Is it permissible to finance a car with interest in this situation please h

[notanaimous123]

Salamalakum,

At present, I’m driving an old, unreliable, and unsafe vehicle. The headlights are dim to the point of being nearly useless at night, and the brakes are faulty this car is from 2003. Since receiving this car in February of this year, I’ve already been involved in two accidents—both of which could have likely been avoided if the vehicle had been in better condition. I rely on this car to get to work daily, and continuing to drive it feels unsafe, not just for myself but also for others on the road and those in my car.

 

Given this situation, I’ve decided that I can no longer risk buying another cheap, low-quality car and instead looking for something with good safety features and in good condition. I went to a dealership to explore my options, and one of the proposed solutions was to finance a more reliable vehicle.

 

Here’s the offer I’m considering:

 

• The car is priced at $33,000.
• I would put down $12,000 upfront.
• My monthly payments would be around $600, with approximately $100 of that being interest.
• Over the course of two years, I would pay around $26,000 total.
• The dealership estimates that after two years, I could sell the car back for around $29,000.

 

 

In this scenario, I would either break even or potentially make a small profit, meaning I would have had a reliable, safe car for two years at very little to no cost at all depending on when I choose to sell it. I also intend to use this time to save for a car I can purchase in full without financing in the future.

 

I’m aware of the Islamic ruling regarding interest (riba), and I’m trying to avoid it unless there is a genuine hardship. However, I’m unsure if this situation qualifies as a necessity (darura) that would permit such an arrangement temporarily.

 

I would greatly appreciate any guidance on whether this approach would be Islamically permissible under these circumstances.

 

Jazakum Allahu Khayran

[notanaimous123]

Just now, notanaimous123 said:

Salamalakum,

At present, I’m driving an old, unreliable, and unsafe vehicle. The headlights are dim to the point of being nearly useless at night, and the brakes are faulty this car is from 2003. Since receiving this car in February of this year, I’ve already been involved in two accidents—both of which could have likely been avoided if the vehicle had been in better condition. I rely on this car to get to work daily, and continuing to drive it feels unsafe, not just for myself but also for others on the road and those in my car.

 

Given this situation, I’ve decided that I can no longer risk buying another cheap, low-quality car and instead looking for something with good safety features and in good condition. I went to a dealership to explore my options, and one of the proposed solutions was to finance a more reliable vehicle.

 

Here’s the offer I’m considering:

 

• The car is priced at $33,000.
• I would put down $12,000 upfront.
• My monthly payments would be around $600, with approximately $100 of that being interest.
• Over the course of two years, I would pay around $26,000 total.
• The dealership estimates that after two years, I could sell the car back for around $29,000.

 

 

In this scenario, I would either break even or potentially make a small profit, meaning I would have had a reliable, safe car for two years at very little to no cost at all depending on when I choose to sell it. I also intend to use this time to save for a car I can purchase in full without financing in the future.

 

I’m aware of the Islamic ruling regarding interest (riba), and I’m trying to avoid it unless there is a genuine hardship. However, I’m unsure if this situation qualifies as a necessity (darura) that would permit such an arrangement temporarily.

 

I would greatly appreciate any guidance on whether this approach would be Islamically permissible under these circumstances.

 

Jazakum Allahu Khayran

Correction the car is priced at 29,000 with tax and all fees it is 32,000. Just for clarification. 

[Haji 2003]

I am not qualified to give guidance from an Islamic perspective. But here are some thoughts. You say that you can buy a car for $33k and sell back after two years for $29k. Now obviously car markets vary based on geography etc. But here's why I think that's a bit optimistic.

As it happens I have been looking around for cars to replace my 16 year old car.

The car below is 3 years old and with 13,200 miles and on sale for £14k (I would expect to pay cash). When it was new it would have been sold for somewhere in the mid-20s. Clearly it has depreciated far more than what your dealer is claiming. But as I said, I am happy to be corrected on this from someone who has more specific knowledge of your car market.

The next point is related. The car below is a reasonable one but closer to US$19k (used). Certainly in the UK, you can get a good, reliable car for far less than this, I'd be surprised if this was not also the case in your market. I have checked and your IP address does not show you live in Singapore which has a weird car market.

The issue about using a large loan to buy what seems like quite an expensive car is that the interest you pay eats into your budget and as it does so, you will have the need to take out more loans to finance other expenses.

In sum, I appreciate you do not want to drive a car that causes accidents, but there is a big gap between that and US$33k.

 

[notanaimous123]

1 hour ago, Haji 2003 said:

I am not qualified to give guidance from an Islamic perspective. But here are some thoughts. You say that you can buy a car for $33k and sell back after two years for $29k. Now obviously car markets vary based on geography etc. But here's why I think that's a bit optimistic.

As it happens I have been looking around for cars to replace my 16 year old car.

The car below is 3 years old and with 13,200 miles and on sale for £14k (I would expect to pay cash). When it was new it would have been sold for somewhere in the mid-20s. Clearly it has depreciated far more than what your dealer is claiming. But as I said, I am happy to be corrected on this from someone who has more specific knowledge of your car market.

The next point is related. The car below is a reasonable one but closer to US$19k (used). Certainly in the UK, you can get a good, reliable car for far less than this, I'd be surprised if this was not also the case in your market. I have checked and your IP address does not show you live in Singapore which has a weird car market.

The issue about using a large loan to buy what seems like quite an expensive car is that the interest you pay eats into your budget and as it does so, you will have the need to take out more loans to finance other expenses.

In sum, I appreciate you do not want to drive a car that causes accidents, but there is a big gap between that and US$33k.

