On installment sales: What is the valid sale, and we ask for examples of it, because it has become common in our time?
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The questioner : In installment sales, what is the valid sale? And we ask for examples of it, because it has become common in our time?
The Shaykh : Installment sales have examples, as the questioner mentioned. The permissible example is when one buys an existing item from the seller, worth one thousand, for one thousand and five hundred over one year, and he wants the item itself. This is permissible by consensus. Or he wants to trade with the item by buying it in this country and taking it to another country to increase its price. This is also permissible by consensus.
An example of this is when a man comes to a person who has a villa worth four hundred thousand cash and says: I want to buy it from you for five hundred thousand, deferred for one year. They agree on this, and there is no harm in it by consensus, because the man bought it to live in it, but he increased its price because it is a deferred price. It is known that a deferred price differs from an immediate price. Or a person buys an item for a deferred price intending to make a profit. This is also permissible, like a person who buys a villa from someone worth four hundred cash for five hundred over a term, intending to make a profit on it. Perhaps it will be worth six hundred over a term, or five hundred cash, so he makes a profit. There is no harm in this by consensus.
The third scenario: A person comes to another, to a merchant, and says: I need a car with such and such specifications. The merchant says: Go to the showroom and choose the car you want, then come to me so I can buy it from the showroom and then sell it to you for a deferred price higher than what I paid for it. This is forbidden, because the seller did not buy the item except for the one who requested it, and had it not been for his request, he would not have bought it. So it is like lending money to the one in need of the car, lending him dirhams over a term with an increase. The merchant’s purchase of this car to sell it to this needy person is merely a ruse, and otherwise he has no interest in the car. This is forbidden, even if some people may issue a ruling that it is permissible. The saying of the Prophet (peace and blessings be upon him): indicates its prohibition, because this merchant intended nothing but the increase; he has no interest in the car.
And some say that the merchant says: If I buy it, meaning the merchant, then you, the one in need, have the option. Even if he says this, it is deception, because it is known that the one who needs the item will not return it; he wants it in any case. These are three scenarios.
The last scenario is not permissible. There is a fourth scenario called the issue of tawarruq (a commodity sale used to obtain cash). It is when a person needs money, so he comes to the owner of the showroom and buys from him a car worth fifty thousand for sixty thousand over one year, and the buyer’s intention is the money. The scholars (may Allah have mercy on them) differed on this issue. Some said it is permissible because the seller says: What do I have to do with the buyer and his intention? I sold a car, and the buyer does what he wants. Shaykh al-Islam Ibn Taymiyyah (may Allah have mercy on him) chose that it is forbidden, and that it is a form of 'inah (a buy-back sale used to disguise a loan) from which the Prophet (peace and blessings be upon him) warned. The scrupulousness (wara') is for a person to leave it and not deal in it. So these are four scenarios in the issue of installment sales. Yes.
The questioner : May Allah reward you, esteemed Shaykh, and may Allah bless you.
The Shaykh : Installment sales have examples, as the questioner mentioned. The permissible example is when one buys an existing item from the seller, worth one thousand, for one thousand and five hundred over one year, and he wants the item itself. This is permissible by consensus. Or he wants to trade with the item by buying it in this country and taking it to another country to increase its price. This is also permissible by consensus.
An example of this is when a man comes to a person who has a villa worth four hundred thousand cash and says: I want to buy it from you for five hundred thousand, deferred for one year. They agree on this, and there is no harm in it by consensus, because the man bought it to live in it, but he increased its price because it is a deferred price. It is known that a deferred price differs from an immediate price. Or a person buys an item for a deferred price intending to make a profit. This is also permissible, like a person who buys a villa from someone worth four hundred cash for five hundred over a term, intending to make a profit on it. Perhaps it will be worth six hundred over a term, or five hundred cash, so he makes a profit. There is no harm in this by consensus.
The third scenario: A person comes to another, to a merchant, and says: I need a car with such and such specifications. The merchant says: Go to the showroom and choose the car you want, then come to me so I can buy it from the showroom and then sell it to you for a deferred price higher than what I paid for it. This is forbidden, because the seller did not buy the item except for the one who requested it, and had it not been for his request, he would not have bought it. So it is like lending money to the one in need of the car, lending him dirhams over a term with an increase. The merchant’s purchase of this car to sell it to this needy person is merely a ruse, and otherwise he has no interest in the car. This is forbidden, even if some people may issue a ruling that it is permissible. The saying of the Prophet (peace and blessings be upon him):
Actions are only by intentions
إنما الأعمال بالنياتAnd some say that the merchant says: If I buy it, meaning the merchant, then you, the one in need, have the option. Even if he says this, it is deception, because it is known that the one who needs the item will not return it; he wants it in any case. These are three scenarios.
The last scenario is not permissible. There is a fourth scenario called the issue of tawarruq (a commodity sale used to obtain cash). It is when a person needs money, so he comes to the owner of the showroom and buys from him a car worth fifty thousand for sixty thousand over one year, and the buyer’s intention is the money. The scholars (may Allah have mercy on them) differed on this issue. Some said it is permissible because the seller says: What do I have to do with the buyer and his intention? I sold a car, and the buyer does what he wants. Shaykh al-Islam Ibn Taymiyyah (may Allah have mercy on him) chose that it is forbidden, and that it is a form of 'inah (a buy-back sale used to disguise a loan) from which the Prophet (peace and blessings be upon him) warned. The scrupulousness (wara') is for a person to leave it and not deal in it. So these are four scenarios in the issue of installment sales. Yes.
The questioner : May Allah reward you, esteemed Shaykh, and may Allah bless you.