Leasing a Car

17-8-2002 | IslamWeb

Question:

Is it Halal or Haram to take car or other utilities of home through leasing or Mudaraba? In this process a Leasing company provides a car to someone taking some amount from that person and paying remaining amount on his behalf to completely pay the price of vehicle (car). They person has to pay the amount to the company in installments, usually up to 5 years. In this process leasing company gets some more money from a person than the price of the vehicle at the time of purchase.

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Answer:

All perfect praise be to Allah, The Lord of the Worlds. I testify that there is none worthy of worship except Allah, and that Muhammad is His slave and Messenger.

Purchasing utilities of a house or a car through companies or banks is of two kinds:

a) The company purchases the car genuinely so that it becomes its property and then sells it to you on installments in return for a higher price; this procedure is permissible. This is called Al-Muraabahah sale that is practiced in Islamic banks.

b) The company does not purchase the car genuinely, but it pays the price on your behalf provided you pay it more than what the company actually paid. This act is forbidden, since it is a loan based on interest. This procedure is carried out in usury-taking banks. They also add interest for any delay in payment, which is also forbidden.

If you mean that you take a car on lease from the company provided you will pay a nominal rent and the remaining payments will be on installments and eventually you will own the car, then this kind of transaction is forbidden.

For more benefit, please refer to Fatwa 81863.

For more benefit on Muthaarabah/Al-Muraabahah, please refer to Fataawa 306337, 276166, 244552, 164735, 10549, 148103, 228259, 94668 and 237232.

Allah knows best.