 

I don’t think it will eat at my budget I would have spent a little over 3000$ total in interest or less if I get a co-signer in 2yrs when I decide to sell it and fully purchase a car I want to buy….that being said the dealership said I could sell it back to them for 29k which is what it’s worth right now but with tax and other fees it will be 32k per my correction in the previous post (not 33k). So I won’t be spending that much at all to drive a car with great safety features which is what I valuable the most. With that being said none of this will be eating at my budget and allahmdillah I have two good jobs in the healthcare field. I could perhaps save for a few months and buy the car in full but I would have to continue to drive a very unsafe car for several more months and I’d rather not risk a potential accident especially at night where the head lights are pointless and emergency braking isn’t an option because it takes so long to come to a complete stop not to mention there are no sensors or driving safety  features. 

[realizm]

As brother Haji said, you could get a very good secondhand car for much less than 33k, some reconditioned and all engine and mechanical stuff checked.

And it is very unlikely that the car only loses 1k of value in 3 years.

 

[Haji 2003]

1 minute ago, realizm said:

And it is very unlikely that the car only loses 1k of value in 3 years.

If this were true, the question that people should be asking themselves is whether they should go into the car rental business in that part of the world!

[realizm]

1 minute ago, Haji 2003 said:

If this were true, the question that people should be asking themselves is whether they should go into the car rental business in that part of the world!

I would !

[notanaimous123]

2 hours ago, realizm said:

As brother Haji said, you could get a very good secondhand car for much less than 33k, some reconditioned and all engine and mechanical stuff checked.

And it is very unlikely that the car only loses 1k of value in 3 years.

 

With all due respect that didn’t anser my inquiry. 

[realizm]

2 hours ago, notanaimous123 said:

With all due respect that didn’t anser my inquiry. 

True. Sorry brother.

Sounds like unnecessary Riba, hence my comment...

 

[Ashvazdanghe]

10 hours ago, notanaimous123 said:

With all due respect that didn’t anser my inquiry. 

Salam generally buying a safe car within your budget has no problem which also it's better to pay lesser interest as much as possible for you because paying interest is inevitable but pay your monthly payment in it's times in order to avoid paying extra interest due to delay in paying or tec .

[Haji 2003]

11 hours ago, notanaimous123 said:

With all due respect that didn’t anser my inquiry. 

It was another way of sense-checking your calculations to show that they are not plausible. To triangulate with what Bro @Ashvazdanghe said. Sure, get a safe car, get it on loan if you must since there is a safety issue with the existing car, but try and minimise the interest payments.

You say you are able to put $12k down.

Quite frankly you can get a reasonable and safe car for around that without the need to borrow very much or perhaps anything at all.

We can share prices and specs if you like.

[notanaimous123]

16 minutes ago, Haji 2003 said:

It was another way of sense-checking your calculations to show that they are not plausible. To triangulate with what Bro @Ashvazdanghe said. Sure, get a safe car, get it on loan if you must since there is a safety issue with the existing car, but try and minimise the interest payments.

You say you are able to put $12k down.

Quite frankly you can get a reasonable and safe car for around that without the need to borrow very much or perhaps anything at all.

We can share prices and specs if you like.

The thing is buying a car in full is less beneficial for me because I plan to save up and buy a car I’d like to keep long term in the next year or two, so paying for a car in full I will not keep more then a year or two is more detrimental and expensive. I could put 12k down on a 32k car, and pay the difference which is 20k for 1year let’s say I pay $600 per month if I keep the car for 1 year and sell it for its original worth before taxes (29k) or even 27k or less I would have actually made over 10k profit. Even if I sell it for 25k I still make profit. Because in one year with monthly payments and my down payment I spent 19k in total to drive a very safe car with great safety features. If I buy any temporary car in full right now it will actually be a waste of money because like I said I don’t plan to keep it. Overall I hope I explained this to whoever is reading it will understand in this situation I could actually loose money if I were to pay the car in full or any car in full as a matter a fact if I only plan on keeping it for a year or two as a temporary car.

[notme]

That sounds incredibly expensive.  

Fixing headlights is cheap.  If you can afford even one $600 monthly payment, you can pay a mechanic to repair your headlights twice.  

Fixing brakes is not cheap, but if you can afford a $12000 down payment, it will be nothing to you.  

For $12000 you can get a really nice car and not have to finance anything.  If you really want a new car, save up all those $600 payments you would have made until you can afford it outright, but buying a new car is always a poor economic choice.  

[notme]

11 hours ago, notanaimous123 said:

. I could put 12k down on a 32k car, and pay the difference which is 20k for 1year let’s say I pay $600 per month if I keep the car for 1 year and sell it for its original worth before taxes (29k) or even 27k or less I would have actually made over 10k profit. Even if I sell it for 25k I still make profit.

No. 

Unless you are buying junk cars and repairing and refurbishing them,  you will never make a profit buying and selling cars.  

Also, never believe a salesman, especially a car salesman.  

[notanaimous123]

3 hours ago, notme said:

That sounds incredibly expensive.  

Fixing headlights is cheap.  If you can afford even one $600 monthly payment, you can pay a mechanic to repair your headlights twice.  

Fixing brakes is not cheap, but if you can afford a $12000 down payment, it will be nothing to you.  

For $12000 you can get a really nice car and not have to finance anything.  If you really want a new car, save up all those $600 payments you would have made until you can afford it outright, but buying a new car is always a poor economic choice.  

if im going to pay for a car in full it’s going to be a nice car with good safety features 

[notme]

18 hours ago, notanaimous123 said:

if im going to pay for a car in full it’s going to be a nice car with good safety features 

Good.  Do that.  Save at least $600 each month and you will have enough in no time.