Car lease on hire purchase : high cost of Islamic lease

Fatawa Question

Dear Prof. Dr. Monzer Kahf, Assalamu Alaykum Sheikh, A fellow Muslim colleague in my work place needs to buy a used car which is worth Sri Lankan Rupees 700,000 / = (US $ 700) through leasing. He has inquired regarding this from an Islamic Leasing Company (Claimed as Shari’ah Compliant) here in Sri Lanka. Their main terms and conditions are as follows : 1-The Lessee (My Friend) will contribute an initial payment Rs. 100,000 / = 2-The lease period will be 03 years 3-The monthly lease rent will be RS. 28,200 / = (Total Cost = Rs.28,200 X 36 Months = Rs. 1,015,200 / =) 4-The ownership remains with the Lessor (The Leasing Company) till the completion of lease rentals. Technically the company is charging Rs.415,200 / = (Rs.1,015,200–Rs.600,000) in excess. In other words, the company is charging 69.2 % in excess. What is your opinion about this transaction ? Is it really Shari’ah compliant ? Appreciate your kind reply with this regard. Jazakallahu Khairan Regards, Azam

Fatwa

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Publication Date

2009-11-08

Main Subjects

Financial and Accounting Sciences
Islamic Studies

Topics

• Banks
• Islamic jurisprudence
• Islamic law
• Islam
• Contracts
• ٌLeasing
• Ruling in Islam
• Prices
• Costs
• Automobiles
• Property transfers
• Usury
• Islamic Banks
• Leasing leading to proprietorship

No. of Pages

1

Data Type

Fatawa

Language

English

Record ID

BIM-732516

• APA
• MLA
• AMA