I have a used car dealership in the U.S. I do buy here pay here for customers who cannot afford to buy a used car in cash the main reason I do this because I would not be able to stay in business if I don’t since most customers cannot afford to buy a car in cash. I have been struggling with my inventory since I am not able to replace most of the cars that I sell when I finance my customers. Also, when customers want to finance a car with my dealership I do not charge interest but I do sell the car for a higher price than the market value and I do lose many customers because they think that I am trying to rip them off. A Muslim friend of mine that has been in this business for a while told me about financing my customers through an outside lender that way I would be able to turn my inventory and sell the car within the market value and not lose as many customers as I’m losing now. Of course the leader would charge the customers a finance charge, when I asked my friend he told me that it is not haram as long as I am not the one that charging the customer interest. I have been struggling because of this a lot; at the same time I want to make sure that I’m not doing haram, so my question is would I be able to start dealing with the leaders to finance my customers knowing that they will charge them interest? Thank you.
Dear brother in Islam,
May Allah place Barakah (blessings) in your Halal earnings and your Halal business.
The method of financing that you have described in your question is acceptable in Islam.
If someone comes to you with a check or financing from an interest based bank and you accept that check as a payment for your car then there is nothing wrong with that. This transaction will be considered permissible in Islam. The reason for which the transaction is permissible is because the contract of interest payment is between the consumer and his lender. You have nothing to do with that and you played no role in making that happen. You just accepted the payment from the bank on behalf of your buyer.
Therefore, it would be permissible for you inform your buyers that they may obtain financing from an outside lender but you should not play any role in having them approved for financing or promote the interest based lending.
And Allah knows best.
Mufti Ikram ul Haq
Fatwa Center of America