Halal Car Finance
Halal Car Finance or Islamic Car Finance has been the topic of many a conversation throughout our community whether that be scholars, imaams or just a family discussion. And everyone has a different approach to what is acceptable and what isn’t.
After much research (and experience) we have simplified the whole approach and made it possible for you to simply walk into a car showroom and purchase any vehicle on a zero percent agreement. Of course you may still have some dealers who may not play ball but we have overcome that hurdle too. This is all explained in our free guide.
When I say ‘we’ I have much to thank my close friend Andrew Clarke for helping me immensely on this project. Andrew has been involved in the Motor Industry for twenty years or so spending many of those years as a Finance Manager. If there is anything about car dealers and finance that Andrew doesn’t know then it really isn’t worth knowing!
He is also the author of the best selling book Car Sales Uncovered which was released a few years back and has proved a massive hit.
Currently the only way to purchase a car without paying any interest is to try and find a bank that will offer an Islamic loan. Once the loan is in place you can then go and find a suitable vehicle. The problem arises if the vehicle you decide to buy is more than the loan requested as this will mean re-applying for the additional borrowing. In the meantime the chances are the vehicle will get sold and you have to start again.
Alternatively you could find a car first and put a deposit down but what happens if the loan is then rejected? A fight with the dealer to get your deposit back involving endless phone calls, emails and letters – none of which helps you buy a car.
I have personally visited several different dealer groups and all have approved and invited this method without question.
Before I explain let’s have a look at how conventional car financing works when using an approved Islamic lender. The following is taken from an article on souqalmal.
Why is Islamic car finance necessary? Islamic banking strives to adhere to Islamic law and central is the fact that money has no intrinsic value; it is simply a medium of exchange. Therefore profit cannot be made from exchanging money with another person meaning that a Muslim cannot benefit from either lending or receiving money. This is why a different approach is needed for personal finance products such as car finance.
So how does an Islamic car loan work? One of the main principles of Islamic finance is that earning interest, or riba, is forbidden. So by using the concept of Ijarah, a leasing agreement, the bank buys an asset for a customer, such as a car, and then leases it back to the customer with a fee attached over a specific time period.
It allows Muslims to enjoy the same access to buying a new car as anyone else, all the time ensuring they are doing so in a Sharia-compliant manner. Once the lease period (or loan tenure) is complete, the customer gains ownership of the car.
Banks may also adopt other concepts such as Murabaha, a similar arrangement to Ijarah, where the bank buys a car on behalf of a customer and resells it to them, clearly mentioning the cost incurred in buying the product and the mark-up when reselling the car to the client.
Is this why I am charged a profit rate rather than an interest rate? Absolutely. The bank needs to make money out of the arrangement but because interest is forbidden, it charges a profit rate instead on the lease or resale of the car to you.
What happens if I default on a car payment? Well, under an Islamic contract, the bank cannot charge compound interest if a customer defaults or misses a payment. However, they may charge a fixed fee – a portion of which may be donated to charity to ensure the fee remains Sharia-compliant. If the missed payments continues, as the technical owner of the car, the bank can demand the car is returned so that it can sell the vehicle to recoup any losses.
Can I sign up for Islamic car finance if I am not Muslim? Absolutely. Islamic car finance is available to everyone as long as they meet the bank’s requirements for the loan. In fact, a lot of people may have an Islamic car loan without even realising it. If they had compared all the car loans available at the time of the purchase, they may have signed up for Islamic vehicle finance simply because it was the best deal. Not all consumers realise there is a difference.
Is Islamic car finance only available for new cars? Not at all. Like conventional car loans, Islamic vehicle finance is available for both new and second-hand vehicles.
We have come up with a much simpler solution
As I mentioned above with the help of Andrew we have come up with a straightforward guide to buying the car you want on a zero percent arrangement. There are no hidden fees or charges that will surprise you down the line just the car, a monthly payment and no interest charges.
This Halal Car Finance guide is available for you to download free of charge now. All we ask is that if you feel we have helped you in any way you may show your appreciation by recommending this site to friends and family.
We are constantly looking at ways to make our lives over here compliant with our Islamic teachings and are currently researching a fantastic new opportunity. We have been looking at the exciting world of business and online marketing and are putting the finishing touches together to what will truly be a much awaited opportunity for all our business minded brothers and sisters.
Here we are looking at a fantastic way of setting up your own business, working from home, in your own time and in a totally Islamic compliant way.
We are working with some of the most successful entrepreneurs in the western world to make this possible. These are people just like you and I who started out with very little and have gone onto become millionaires. They have tried and tested proven methods and have now evolved them to benefit the rest of us.
It’s not about becoming a millionaire overnight but about setting up a financially secure future for ourselves and our children.
If you thought setting up a business involved a hefty capital or interest bearing bank loans then you are in for a very pleasant surprise.
With our guidance you can now set up a small successful business from your bedroom with only minimal capital. Everything you need to know will be available at your fingertips so let your entrepreneurial imagination run wild.
Just enter your contact details on the Contact Form on the right panel of the page and we will send you full details once this is up and running. This is definitely an opportunity not to be missed!
We are also constantly looking at ways of helping our brothers and sisters around the world. The Halal Income project is just one of several new ventures we are working on all designed to make our lives here better financially, physically and emotionally.
Back to the Halal Car Finance Guide if you just click on the link here ‘Halal Car Finance Free Guide’ you will be taken to the relevant page.
We really hope you enjoy this and Insha’Allah all future ventures we are working on.