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Fatwa ID: 86061
Title: is this way of buying a car halal?
Category: Financial Transactions
Scholar: Dr. Main Khalid Al-Qudah
Date: 12/05/2011

Question

I recently bought a car. I insisted on not paying interest and as a result, the dealer raised the price of the car and adjusted the price (to add what I would have paid as an interest for three years to the initial value of the car). I ended up paying higher installments with zero % APR for three years. Is buying cars this way halal ? JAK


Answer

Alhamdu Lillah

What you did is called in the industry (capitalizing the interest).It is Halal because determining the price should be done upon mutual consent of the two contracting parties. Increasing the price is like decreasing it, both are permissible.