Islam’s Stance on Leasing a Vehicle

In his clarification on this issue, Dr.Monzer Kahf, a prominent economist and counselor stated that

‘whenever we deal with Fatawa for actions/transactions done under the system of interest credit we would be looking at the Islamic finance paradigm from the angle of interest-based lending. This what creates hesitations in our mind regarding the “factoring of interest within the rental amount.” The plain fact is: Islamic finance is an approach to profit making finance but not through the process of lending/interest. In other words, it is a finance that has its own philosophy that is essentially based of “dealings with real goods and services and facilitating their reaching to consumers/users without making it possible to assign any increment to debts because that is unjust as debts cannot by their own nature create increments. Of course if you own a car you can lease it to a user and make profit out of that transaction. This is financing through goods and assets not through assigning increments to debts because the usufruct of the car is derived through time and it has value.

Car leasing is permissible although the car dealer has factored interest within the rental amounts and insurance is made required on it. By the way, insurance is not that of a taboo, there is a very respected and rational argument that it is perfectly permissible whenever it is not interest-based! I subscribe to this view.”