They compare the APR, origination fee, recording costs and payment against the dealer offer, and they pay you directly.
Where dealer financing genuinely wins
Speed and simplicity. A customer who decides at the kitchen table and wants it handled now is a real scenario, and a second lien cannot match a same-visit approval on a small ticket. For a $9,000 job, the arithmetic barely matters.
The comparison matters more as the ticket grows. On a $120,000 kitchen, a dealer fee of several percent is several thousand dollars embedded in the price. That is the number to set beside the HELOC offer’s APR, origination fee, recording costs and payment.
The practical approach
Offer both. Keep dealer financing for small, immediate jobs. For larger projects, give the homeowner the equity comparison before they sign. Most have never seen it, and it lets them choose with both offers in front of them.
Dealer financing: questions
Typically a dealer fee of several percent of the financed amount, deducted at funding. It is the mechanism that pays for the promotional rate offered to the customer, and it comes out of your margin or gets added to the price.
No. For small tickets decided on the spot, dealer financing is faster and simpler. On larger projects, many homeowners compare both: the dealer fee embedded in the price against the HELOC offer’s APR, origination fee, recording costs and payment.