Buying out interest up front

As salaamu aliekum,

I informed an automotive dealership that I am interested in purchasing their car but only with 0% interest. The option they provided was to pay the interest up front and then a 0% contract can be written up. Is it permissible to buy out the interest as a “finance charge” up front and then sign the contract at the agreed purchase price at 0%?


May Allah bless you.
The company offering the finance deal is not the car dealer but it is a financing company right?

Jazaak Allahu Khair for the quick reply.

I’m not in direct contact with the financing company, but the car dealer relayed that message to me. I can get more clarification on where that offer is coming from. Could you explain the difference in the two scenarios and how it determines whether or not this approach is permissible?

Yes please, ask them to clarify on the offer.

Got an update: The dealer is asking the bank to allow a finance charge to buy out the interest rate to 0%. Does that help answer your question?

Not really sorry.

Usually, when you buy a car on finance, the sell contract is not with the dealer anymore but with the financing company.

  1. In your case, are you saying that the repayment will be made towards the bank instead of the dealer?

  2. What is the price of the car with and without interest?

  3. Is the interest rate fixed?

So I got some more information today and here’s what they’re doing. They’re basically calculating the amount of interest on the car and adding it to the total value of you car and writing up a 0% contract. For example:

Car is $25,000
Finance fee is $3,000

They’re writing up a contract for $28,000 with 0% interest to be made in installment payments.

If the scheme is as you said it is, then I believe it is permissible.

And Allah knows best!