I'm not sure I follow. You're saying he should pay in full, and then put $X into his bank account every month? I guess I do this all the time. When I bought my car insurance, I used to set $X aside every month, so that, the following year, I could again pay in full. This is better than paying 10% interest on the payment plan. With our car, we used to set aside what our payments would be. But, now I just use a monthly budget that includes savings. I've predetermined how much I need for things like retirement savings, car insurance, and so on.
My rationale for taking the $50 discount is that 5% * 650 = $32.50. And you aren't going to get 5% in a six month period -- you'd get more like 2.5%, which is more like $16. So he's way better off taking the discount.