Answered by Shaykh Muhammad ibn Adam al-Kawthari
Here is the scenario: the price of a car is currently, say £9000 and the purchaser is given the choice of either paying the whole amount now, or pay over a 4 year period at an increased price for the item divided into 48 monthly payments. (say £11000 divided into 48 monthly payments). The seller calculates the price of the item in accordance with an annual percentage rate. Is this type of transaction allowed?
Wa alaykum assalam
This question has been answered before, in that if the price is agreed upon by both parties, whether to pay at spot or in installments, then this is permissible and cannot be considered Riba. [for details, see relevant sections in the Hanafi Fiqh Archives at www.sunnipath.com]
The seller has a right to fix any price for his commodity, and he also has a right to increase the price if the payment is done in installments. However, the important factor here is that the price of the item must be fixed.
And Allah knows best
Muhammad ibn Adam al-Kawthari
Darul Iftaa, Leicester, UK