What is the ruling on installment sales where the installment amount exceeds the cash amount, on the grounds that it is a new contract between the seller and the buyer?
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The questioner : What is the ruling on installment sales where the installment amount exceeds the cash amount, on the claim that it is a new contract between the seller and the buyer?
The Shaykh : Selling on credit is permissible, as Allah Blessed and Exalted is He said:[Al-Baqarah 2:282].
It is well known that the price in a credit sale will be higher. If we sell this car for forty thousand cash, we will not sell it on credit for less than fifty thousand. Both are permissible. It is permissible to sell an item for cash at a lower price than if you sold it on credit, and it is permissible to sell it on credit at a price that would be lower if sold for cash. You may give the buyer the choice at the time of the contract and say: Do you want it for forty thousand cash, or for fifty thousand on credit? Then, once he chooses one of the two prices, you sell it to him at that price.
This is not a case of two sales in one sale, as some scholars have suspected, because this is a single sale, and the choice is only regarding the amount of the price, and the contract is concluded on one of them.
Two sales in one sale is the issue of 'inah, for example: a person sells an item for a deferred price and then buys it back for cash at a lower price. For instance, selling a car for fifty thousand for one year, then buying it back for forty thousand cash. This is the forbidden issue of 'inah. However, giving the choice between the two prices, and then the two parties do not part without taking one of them, there is nothing wrong with that.
The Shaykh : Selling on credit is permissible, as Allah Blessed and Exalted is He said:
O you who have believed, when you contract a debt for a specified term, write it down.
يا أيها الذين آمنوا إذا تداينتم بدين إلى أجل مسمى فاكتبوهIt is well known that the price in a credit sale will be higher. If we sell this car for forty thousand cash, we will not sell it on credit for less than fifty thousand. Both are permissible. It is permissible to sell an item for cash at a lower price than if you sold it on credit, and it is permissible to sell it on credit at a price that would be lower if sold for cash. You may give the buyer the choice at the time of the contract and say: Do you want it for forty thousand cash, or for fifty thousand on credit? Then, once he chooses one of the two prices, you sell it to him at that price.
This is not a case of two sales in one sale, as some scholars have suspected, because this is a single sale, and the choice is only regarding the amount of the price, and the contract is concluded on one of them.
Two sales in one sale is the issue of 'inah, for example: a person sells an item for a deferred price and then buys it back for cash at a lower price. For instance, selling a car for fifty thousand for one year, then buying it back for forty thousand cash. This is the forbidden issue of 'inah. However, giving the choice between the two prices, and then the two parties do not part without taking one of them, there is nothing wrong with that.