As-salāmu ‘alaykum.
Dear Mufti Faraz sb & Mufti Bilal Sb.
We received the following question. We didn’t feel the information provided below and on the link is sufficient to deem this Hire Purchase Sharia-compliant. Thus, we wrote a Fatwa accordingly.
Our main points were as follows:
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As outlined above, there are evidently two transactions running parallel to each other. One is a hire and the other is a purchase. Both contracts are dependent on each other and are not separable and thus, they are dependant on each other. Rasullullah ﷺ prohibited from two transactions within one transaction.
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If for instance, we assume that the entire transaction is one of purchase, then the seller/provider (Black Horse Ltd) still holds legal title of the vehicle until maturity (last instalment). This is not Shariah Compliant as the purchaser (buyer of car) should be the sole and complete legal owner of the vehicle with all its rights and benefits. Once again, that’s if we assume this to be a purchase agreement. We’re not satisfied that is either a purchase agreement or a hire/lease agreement as this scheme has elements from both types of agreement, as outlined above.
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There is an indication (see documentation via link below) that there may be monetary penalties for late payments on instalments. This is a common issue of such conventional schemes, as this renders the scheme not Shariah-Compliant.
This has been clearly forbidden from the perspective of Shari’ah and there are various fundamental issues that arise from such transactions.
End.
Now, we’re seeking a second opinion to see if we need to revise our Fatwa Insha’Allah. We’d love to hear your thoughts. Please see below…
Is the following information sufficient to show that there are two separate agreements? (Hire & Purchase) – See Link below for further details
‘The hire purchase agreement – The agreement you are thinking of making is a hire purchase agreement. This means Black Horse Ltd will own the vehicle and hire it to you. You will only become the owner when you have paid all the amounts due to Black Horse Ltd under the agreement. This includes any purchase fee. If you wish to own the vehicle from the outset, this product is not suitable for you’