I’ve recently come across something Umer Suleman (global head of risk at Wahed Invest) said about financing a car from a company that 100% owns its financial services, e.g. Toyota and Toyota finance, and how it is not riba because ultimately the structural/partnership reality of the installments is halal, i.e. the owner of the item you want is selling it for a higher price via installments and you’re not borrowing money from a third party lender
Brother Umer talks about this in this podcast episode from 17:20 until 18:30
Yes, in many instances, car financing doesn’t involve Riba, as it involves the financing company purchasing the car and then leasing it to you as the customer. The evidence that it is not a loan is that you do not become the owner of the car, rather the finance company retains title of the car. You are just the registered keeper and you can return the car at the end of the lease term.
However, many a time, the contracts have non-compliant elements and are heavily skewed in favour of the finance company. Scholars raise concerns here. I too feel that there are concerns in the contracts and that they unjustly favour the financier. Hence, we do need Sharia Compliant car financing products.
