new car

American Muslim

Just Another Slave
Assalamu alaikum,

I am considering purchasing a new car. I don't happen to have an extra $25k laying around, so I am considering other options. I could buy a used car, but prefer not to buy someone else's problems. So, one of my options is leasing a new car.

Does anyone know of a ruling about an automobile lease? It would be appreciated.
 

senadb

New Member
leasing a car!!!!!!!

Salam Brother,

Leasing a car can be expensive, depends what kind of car you also want to lease toyota or lexus. big difference......anyhow if you were to lease a car your only entiteled to 12,000 miles a year and you maybe pay 300 avg for a descent car but if you cross the 12000 miles a year the dealer usually charges you between 15 and 18 cents a mile extra. and the bad thing about leasing also is the the contracts are only 24-34months long and if you dont pay the balance of within the time frame they use that against you if you want to trade it in after the lease is over. best bet buy a used car not too old but dont buy a new car either because living in chicago is very bad especially if you have to park in the streets you gat your car all banged up. btw im from chicago too. Hopefully this will help in any way if you have further questions just let me know brother.

Salam aleykum
 

Aapa

Mirajmom
Salaam,




Most advocate of consumers tell us to stay away from leasing. It becomes very expensive.

Have you tried estate sales. Yes, I wrote that. But, often families need to get rid of items and cars are included.

Think of these terms: car note + insurance will run you about $350.00 and up a month. Would leasing be cheaper? Have you thought about buying a car from a place like Budget or Hertz..they sell good cars for a decent price.

Also..www.craigslist.com has many good deals...
 

wannabe_muttaqi

A MUSLIM BROTHER
more details please

i would like to know more abt leasng the car. brother Senadb can u please explain a little bit in detail.

wat abt insurance on that?

wat if there is any damage on that while we return?

wats the avg price that we have to pay for that vehicle after say 3 yrs or 2 yrs of lease?

also if you have anymore details, it will be appreciated.
 
Pros & Cons of Leasing

Asalaamalikum,

LEASING A CAR

Advantages:
1) You know you will be keeping your new vehicle for only two or three years.
2) The car manufacturer is offering a "lease special", featuring low down payment and low monthly payments.
3) Your accountant advises you to lease.
4) A lease costs less than a purchase.
You don't have to worry about a large down payment. When the lease begins, you'll just have to pay the first month's payment, title, taxes, registration, banking fees, and a security deposit.
You don't have to worry about selling the car when you no longer want it.

Disadvantages:
1) Salesmen love leases because it's a good deal for them, which means it's probably not a good deal for you.
2) There may be a penalty for excessive mileage.
3) You need very good credit in order to lease. It's not always that easy to qualify.
4) You are still required to maintain the car as if you owned it.
5) There may be a hefty return fee at the end of the lease.
6) You will have to get extensive auto insurance, more than if you owned the car.
7) Leases are difficult to terminate early.
8) Your lease payments may not be that much lower than if you bought the car.
9) The lease payments they quote you may not include sales tax.
10) You don't actually own the car.
You aren't able to customize the vehicle or make modifications to it as you could if you bought it.
There are additional charges for excessive mileage (for example, more than 15,000 miles a year) and any damage to the car.
If you have the option to buy the car at the end of the lease (as is often the case), you'll have to make that decision as soon as the lease ends, whereas if you owned the car you could decide exactly when to sell it.
Generally, you will need to have the maximum insurance coverage limits.
For these reasons, leasing is generally most attractive for people who want to (and can afford to) drive a new car every three or four years.

Another big decision while purchasing a vehicle deciding is whether to buy or lease. Leasing is growing in popularity, and represents a viable alternative to buying. It costs less, because you're basically paying for the estimated depreciation of the car over the lease period, rather than paying for the whole value of the car. Of course, all you're getting is the use of the car during that period, rather than actual ownership of it.

If you do decide to lease, there are a few things you should know. First, understand the lingo. Capitalized cost is the leasing equivalent of the selling price. This is the total-package cost, which you want to minimize. The residual value is the estimated worth of the car at the end of the lease. Your monthly payments will be based on the difference between these two amounts, plus an interest expense called the money factor. But these are just the basics. The world of leasing is complex, and the dealer is an expert at it, so if you don't educate yourself you will be at a distinct disadvantage.

Second, negotiate the capitalized cost of the vehicle. The dealer will want you to lease the car at its sticker price, but you should talk him or her down as far as possible, just as you would if you were buying the car. In order to know what a reasonable price is, follow a similar process to the one described in the purchasing section .

Third, make sure you understand what conditions will end up costing you extra. For example, what is the mileage limit, and how much is the penalty if you exceed that limit? The per-mile charges can be extremely high, so be careful.

If you enjoy driving a new car every two or three years, want lower monthly payments, like having a car that has the latest safety features and is always under warranty, don't like trading and selling used cars, don't care about ownership equity, drive an average number of miles, properly maintain your cars, and are willing to pay more over the long haul to get these benefits, then you should lease.

