The comparison is made on time, not on price: a discount is interest paid to you for paying early. If the cash price is 97 and the deferred price 100, the 3 difference is the charge for using 97 over the credit period; taking the deferral means borrowing at 3.09%. Convert that to a yearly rate: annual cost = discount / (1 - discount) x 365 / days of credit.
| Credit period | Annual equivalent of a 3% discount |
|---|---|
| 30 days | 37.6% |
| 60 days | 18.8% |
| 90 days | 12.5% |
| 120 days | 9.4% |
If your loan or deposit rate is above the rate in the table, the deferred offer is cheaper; if it is below, the cash offer is. When surplus cash would sit in an account that earns less than the table rate, the discount wins; when your credit line is full or the pre-season cash need is high, the deferral gains value. However good the discount, a plan that empties the cash buffer can stop operations at the first unexpected event.
Tax and currency
A deferral charge is part of the VAT base (VAT Law, Article 24(c)), while a discount shown on the invoice in line with trade custom is not (Article 25(a)). The VAT on the deferral charge also enters your payment flow, so write both offers, VAT included, on the same calendar. In a foreign-currency deferred payment, the amount you pay in lira is not known at signing; paying cash removes that uncertainty.
In some offers the deferral charge is not written as a separate line but built into the price. Ask both suppliers for the cash price, and discuss payment terms separately on top of that cash price.
