What is the ruling on installment sales, with an explanation of the forbidden ruses?

The questioner : I need a car... but you pay me forty in installments. He promised me and bought the car... then sold it to me... so what is the ruling, O Shaykh?

The Shaykh : A loop, a turn; do you understand? May Allah send prayers and blessings upon Muhammad. He said, (peace and blessings be upon him): . Our Lord, (Mighty and Majestic), as this hadith indicates, forbade the Jews the fat of slaughtered lawful animals. He also pointed to something of this in the Qur'an when He said, (Mighty and Majestic): . The Jews did not have patience with this ruling of Allah. So what did they do? They took the fat and melted it in large, heavy vessels, and lit a fire underneath it. It took on a form other than its natural form. In their opinion, or through Satan's whispering to them, they thought the fat had now come out of being forbidden fat because it had taken on another form. So they were cursed for this reason, just as they were cursed for their ruse on the day of the Sabbath. Then he said, (peace and blessings be upon him), as a lesson for us, the Muslims, so that we do not fall into what the Jews schemed for, and did not consider lawful what Allah had forbidden by the slightest of ruses: .
And Islam, in its perfection and the completeness of Allah's blessing upon those who hold fast to it, does not concern itself with formalities, but rather with objectives and effects. Perhaps you all remember with me his saying, (peace and blessings be upon him and his family): . Why? Because he exploited the apparent aspects of the Shari'ah that permit marriage, while he did not intend marriage. So he said: . Even though some scholars permitted the marriage of tahleel despite this severe curse upon the one who performs tahleel and the one for whom it is performed. Why? Because they looked at the form. The woman's guardian agreed, the witnesses testified, and both the one performing tahleel and the wife who was divorced three times also agreed. But they all know that the objective of this marriage is not the marriage to which Allah, (Mighty and Majestic), referred when He said: "And He created from it his spouse that he might find tranquility with her, and He placed between you affection and mercy." So when the Messenger, (peace and blessings be upon him and his family), cursed the one who performs tahleel and the one for whom it is performed, he did not look at the form, but rather at the intention. What is the intention? To make lawful the woman who was divorced three times for her first husband. In it is a ruse against the ruling of Allah, (Mighty and Majestic), who said: .
Just as you married the first husband; meaning, that he might find tranquility with her. But when this marriage was for the purpose of making lawful what Allah, (Mighty and Majestic), had forbidden, the Messenger, (peace and blessings be upon him), invalidated it definitively, and cursed those who cooperated in it, saying: . And in some of the interesting hadiths, the one who performs tahleel was described as , a borrowed goat; because he is not a husband. So from this hadith and its like, we know that scheming against the rulings of Allah, (Mighty and Majestic), is forbidden; because it is among the characteristics of the Jews, and among the deeds of the Jews. And he, (peace and blessings be upon him), forbade following their example with a general prohibition, saying, (peace be upon him), in a hadith in al-Bukhari: . So this form that you asked about does not pose a difficulty for anyone to know that its objective is to make lawful what Allah, (Mighty and Majestic), has forbidden of riba; because everyone knows that if this person who needs a car worth thirty thousand cash came to a rich man and said to him: "Lend me thirty thousand to buy this car," and he said to him: "I will lend you thirty thousand, but on the condition that you repay it to me after a year for forty thousand," no one would doubt that this is riba. Good; but now the form changes, as you said just now. This rich man says to you: "You go, take the car, and I will pay its price, and you give me the price of forty thousand." What is the difference between this and that? There is no difference at all, except for the looping and turning and scheming against what Allah has forbidden.
Rather, we say: If the owner of the company said to you, "This car is thirty thousand cash, and forty thousand in installments," and he took forty thousand from you, then the ten thousand is riba for him. So it is even more so, and more emphatically, for the form that you mentioned, and then I rambled around it. And this is one of the problems that occur in the present age based on the fatwas of some scholars, old and new, who rely on general texts: . Truthful is Allah . But there are sales that the Wise Lawgiver has forbidden, so we must stand by His prohibition of them. Among them is the prohibition of two sales in one sale. The narrator of this hadith, Sammak ibn Harb, explained this prohibition as in "Musnad al-Imam Ahmad": "It was said to Sammak: What is the prohibition of two sales in one sale? He said: That you say: 'I sell you this for such-and-such cash, and for such-and-such on credit.' So he increased the amount for the credit, even if it was a single coin, or a single dirham. So this increase is invalid; the Messenger, (peace and blessings be upon him), invalidated it in another hadith, which is worded as: . So the increase is riba; the Messenger, (peace and blessings be upon him), stated it explicitly. And therefore, this transaction that many of the disbelievers engage in, whom the Lord of the Worlds described in the Qur'an as not forbidding what Allah and His Messenger have forbidden, we have taken this transaction without thinking whether it is in accordance with Islamic morals in general, and whether it agrees with some of the texts of the Prophetic hadiths in particular?
Islam encourages Muslims to cooperate in good, and encourages them specifically to give good loans. It even made a loan of two dirhams equal to a charity of one dirham, a loan of two dinars equal to a charity of one dinar, and a loan of two hundred dinars equal to as if you gave charity of one hundred dinars. So if the Muslim merchants today were standing by the Shari'ah rulings on the one hand, and were truly aware of or believed in His saying, (Glorified and Exalted is He): , their otherworldly earnings and their worldly earnings would be greater than those of those who do not fear Allah, (Mighty and Majestic), who make riba lawful through installment sales. If we took...