If you don't mind higher monthly payments, prefer to build up some trade-in or resale value, like the idea of having ownership, like paying off your loan to be payment-free for a while, don't mind the unexpected cost of repairs after warranty has expired, drive more than average miles, prefer to drive your cars for years to spread out the cost, like to customize your cars, and don't like the risk of surprise lease-end charges — then you should buy.

I hope this helped inshallah
 

senadb

New Member
leasing vs. buying

I hope this helps.

It's a common dilemma: lease versus buy — lease or buy a car — which is better?. Everyone who has ever considered leasing has had this question cross their mind.

So what is the answer?

Lease versus buy?

The answer: It depends.

Leases and loans are simply two different methods of automobile financing. One finances the use of a vehicle; the other finances the purchase of a vehicle. Each has its own benefits and drawbacks.

It's not possible to simply say that one is always better than the other because the answer depends on each specific situation.

When making a 'lease or buy' decision you must look not only at financial comparisons but also at your own personal priorities — what's important to you.

Is having a new vehicle every two or three years with no major repair risks more important than long-term cost? Or are long term cost savings more important than lower monthly payments? Is having some ownership in your vehicle more important than low up-front costs and no down payment? Is it important to you to pay off your vehicle and be debt-free for a while, even if it means higher monthly payments for the first few years?

So, making the lease or buy decision is not quite cut and dry. There are things you need to consider. Let's take a look at some of these things.

First, is to understand that buying and leasing are fundamentally different, not just two versions of the same thing.

Buying and leasing are different

When you buy, you pay for the entire cost of a vehicle, regardless of how many miles you drive it. You typically make a down payment, pay sales taxes in cash or roll them into your loan, and pay an interest rate determined by your loan company, based on your credit history. You make your first payment a month after you sign your contract.

When you lease, you pay for only a portion of a vehicle's cost, which is the part that you "use up" during the time you're driving it. You have the option of not making a down payment, you pay sales tax only on your monthly payments (in most states), and you pay a financial rate, called money factor, that is similar to the interest rate on a loan.

With leasing, you may also be required to pay special lease-related fees and possibly a security deposit that you don't pay when you buy. You make your first payment at the time you sign your contract — for the month ahead.

Buy vs lease example

As an example, if you lease a $20,000 car that will have, say, an estimated resale value of $13,000 after 24 months, you pay for the $7000 difference (this is called depreciation), plus finance charges, plus fees.

When you buy, you pay the entire $20,000, plus finance charges, plus fees.

This is fundamentally why leasing offers significantly lower monthly payments than buying.




Lease payments are made up of two parts: a depreciation charge and a finance charge. The depreciation part of each monthly payment compensates the leasing company for the portion of the vehicle's value that is lost during your lease. The finance part is interest on the money the lease company has tied up in the car while you're driving it. In effect, you are borrowing the money that the lease company used to buy the car from the dealer. You repay part of that money in monthly payments, and repay the remainder when you either buy or return the vehicle at lease-end.


Loan payments also have two parts: a principal charge and a finance charge, similar to lease payments. The principal pays off the full vehicle purchase price, while the finance charge is loan interest.

However, since all vehicles depreciate in value by the same amount regardless of whether they are leased or purchased, part of the principal charge of each loan payment can be considered as a depreciation charge, just like with leasing — it's money you never get back, even if you sell the vehicle in the future.

The remainder of each loan principal payment goes toward equity. It's what remains of your car's original value at the end of the loan after depreciation has taken its toll. Equity is resale value. It's what you get back if you sell the vehicle. The longer you own and drive a vehicle, the less equity you have. At some point in time, after the wheels have fallen off and the engine is worn out, the only equity left is scrap value. You never get back the amount you've paid for your vehicle.

Buy versus lease - savings account or no savings account

So, buying a car with a loan is essentially like putting money into a declining-value savings account — you never get out as much as you put in. A portion of every payment you make is lost to depreciation and finance charges. What you have "to show" for your investment when your loan is paid off is only the part that is left over after depreciation and interest. A terrible investment by any measure. But cars are not usually purchased as investments, are they?

Leasing, then, is similar to buying, but without the equity "savings account." You only pay for what you use and you don't put anything extra into "savings." It's true that you'll own nothing at the end of a lease; you'll have nothing "to show" for the money you've put into it. But... what you don't own is the same part of the car's original value — the depreciated part — that a buyer too doesn't own at the end of his loan. Again, a car's value depreciates the same amount whether it is leased or purchased. That money is gone forever, lease or buy.

With leasing, you may have the option of putting your monthly payment savings into more productive investments, such as mutual funds or stocks that have the possibility of increasing in value. In fact, many experts encourage this practice as one of the benefits of leasing, though most people will typically find other uses for the money they save by leasing — such as paying the mortgage or buying groceries.

