First of all, it should be clear that riba is any contractual increment in a lending relation. It is prohibited and considered one of the major sins and acts of disobedience to Allah. Almighty Allah and His Messenger declare war on the parties to a riba-based contract, as stated in the Qur’an: (O ye who believe! Observe your duty to Allah, and give up what remaineth (due to you) from usury (riba), if ye are (in truth) believers. And if ye do not, then be warned of war (against you) from Allah and His messenger.) (Al-Baqarah: 278-279)
The Prophet (peace and blessings be upon him) invoked the wrath of Allah on the person who deals with riba, the one who gives it, and the one who writes its contract. The Prophet (peace and blessings be upon him) also classified dealing with riba as worse than adultery. Both sayings of the Prophet are classified as authentic Hadith.
Dr. Monzer Kahf, a prominent economist and counselor, states the following: Riba is forbidden in a clear and very strong manner both in the Qur’an and the Sunnah, and any increment or material privilege in a loan contract is certainly riba, no doubt about that, regardless of the personality of the giver or taker of the loan, be it a bank, an institution, a government or a natural person; and regardless of the purpose of the loan, be it for consumption, to buy consumer durables like a car or a refrigerator, for production or for no specific reason.
Necessities are referred to in the Qur’an several times as circumstances for relaxing any prohibitions. Obviously necessities have to be real, true and related to the prohibition itself.
With regard to the prohibition of riba, four things are prohibited, for three of them it is hard to imagine that a necessity may occur, except in a case of coercion by use of excessive force. These three things are taking interest, writing its contract and being a witness to the contract. Giving interest may fall under circumstances of necessities, the simplest example of which is the case of hunger and no food can be obtained except on an interest-based loan basis.
The case of a car needed for work, there may be a necessity for it that may justify borrowing on interest. But to establish a necessity one needs to pass a few tests first: The job that needs a car to reach its location must be the only one available; income from that job must also be essentially needed for survival; the car must be the only possible transportation to work; there must be no other means to finance the purchase of the car except a riba-based loan; the value of the car must be minimal so that it provides only needed transportation to work; the amount of the loan must be the minimum needed only after exhausting all other potential sources and savings, etc.
Above all, in applying these conditions, one must realize that the critique and examination of the truthfulness of these circumstance will come from the Most Knowledgeable, Who cannot be cheated or deceived, that is Allah.
The fulfillment of these conditions of necessities is very unlikely in all Muslim countries, including Malaysia, and in most Muslim communities, including the Muslim community in the USA. The least of it is that there are very often other means of transportation; other sources to finance the purchase, especially family and friends; and there are other forms of contracting finance that are permissible in the Shari`ah, such as leasing. In my opinion, it is very difficult to establish a case of necessity for buying a car, although such a possibility theoretically exists.