Islamic Car Finance from “InterestFree4Cars”

Q: Can we buy cars from “Interest Free 4 Cars” company?


   الجواب حامدا ومصليا ومسلما ومنه الصدق والصواب


A: I have spoken with the company concerned today.  I have been informed that the cars are owned by the company and they arrange finance with a conventional finance provider for a period of five years. The amount borrowed is the amount returned. However, if the client defaults on payments the financier allows a [small] grace period but there is then a penalty payment.  This payment is riba and so the current structure is not Sharia compliant.  This can be remedied by introducing a unilateral promise to donate to charity as a deterrent for default.  If this can be achieved and the contract wording can also be made to conform to Shariah principles there is the possibility of a Shariah-compliant car financing product.


PS The company does not have a Shariah advisor, qualified or otherwise.  It is simply going by the words of its Muslim clients that it is Shariah-compliant.

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