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What is the difference between an islamic lease and a normal lease?
after searching online, the definition of a lease is
" A lease is a contract outlining the terms under which one party agrees to rent an asset—in this case, property—owned by another party. It guarantees the lessee, also known as the tenant, use of the property and guarantees the lessor (the property owner or landlord) regular payments for a specified period in exchange."
For those that might not even know what a lease is lol
In an ordinary lease: you buy a vehicle at a discount price and rent it out and then get the car back after a certain time
As part of this, I believe there’s an interest element in when paying the rent of the vechicle
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Ahh yes yes, so for example, if you can’t afford my 10k car now, I will lease it to you, and you will pay me altogether 13k instead but monthly and that car will be yours? is that how it goes?
The interest here isn’t necessarily haram right? You agreed to pay a higher price that is fixed!, so it isn’t riba but it is interest if paid monthly.
This seems like a good business plan to make good money if you have a good car! I have heard of companies who allow you to do this and has insurance incase your car gets destroyed or stolen.
Here’s a few differences:
Under Ijarah rent is charged when the asset is made available to the lessee for use while under conventional leasing interest is charged once the contract is signed and cash made available to the customer, irrespective of whether asset is actually available for use or not. Any rent received prior to delivery of the asset is not forming income of an IFI (Islamic finance institutions) and treated as liability which is not the case under interest based banking.
During repair and overhauling phase, IFI cannot charge the rentals while conventional banks continuously receive the installments consisting of interest as well as principal irrespective of usage of the asset by lessee.
No that’s financing: with leasing car ownership is not transferred
What’s the difference between this and just normal rent?
Is Ijara agreed to be permissible?
Yeah ijara is a classical contract.
It depends on the different leasing options. In not all car leasing contracts you buy the car. Typically, it’s just a long-term rental of a car
Fixed-rate interest and variable rate interest can make a difference. Fixed-rate interest is in effect a murahaba contract, expect people just call it interest lol.
Oh right so if Ijara is allowed then which one is the one that’s debatable? Is it Musharakah or Murabahah that’s a bit controversial?
None of those contracts in their essence are debatable. It’s how people utilise them and combine them that becomes a problem.
For instance, combining musharakah with Ijara just becomes interest.
I see that makes sense Jazaki Allahu Khayra