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Purchasing car on deferred payments: Paying more than the actual amount… is this type of transa

Answered as per Hanafi Fiqh by Qibla.com

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?

Answer:
In the Name of Allah, Most Gracious, Most Merciful

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

This answer was indexed from Qibla.com, which used to have a repository of Islamic Q&A answered by various scholars. The website is no longer in existence. It has now been transformed into a learning portal with paid Islamic course offering under the brand of Kiflayn.

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