Car financing schemes that are being offered by banks nowadays...people argue that since we are using the car, extra money charged by banks is there to compensate for depriciation.Is this correct?

24 Jul 2003 · 24 Jumada I 1424 AH1 min readFatwa 9221English

Question

people argue that since we are aslo using the car therefore the extra money charged by the banks is there to compensate for the depriciation.Is this correct? If not how does Islam carters to the depriciation of item??

Answer

1. This is merely another excuse for legalising interest. The extra money conventional banks charge for property or vehicle finance is interest. Yes, if the financing is carried out in a Shari?ah-compliant manner, such a financing scheme is permissible.

2. Coming back to the argument of ?depreciation?, what would they say in the case of financing of a fixed property which, in fact, appreciates in value? Would the banks then pay out the consumer for this appreciation? Obviously, their argument holds no water.

and Allah Ta'ala Knows Best

Mufti Muhammad Kadwa
FATWA DEPT.

CHECKED AND APPROVED: Mufti Ebrahim Desai

Answered by: Mufti Muhammad Kadwa

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Source: Darul Iftaa Mahmudiyyah — https://askimam.org/public/question_detail/9221
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