For army we have a CSD department which sells cars on higher purchase concept. Installments with different combinations of down payment are distributed over different years.

The higher purchase scheme is un-Islamic. Rasulullah [sallallaahu alayhi wasallam] prohibited two transactions in one deal. (Tirmidhi). The Fuqahaa have explained this as one deal being a condition of the other. According to the Shari’ah, both deals should be completely separate and independent of the other. In the higher purchase scheme, one hires the item and upon paying the ‘final’ hiring fee, he becomes the owner at that stage.

If this was a real purchase, the purchaser should be the sole owner of the item from the day of the purchase, but that is not the case. The purchaser does not have complete and independent rights over the item. He is governed by the rules of HP which restricts his rights over the item. According to the Shari’ah, a purchase and sale agreement has a set price. Upon concluding the deal, there is no interest on late payments. That is not so in an HP. The concept of penalty for late payments is also not acceptable in Shari’ah.

and Allah Ta'ala Knows Best

Mufti Ebrahim Desai