Rebate Option

DEFINITION of 'Rebate Option'

An offer to consumers for a cash discount on the purchase of a consumer good. The rebate option may also be called "cash back", though the consumer will not actually receive cash in hand - the "cash back" is used to directly reduce the purchase price. The rebate option is one of two common choices consumers can make when negotiating a price; the other choice is a reduced interest rate. Dealers offer these options as incentives to entice people to buy.

BREAKING DOWN 'Rebate Option'

Customers who are financing a product will need to decide between the two choices. While the rebate option makes the most sense for cash buyers, on a loan, the principal and interest both affect the monthly payment, so the buyer who is financing should consider what the monthly payment will be under both options, and what the total cost will be during the time he plans to own the vehicle.