Fatwa No : 88365
Buying a car through a non-Islamic bank
Fatwa Date : Jumaadaa Al-Aakhir 8, 1425 / 26-7-2004
My question is: I want to buy a car, but I want to pay for the car by monthly installments. The car is Volkswagen Golf. I hear from the Ulama that it is not Haram if you buy a car like that. The company works together with a bank, but it is not a normal bank; the name of the bank is: Volkswagen bank. They use this bank to make it possible for the people to buy a car if they cannot buy the car themselves in onetime.
The bank gives all the money for the car at one time to the garage, so it means they own the car. Then you have to give Volkswagen bank every month some money, until you finish everything.
But the Volkswagen bank takes some extra money, for example the car costs 20000 Euro, in the end you pay 22000 Euro.
If you answer this question, can you please give us the name of the sheikh.
Praise be to Allah, the Lord of the Worlds; and may His blessings and peace be upon our Prophet Muhammad and upon all his Family and Companions.
Non Islamic banks do not usually purchase car to sell it to a customer rather they gives loans and take interest on the loans. The questioner's claim that when the bank pays the cost of the car means it owns the car is not correct. Owning a car means taking its custody after paying its cost and bearing all the liabilities before selling the car to a client which is not practiced by non-islamic banks.
If it is assumed that a non-Islamic bank follows the above procedure then purchasing from that bank is allowed, even though it is likeable to avoid dealing with such non-islamic institutions to avoid any possible involvement in haram activities.
Muslim scholars permitted purchasing a car from an Islamic bank since it actually owns a car and then sells it to the client. Also as we said purchasing a car from a non-islamic bank is allowed provided the dealings in this transaction-meet the Shariah requirements.
Allah knows best.