Assalamu A’laikum WW,
Hope you are well. Could you please check the following attached agreement and kindly let me know if it is allowed to accept this agreement? The concern is that they have mentioned HIRE PURCHASE in their agreement. Please see the attached file for more information about HIRE PURCHASE.
This deal has so far had no late fees, but there may be a direct debit refused fee to set up RETURN DIRECT DEBIT, though the overall amount will remain the same. Will I be able to accept this agreement if they add any late payment charges or RETURN DIRECT DEBIT fees in the future, and if I am confident that I will not make any delays in my payments in sha Allah?
Conventional hire purchase schemes are generally not permissible as they do not comply with shar’i standards of business. The ruling for each contract would vary depending on the specific terms and conditions of that contract. In your case, the second screenshot provided mentions:
“At the end of the repayment you’ll have two options:
1. pay the optional option to purchase fee and the car is yours,
2. hand back the car with nothing more to pay.”
Stipulating this option within the contract is not valid and conflicts with a standard lease agreement. A lease agreement provides the lessor with a right to rentals and the lessee with the right to benefit from the object being rented. There is no right to purchase within a lease contract. Therefore, stipulating a right to purchase within the lease contract conflicts with the basic agreement and will therefore render the transaction invalid. Hence, even if there is no interest being charged to you the transaction will be invalid for this reason.
It may be argued that if the customer intends to purchase the car then the entire contract should be seen as a sale contract, rather than a lease contract with an option to buy, however this is also not valid. The reason being that the title to the car remains with the company and not the customer, which indicates that the car has not been sold. Also, if the car has not been sold then the customer should not have the right to benefit from the product but they do. It is clear that this is a lease contract with an option to purchase at the end, and therefore this type of arrangement will not be valid.
Answered by:
Ifta Research Fellow
Checked & Approved by:
Mufti Abdul Rahman Mangera
Mufti Zubair Patel