Assalamualaikum,

From some of your previous answers on this website it seems that a lease contract as done in the US is allowed but you did not address the issue of late fees. According to my understanding, late fees are a form of riba.

I am considering leasing a car. What if I `pre-pay` all my payments at the time of signing the contract so as to completely eliminate any possibility of paying late fees? Would that make it permissible for me to enter into such a contract?

For example, if my lease payments come out to be $200/month for 36 months, I pay $7200 at the time of signing the contract (or shortly thereafter) and therefore make it impossible that any late fees will ever be charged.

Would that be a valid way to get around the issue of late-fees according ot shariah?

Jazakallahu khairan

AAWW

Signing a contract containing (Late fees) is some thing prohibited because of its consequences, and not because of itself. According to the Islamic jurisprudence, whatever is prohibited because of its consequence could be allowed in case there is a true need for it.

In another words, conducting a transaction includes the obligatory of paying late fees is a mean to fall in usury, since you may, and you may not delay your monthly payment. In case of delaying your payment, you -eventually- become subject to Riba, and vice versa.

So, paying in full upfront, or systematically on a monthly basis does not make any difference Islamically, since you already signed an agreement/contract showing clearly your willingness to pay (Late fees) in case of delaying your due payment.

The status of such a transaction is that it is allowed only under two conditions:

One: You are truly in need for renting a car, and any other option available does not fulfill your need.

Two: The financier is the car dealer himself, and not a third party, because involving a third party -as applied in the U.S- means that he pays the due amount in full on your behalf to the car dealer, and then charges you the amount in full plus extra money on a long term basis, which is one of the most explicit examples of usury.

Allah Knows best.