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Car financing

Fatwaa ID: 467

Assalamualikum vrvb
I wanted to ask if it is permissible to buy a car on finance and pay the total interest amount upfront while giving the down payment?

In the Name of Allaah, the Most Gracious, the Most Merciful.
As-salaamu ‘alaykum wa-rahmatullaahi wa-barakaatuh.

This depends on how the contract is drawn out. In many cases, the dealers are understanding and they facilitate for this as it really makes no difference to them. The way this is done is that the total anticipated interest amount would be added to the total price of the car. So for example, if the car price is $40,000 and they charge interest at the rate of about 6.2%, which is about $2,500, they can consider that amount and add it to the total price for the car, thereby charging you a total $42,500 instead. This amount can then be paid in installments. They may not charge you any interest or late fee thereafter. The Shari’ah permits having different prices for cash sales and credit sales. However, the agreement and choice must be made upfront.
In the enquired situation, you cannot simply pay it upfront. You will have to have the agreement arranged that way with the seller.

And Allaah Ta’aala knows best.
Mufti Muajul I. Chowdhury
Darul Iftaa New York

وصل اللهم وسلم وبارك على سيدنا محمد وعلى ءاله وصحبه أجمعين


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