Q: A car dealer offers a 10% discount on next year’s model if payment is made by May 31, four months before delivery. May I take advantage of this offer?
A: Prepayment discounts are often a forbidden form of ribbis; they are the flip side of buying on credit for an added charge (discussed in previous weeks).
In the prepayment case, the customer advances money to the seller before the purchase is consummated, which is effectively a loan to the seller. On account of this prepayment “loan,” the seller gives the customer a discount, i.e., sells him an item worth more than he paid. In our example, because the customer “lent” the dealer $30,000 for four months, the dealer agreed to sell him a car worth an extra $3,000.
There are a number of situations, however, in which prepayment discounts are permitted:
- If the seller currently has sufficient quantities of the item in stock (yesh lo).
- If the item has no set market value, such as a custom order item.
- If the merchandise’s worth is variable, and may turn out even less than the discounted price, such as buying a farmer’s future crop.
Even in these situations, the seller may not explicitly state that the discount is being offered because of prepayment, but should simply state that this is the price for payment now. (Yoreh De’ah 173:7-9)
In the absence of these circumstances, the discount can only be offered when using a heter iska. If the seller is a corporation, it is possible to rely on the opinion of R. Moshe Feinstein zt”l that accepting ribbis from a corporation is permissible. (See also Bris Yehuda ch. 23; The Laws of Ribbis, ch. 7)
Authored by Rabbi Meir Orlian
These articles are for learning purposes only and cannot be used for final halachic decision. The Business Halacha email is a project of Business Halacha Institute (www.businesshalacha.com) and is under the auspices of Rav Chaim Kohn.
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