Darul Iftaa Mahmudiyyah

Administrative fee to cover up for interest charges

· 9 Muharram 1437 AH1 min readFatwa 34300English

Question

am considering buying a car on 0%. The dealer told that he should apply on my behalf if the lender agrees then they can proceed with car sale. So let say if the lender accept my 0% and I am allowed a car of £4000 pounds then I need to pay £4000 in 24 months. Is this halal? Thanks

Answer

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh

We understand that you intend to purchase a vehicle and you have been offered 0% financing over 24 months. In general, such contracts charge high administrative fees to cover up for the interest charge. Moreover the dealer also pays an administrative fee to cover up for interest charges. Kindly submit the following information in order for us to provide a specific ruling:

1. Terms and conditions of financing agreement

2. Are there any charges? If so, what are the charges defined as?

And Allah Ta’āla Knows Best

Mufti Ismail Desai,

Darul Iftaa

Checked and Approved,

Mufti Ebrahim Desai.

Answered by
Mufti Ismail Desai
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Source: Darul Iftaa Mahmudiyyah — https://askimam.org/public/question_detail/34300
Fatawa SA: https://fatawa.co.za/fatwa/askimam-34300

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