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Wa` alaykum as-salamu wa rahmatullahi wa barakatuh.
In the Name of Allah, Most Gracious, Most Merciful.
All praise and thanks are due to Allah, and peace and blessings be upon His Messenger.
Dear Brother in Islam, thanks for your question, which emanates from an allah-fearing heart, since it shows your commitment to Islam, the true religion of Allah. We would like to commend your pursuit of Islamic guidance.
In reply to your question, Dr. Monzer Kahf, a prominent economist and counselor, states:
“Car leasing is permissible both for short period, as we have in car rentals, and for long periods as we have from car dealers as an alternative to purchase.
These contracts normally give the option at the end of the lease (e.g., three years) to either extend the lease for a new period, or buy the car at a given price, or return the car and end the relationship between the lessee and the lessor.
Some Muslim scholars, who are not fully acquainted with the nature and application of car insurance, argue that car insurance must be the responsibility of the lessor (i.e. the auto dealer). I disagree and I go along with the condition of the lease contract in the US that insurance is the responsibility of the lessee. A car is a moving machine, and its operator is in fact the one who is insured on her/his use of the machine. That is why rates of insurance vary according to the variations of the status, qualifications, and normal behavior of the driver. The driver and the driving are the main cause of any damage that normally affects a car. If the car is only going to be stored in your garage without being exposed on the street or driven on highways, the amount of insurance on it would be negligible or even covered by the house insurance as ‘incidental properties on the premises’. I therefore think that car insurance is the lessee’s responsibility, as is practiced in the United States.
It doesn’t matter with the lessee if the lessor calculates the amount of the monthly lease payment on the basis of interest or any other basis. It also doesn't matter where and how the lessor gets his financing.”
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