Question Summary:
Administrative fee to cover up for interest charges

Question Detail:

 am considering buying a car on 0%. The dealer told that he should apply on my behalf if the lender agrees then they can proceed with car sale. So let say if the lender accept my 0% and I am allowed a car of £4000 pounds then I need to pay £4000 in 24 months. Is this halal? Thanks

Answer :

In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh
We understand that you intend to purchase a vehicle and you have been offered 0% financing over 24 months. In general, such contracts charge high administrative fees to cover up for the interest charge. Moreover the dealer also pays an administrative fee to cover up for interest charges. Kindly submit the following information in order for us to provide a specific ruling:
 
1. Terms and conditions of financing agreement
2. Are there any charges? If so, what are the charges defined as?
 
And Allah Ta’āla Knows Best
 
Mufti Ismail Desai,
Darul Iftaa
 
Checked and Approved,
Mufti Ebrahim Desai.