Getting a new vehicle is tempting for anyone. As Muslims, we should be aware of some a few but important tips when considering financing a car. Islamic auto financing is vast topic but we believe falls into 3 key areas.
3 Tips on Islamic Auto Financing
1) Try to get a 0% finance deal
This is a tricky situation. While leasing gives you the ability to switch up your car every couple of years, you’re basically renting. There are obvious downsides of leasing.
Here is an excerpt from howstuffworks.com which breaks down the key difference between lease vs buy
But there are also extra expenses with a lease. Insurance rates are usually higher for leased vehicles since lease coverage may include gap insurance — which pays off what is still owed on the lease in the event the car is totaled. And, since you turn in your car every three years, if you lease a car that requires a down payment, that expense will come out of your pocket each time you get a new lease. Each time you turn in your old car for a new one, there are added fees. When a car is driven, it depreciates — reduces in value. When you buy a car, the depreciation is your burden as the car owner; it’s reflected in the price you can resell your car for later on. With a lease, the dealer is the one who accepts the depreciation, since he or she will take back the leased car.
3) Buying a Used Car
The best thing you can do as a Muslim and your finances is buying what you need on cash. While it may be tough to do this for a car, there’s nothing better than up-fronting cash and getting the headache of paying a bank/or dealer. Islam teaches us to live with in our means and buying a used car on cash is the ideal way to do it.