Finance

Cash Rebates

Cash rebates, to the eye of a financial neophyte, seem perplexing. When one buys a new appliance, for example, a cash rebate usually takes the form of an offered incentive to make the purchase on the manufacturer's part whereby the consumer is offered a rebate if he or she sends in an enclosed coupon within a certain time frame. Why not simply take the discount off at the register, the consumer might wonder? However, from the company's perspective, from an accounting point-of-view, this allows the company to slow down the payments it makes upon its bills by forestalling discounted payments.

A sound business practice on the company's part, perhaps -- but not entirely ethical, as the consumer is essentially making an unacknowledged loan to the company, for a product or service the consumer is purchasing at a supposedly discounted rate. Still, because the items are often quite pricey, such as electronics or cars, the consumer is often more than willing to overlook this unfair technicality in exchange for an advantageous discount. An even less ethical practice is the idea of cash rebate credit cards, where consumers are encouraged to charge in exchange for rebates on their purchases -- this surely encourages the habit of spending plastic money rather than paper money, and thus facilitates a debt culture.

Even from a company's marketing and advertising point-of-view, cash rebates can appear to be a desperate measure, as when Ford recently offered a misguided $1,000 rebate on its new line of trucks. (Reuters, 2003) Instead of garnering new sales and praise, this effort only drew attention to Ford's persistent reliance on high-fuel use cars, causing industry analysts to question how much profit Ford could get from its trucks given higher assembly costs and cutthroat competition in the U.S. market.

Works Cited

Reuters. (5 Dec 2003) "Ford puts Cash Rebate on New Pickup." USA Today. Retrieved 17 Apr 2005 http://www.usatoday.com/money/autos/2003-12-05-f150_x.htm