An unconventional vehicle leasing package

Investment Questions and Chats Property
#1

Assalamu Alaikum Mufti Saab,

My employer has a salary sacrifice vehicle leasing offer which has some interesting aspects which I haven’t been able to get a definitive ruling on from my local mashaikh.

The agreement packages together the vehicle rental, ALL fuel costs (irrespective of how much is spent), all government and state charges and insurance cover (the employer self-insures the vehicle), and more into a fixed repayment.

The vehicle remains the property of the employer throughout the agreement and at the end the employee must return the vehicle to the employer.

The payments for the vehicle are deducted at source from the employee’s pay, running costs are deducted pre-tax and vehicle rental charges are post tax.

The full package inclusion list is below:
The package cost includes:
• all lease costs for the 1 or 2 year period
• all lease costs are on a pre and post-tax basic, Employee Contribution Method(ECM)
• fuel costs, paid using your Fuel card (see section 8 “Purchasing Fuel &Tolls”)
• maintenance costs, e.g. servicing as per the manufacturer’s handbook, oil and tyre replacement
• repair costs
• vehicle registration
• Employer vehicle insurance
• roadside assistance
• Fringe Benefits Tax (FBT)
• any applicable GST, and
• a contribution to the GreenFleet initiative.

There is a clause in the contract which seems fair to me personally (to protect the employer) but introduces uncertainty with respect to the employees obligations in the future due to the possibility of the variability of payment as fuel costs / government costs might change too drastically for the employer to sustain:
CLAUSE IN QUESTION:
While the annual total cost of an Employer provided salary sacrifice motor vehicle is otherwise fixed for the term of the vehicle lease, the Employer reserves the right to vary the annual total lease cost during the life of the lease if there is an unexpected or large rise in the cost of government charges or fuel.

Any increase in the lease cost will be limited to that required to enable Employer to achieve “break-even” cost across its fleet.

The Employer may at any time at its complete discretion withdraw any cost increase levied in whole or in part. You will be informed of any changes prior to implementation.

My understanding is that the above clause would violate the requirement for a basic Ijarah agreement where variable rental (unilaterally imposed) is typically not allowed.
However due to the packaged nature of the offer, the variability is due to the non-rental component, i.e the consumable costs of fuel, or changes in government taxes in the future.

How would you approach the above leasing package and would it be impermissible to engage in?

The contract has many more conditions which I can share if you think it would be of benefit.

1 Like
#2

Wasalam

May Allah bless you.
Before making any changes to the rental amount, the employer will be informing you. What happens if you don’t want to pay the extra. Can you cancel the lease agreement?

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#3

The contract has the below statement with respect to returning the vehicle prior to the end of lease, this could possibly be invoked, however it would likely result in additional charges:

RETURNING A VEHICLE PRIOR TO END OF LEASE 16.1.
Will I incur any penalties?
If you return an Employer provided salary sacrifice motor vehicle prior to the end of the lease, any penalties incurred by Employer resulting from this action will be charged back to your remuneration package except in the event of redundancy, resignation, retirement, unpaid parental leave, or where you are going to work overseas for the Employer or with an Employer Joint Venture in the circumstances described in section 14 “Employees Going to Work Overseas for Employer or With an Employer Joint Venture”.
Where the Employer provided salary sacrifice motor vehicle is repaired and / or returned it will be assessed for unfair wear and tear. The Fair Wear and Tear guide can be found athttps://www.afia.asn.au/s/FairWearTearGuide5kgf.pdf and outlines the current standards applicable for Employer vehicles.
See section 16 “Unfair wear and tear” for full details and charges. Employer provided salary sacrifice motor vehicles must be returned on the day of separation.

EDIT: In practice, the historical track record has been that the employer has never invoked the clause relating to increasing the lease payment, and have never had to increase the lease payment within the contract period. However they do retain the right to do so.

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#4

In my humble opinion, the way I would interprate the arrangement is that, at the time of deciding to change the rental amount, the employer terminates the current lease contract and gives you a choice to enter into another with an amended price.
The scholars differ as to whether an agreed leased contract can be terminated before the end of its term.
The Hanafis argue that it can be terminated with a valid reason.
Keeping the above into consideration, and given the information provided, I do not see any issue this contract.

And Allah knows best!

1 Like
#5

AWW. I have posted this on another thread but then found this. My question is similar.

Have you done any research into NHS car salary sacrifice scheme? If so is this jaaiz?

The car is on a 3 year lease. It’s all inclusive i.e. the monthly cost you pay at source (pre tax) includes insurance, MOT, tax, servicing, breakdown cover etc.

The money is taken at source from the wages and includes the BIK tax.

One has the option to buy the car at the end or return the car or return the car and apply for a new car.

Any info or advice would be much appreciated.

JzkAllah

#6

Wasalam

May Allah bless you.

I have looked at a pdf document for a leasing scheme offered by South West Yorkshire Partnership
NHS Foundation Trust. From what I have red one the main problem I have found is that there is a penalty clause attached to the offer which we would be considered as impermissible from a shariah perspective.
I am not sure if its the same structure across the country.
If it was similar, and someone was in need of a car and could not afford to buy one, then they could maybe take a car under such scheme; but they should consult their local scholars first.

Kind regards

#7

Wsalaam only just saw this now for some reason.

Not sure what the pentalty clause is that you refer to here?

If you get a speeding ticket for e.g. they would pass that to you. If for e.g. you leave the Trust you would have to agree how it’s paid back etc and that may include like a fee if that’s what you mean?

JazakAllah