Fatwa ID: 07709

Answered by Alimah Shireen Mangera-Badat

Question:

I am looking to buy a used car for my family ( an old car which has broken down). I don’t have access to cash and dealers charge interest. I checked with a dealer who sent me the following message.

“Your bottom price will be the same. We can buy down the interest rate from the lender and we can just add that to the price of the vehicle, so you are not involved with the interest directly”

Is this permissible?

In the name of Allah, the Most Gracious, the Most Merciful

Answer

When considering the option of purchasing a used car with a financing arrangement where the dealer suggests “buying down the interest rate” and including that cost in the overall price of the vehicle, it’s important to evaluate whether this approach aligns with Islamic principles. 

The dealer mentions “buying down the interest rate” and adding that cost to the price of the vehicle. 

Interest (Riba): Even if the interest is being handled indirectly by the dealer, it remains a form of riba because the transaction inherently involves a lender charging interest on the financing.

This is not permitted in Islam by the clear verse of the Quran for those that class trade as interest in Surah Baqarah: 275,

Those who consume interest will stand ˹on Judgment Day˺ like those driven to madness by Satan’s touch. That is because they say, “Trade is no different than interest.” But Allah has permitted trading and forbidden interest……..

Adding Costs to the Vehicle Price: If the dealer increases the price of the car to cover the cost of buying down the interest rate, this is essentially masking the interest by embedding it into the total price.

In Hanafi Fiqh, engaging in any transaction where interest is a component—whether directly or indirectly—is impermissible. The Prophet Muhammad ﷺ cursed the one who consumes riba, the one who pays it, the one who writes it down, and the witnesses to it, indicating that any form of involvement in riba is sinful (Sahih Muslim: 1598).

Therefore, based on the explanation provided by the dealer, the transaction would not be permissible, as it indirectly involves riba. You should explore alternative financing options that comply with Islamic principles to ensure that the purchase is halal, such as:

• interest-free financing: Seek out Islamic financing options that do not involve interest, such as Murabaha (cost-plus financing) or other Shariah-compliant schemes.
• Personal Loans: If possible, consider borrowing money from friends or family on an interest-free basis.
• Saving and Delayed Purchase: If an immediate purchase isn’t critical, save up for a period until you can buy the vehicle outright.

May the Almighty grant you ease in your situation Ameen

I hope that this answers the question.

Only Allah knows best.

Written by Alimah Shireen Mangera-Badat

Checked and approved by Mufti Mohammed Tosir Miah

Darul Ifta Birmingham

 الاقتصاد الإسلامي، ص، ٤٤

 حَدَّثَنَا مُحَمَّدُ بْنُ الصَّبَّاحِ، وَزُهَيْرُ بْنُ حَرْبٍ، وَعُثْمَانُ بْنُ أَبِي شَيْبَةَ، قَالُوا حَدَّثَنَا هُشَيْمٌ، أَخْبَرَنَا أَبُو الزُّبَيْرِ، عَنْ جَابِرٍ، قَالَ لَعَنَ رَسُولُ اللَّهِ صلى الله عليه وسلم آكِلَ الرِّبَا وَمُوكِلَهُ وَكَاتِبَهُ وَشَاهِدَيْهِ وَقَالَ هُمْ سَوَاءٌ ‏.