Wants to take a car on installments from a Riba-based bank
25-11-2012 | IslamWeb
Question:
Assalam u Allikum ! I want to ask one question regarding taking new car on installments. I am living in China , there is no Islamic banking in the China even though many Muslims are living here , but all normal commercial banking are available. I want to buy a new car for that I need to pay the 30% down payment of the total price with some additional service charge, tax and insurance and remaining portion of the car cost will be paid by the bank/financer to buy the car from the car showroom and then I need to pay the monthly installment to bank/financer every month for the period of 36 months that he has paid to the bank, (BTW in case of selling the car before paying full installments there are two ways so like I will sell to another person and ask him to pay my paid installments money to me and remaining installments he will pay to Bank , it’s my choice but surely I will not go for sselling car before paying my all installments, I am just writing as per reference and contract details). The monthly installments have little profit or interest for the bank. And I have to pay the installment every month on agreed date of the month. Secondly, there should be one guranter/assurer from China like my friend who gives the guarantee that I will pay the installment on time every month. So after paying all 36 installments, It will be my choice to sell the car or keep it, but I have no liability to pay any installment. Please also note that from first day of signing this contract and taking car the ownership of the car belongs to me, means in document it will be mentioned that car belongs to me. Banks name on the agreement not on the car licensing book that it is mortgage or finance by Bank. So please tell me is this HALAL and permissible or not. I am looking forward to your guidance. Regards Sameer
Answer:
All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad 
is His slave and Messenger.
It is not permissible for you to enter into this transaction because it leads to dealing with a Riba-based bank and borrowing a Riba-based loan from it. This is forbidden and is not allowed except for some necessary reason to partake in such prohibited acts, and we do not see any such necessity in what you have mentioned.
There are many substitutes for Riba, like a Muraabahah (profit-sharing) transaction. That is, you could ask someone who possesses the amount needed to buy the car and he could sell it to you in installments even for a profit. He could take what he deems fit as a guaranty for the car until you pay him the price or bring him someone to vouch for you or that you write checks for a number of payments, and so forth. You must not resort to taking a Riba-based loan.
We have clarified the ruling about buying on installments and the conditions that distinguish what is permissible from what is forbidden of it. For details, please refer to Fataawa 82986 and 12927.
Allaah Knows best.