Another questioner: Peace be upon you.

The Shaykh : - And upon you be peace and the mercy of Allah and His blessings - If we took this transaction by the economic measure, and mentioned two large merchants; one sells at the cash price, not increasing it by a single coin even if he sells on installments, and the other sells at two prices; the installment price is more than the cash price. Do you see what the people of economics rule - now, regardless of the Shari'ah; let us look that the outcome is for the righteous -; what do the people of economics say? Which of the two men is more profitable in terms of material? The one who sells at one price, which is the cash price, or the one who sells at the cash price and an installment price that is more than the cash price? From the economic perspective, which is more profitable? What do you say?

The questioner : ... because he receives the price of his goods...

The Shaykh : The customers are numerous. So, if this is the situation of the one who sells for cash, it is more beneficial for him in the immediate payment—excuse me, in the immediate payment—, whereas the deferred payment is clearer, as we mentioned earlier. So, what compels Muslims to imitate the Westerners in this sale? It is greed that is based on not exercising thought and not applying knowledge. He assumes that this increase he adds is more profitable for him than limiting himself to the cash price, while the truth is the opposite is the reality. But the matter requires some patience and deliberation until this person becomes known for actually selling at one price, which is the cash price. And I say at one price and actually the cash price; because some people—regrettably—have reached us in some Arab countries that they resorted to deception as well. They heard that selling one item at two prices is something the Messenger (peace be upon him) forbade. So, what did he do? He made the price one, but what is the price? The increase, the installment price. Meaning, if we assume this merchant has customers, half of whom buy from him on installments and half buy from him for cash, he was oppressing half of his customers. But now he oppresses all the customers; because he unified the price. This is not the intention. The intention is to unify the price based on the cash price. And then the benefit of the deferred payment that we referred to earlier becomes apparent to you. Because this man who sells at one price is as if he lent that person a good loan. How much, for example? We said in the previous example: thirty for cash and forty on installments. It is as if the ten is five thousand; it is as if he lent him, as if he gave charity of five thousand. Because he lent him twenty, ten is half of five. So, the merchant now, as they say in our land of Sham: if he fears Allah (Mighty and Majestic) and sells at one price, which is the cash price, he is like a saw on the rising and falling, eating an immediate reward and a deferred reward. But the issue requires some fear of Allah, patience, and deliberation.
I give you an example with my own person. I am a man—and praise be to Allah—I was modest, and I still am. I was a watchmaker who repaired watches. I sold at one price—the cash price. And yet, within the limits of my capital, I would be patient when I sold a unit of watches, I would go and buy its replacement. I would be satisfied with cash. If I trusted the buyer with a debt, I would sell to him and profit, even if it was after haggling. So, what I would profit in cash, and I was rewarded by Allah (Mighty and Majestic) when we mentioned that the one who lends a good loan is as if he gave charity of half of it. This came in authentic hadiths. And praise be to Allah, our Lord, how much we need a person at all. And by the grace of Allah, customers would flock to us such that in Ramadan, when people need watches, I would place the watches in front of me in a row. The man would come and I would say: I do not have the ability to repair the watch. Why? Look at these watches, thirty watches, forty watches. Each one takes an appointment. So, he is spared from taking the watch to another watchmaker, even if I told him: come after Ramadan, after Ramadan. Even though he needs the watch in Ramadan. But trust in the transaction—here is the point—makes people flock to this one who is truthful in dealing with people. But greed is what harmed and did not benefit.
So, the point is that installment sales by merchants, I advise them, in religion and in this world, to refrain from it. If his budget for trade is to profit—for example—ten percent, fifteen percent, twenty percent; this varies from type of trade. In things that are sold in large quantities, in things that are sold in small quantities. So, the important thing is if he set in his budget to profit ten in the hundred—for example—let him sell ten in the half-hundred, whether for cash or on installments. That is better for him and more lasting.
Please proceed.

The questioner : He has a house for him and he offered it for rent.

The Shaykh : How?

The questioner : He has a house for him.

The Shaykh : A house.

The questioner : He offered it for rent, so the lessor came to him and said to him: I will rent it from you for a month. He said: for the year, I will rent it to you, I will rent it to you for eighteen thousand riyals. And if you want it by the month, one thousand five hundred.

The Shaykh: Yes.

The questioner : Excuse me, for the year it is twelve thousand and for the month one thousand five hundred, meaning it comes out to eighteen thousand. Then they agreed on a year. So, in the middle of the year, the one who rented the house asked to leave the house, to vacate the house. And between them was a contract that he would not vacate it except after a year. And he had paid the amount of half... So, the owner said to him: If you want to leave, either you pay the rest of the price, or—the rest of the rent in full—and this is what we agreed on. And after... he said to him: Pay me then, you remain two months, you pay me for each month one thousand five hundred. Is this considered a type of riba?

The Shaykh : No, as long as the agreement was on one of the two ways, then he chose the annual way, then he offered him not to complete the benefit of the rented property. So, at that time, the matter returns to the first agreement. So, there is nothing wrong with it.
Please proceed.