Buying a Car with Interest-Based Loan: OK?
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Buying a Car with Interest-Based Loan: OK?

Questioner

Kifah

Reply Date

Mar 11, 2018

Question

As-salamu `alaykum. I want to buy a car by installments, but the shop owner asked me to deal with the bank in the payment, and I can't buy it cash. Is this usury (riba)?

Mufti

Answer


Buying a Car with Interest-Based Loan

Wa `alaykum as-Salamu wa Rahmatullahi wa Barakatuh.

In the Name of Allah, Most Gracious, Most Merciful.

All praise and thanks are due to Allah, and peace and blessings be upon His Messenger.


In this fatwa:

1- Riba (interest on loans) is prohibited by the texts of the Qur’an and the Sunnah. Therefore, a Muslim needs to keep far away from dealing with riba.

2- With regard to your question, yes it is plain usury; it is no more a sale on installments because you take a loan from the bank and pay in cash.


Responding to your question, Prof. Dr. Monzer Kahf, Professor of Islamic Finance and Economics at Qatar Faculty of Islamic Studies, stated:

Yes it is plain usury; it is no more a sale on installments because you take a loan from the bank and pay in cash. Alternatives available in America are leasing with option to buy at the end of lease; it is about the same cost.

We also have no interest financing; many advertisements on this come during this time of the year end. We also have some car dealers who have their own finance companies that you deal with one de facto entity, rather than a loan from another entity.

The difference is not only formality. Rather there is a big difference between a sale and a loan. A loan is giving a debt and a debt does not create any increment. A sale always creates an added value whether it is cash sale or sale on credit.

Allah Almighty knows best.

Editor’s note: This fatwa is from Ask the Scholar’s archive and was originally published at an earlier date.




About Prof. Dr. Monzer Kahf

Professor of Islamic Finance and Economics at Qatar Faculty of Islamic Studies

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