Can I Buy a Car on Loan With an Interest Buydown or On a Lease Contract?

Answered by Mawlana Ilyas Patel

Question

I am sending an inquiry about buying a car on a loan. I have two options, and I would like to inquire about the most halal option to avoid any interest (riba) and whether any of them is haram, to begin with.

Option 1: I can buy the car on loan, do an interest buydown to make the interest on the contract at 0%, then add the interest + the original car amount and be financed for it and pay monthly fees.

Option 2: I am on a lease contract for X years, and then I can do a buyback for the residual amount and pay it at once at the end of the contract.

I prefer option one because it means I already own the car, and it is not on a lease. However, I am afraid that the interest buydown is still considered interest.

Answer

In the Name of Allah, the Most Merciful and Compassionate

The first option is impermissible as the car loan will be based on interest. The second option would be permissible if you draw up an agreement to lease for several years on one contract. Then, at the end of the contract period, do a separate sale agreement for buying the car for the residual amount. [Marghinani, Al-Hidaya Fi Sharh Bidayat al-Mubtadi]

Once again, it is always best to have individual contracts looked into by local scholars of your country who are experts and can verify in light of the Sharia.

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[Mawlana] Ilyas Patel
Checked and Approved by Shaykh Faraz Rabbani

Mawlana Ilyas Patel has received traditional education in various countries. He started his schooling in the UK and completed his hifz of the Quran in India. After that, he joined an Islamic seminary in the UK, where he studied secular and Aalimiyya sciences. Later, he traveled to Karachi, Pakistan, and other Middle Eastern countries to further his education. Mawlana has served as an Imam in the Republic of Ireland for several years and taught the Quran and other Islamic sciences to both children and adults. He also worked as a teacher and librarian at a local Islamic seminary in the UK for 12 years. Presently, he lives in the UK with his wife and is interested in books and gardening.

قال: “ومن اشترى ثوبا على أن يقطعه البائع ويخيطه قميصا أو قباء فالبيع فاسد”؛ لأنه شرط لا يقتضيه العقد وفيه منفعة لأحد المتعاقدين؛ ولأنه يصير صفقة في صفقة على ما مر

الهداية في شرح بداية المبتدي، علي بن أبي بكر بن عبد الجليل الفرغاني المرغيناني