To summarize, leasing typically does not build equity, while buying does. The reason that a buyer has equity at the end of his loan is that he purchases that equity by making higher monthly payments. Leasing - lower payments, no equity. Buying - higher payments, some equity.

About 0% Loans vs Leasing

Below is a comparison of a typical lease compared to a 0% loan and a conventional loan. Does this mean leasing is always better? Not necessarily, because monthly payments are not the only factor that should influence your decision.

Lease 0% Loan 6% Loan
Car Price $23000 $23000 $23000
Down Payment $1000 $1000 $1000
Interest Rate 6% 0% 6%
Residual $11000 n/a n/a
Months 36 36 36
Payment $388.06 $611.11 $669.28




Leasing can be a little more complicated

Because leasing is somewhat more complicated; with residuals, money factors, etc.; it shouldn't be undertaken quite as casually as you might with a simple loan. There are more opportunities to misunderstand and make mistakes. Therefore, leasing requires that you be more careful and more informed.

This is precisely the reason we've provided this Lease Guide and our optional Lease Kit — to make leasing as easy as possible for you.

Just a comment on lease-to-buy plans

Some folks lease with the intention of buying their vehicle at the end of the lease, or before the end of the lease. This is nearly always more expensive than simply buying outright. However, you may have a good reason for this tactic. Just be aware that it costs you more in the long term.


One other thing

Most car leases have automatic built-in gap coverage, while car purchase loans almost always do not. Gap coverage, or gap insurance, pays the difference between what you owe on your loan or lease, and what your vehicle is actually worth if your vehicle is stolen or destroyed.

Why is this important? Because it's very common with car leases and loans, in these days of 0% interest, no down payment, and delayed payments, to owe more than your car is worth for most of the life of the financing. This can mean you'll still owe hundreds or thousands of dollars to the finance company even after your insurance has paid off — for a car you no longer have. This turns out to be a shocking surprise for most people caught in this unfortunate situation.

So, nearly all leases have it, but most purchase loans do not. You're better protected with a lease, unless you purchase the gap insurance separately at extra cost for the loan — if you can find somewhere to buy it.

Lease or Buy? Which is Better?


So, is it better to lease, or to buy? Every article, book, or web site about car leasing addresses this classic question.

The answer usually involves a financial comparison of the two options — typically ignoring the fact that the consumer may have interests other than overall long-term cost that can't be factored into a simple financial analysis.

Although the authors of these writings often go into great detail, providing lease-buy calculations and the obligatory side-by-side cost analysis, the answers always come out the same — though frequently presented with a biased slant that reflects the author's particular viewpoint about leasing.

Lease versus buy? Let's simplify the answers and summarize them here:

1. The short-term monthly cost of leasing is ALWAYS SIGNIFICANTLY LESS than the cost of buying.
For the same car, same price, same term, and same down payment, monthly lease payments will always be 30%-60% lower than loan payments. This is still true even when compared to 0% or low-interest loans. For actual detailed comparisons, see our Lease vs. Buy Calculator.


2. The medium-term cost of leasing is ABOUT THE SAME as the cost of buying, assuming the buyer sells/trades his vehicle at loan-end and the leaser returns her vehicle at lease-end.
The overall cost of leasing compared to buying, over the same lease/loan term, is approximately the same, more or less, assuming the buyer sells the vehicle at the end of the loan. Comparisons sometimes show buying to cost a little less than leasing due to fewer fees, lower total finance costs, and the assumption that a purchased vehicle will return full market value if it is sold or traded at the end of the loan (often a bad assumption, especially if traded). However, when the benefits of wisely investing monthly lease savings are considered, the net cost of leasing can easily be less than buying.


3. The long-term cost of leasing is ALWAYS MORE than the cost of buying, assuming the buyer keeps his vehicle for years after loan-end.
If a buyer keeps his car after the loan has been paid off and drives it for many more years, the cost is spread over a longer term. It doesn't take rocket science to figure out that the cost of buying one car and driving it for ten years is less expensive than leasing or buying five different cars over the same period. Therefore, leasing is always more expensive than long-term buying. If long-term financial cost savings were the most important objective in acquiring a new car, it would always be best to buy the car and drive it for as long as it survives — or until the cost of maintenance and repairs begins to exceed the cost of replacing it. However, many automotive consumers have other objectives that reduce the importance of long-term cost savings.

So, which is better, lease or buy?


It depends on what's most important to you. All of us have different lifestyles and priorities — in cars and in finances. Car lease-versus-buy decisions must be made with your own lifestyle and priority attributes in mind. What's right for one person can be totally wrong for another.

If you enjoy driving a new car every two or three years, want lower monthly payments, like having a car that has the latest safety features and is always under warranty, don't like trading and selling used cars, don't care about ownership equity, drive an average number of miles, properly maintain your cars, and are willing to pay more over the long haul to get these benefits, then you should lease.

If you don't mind higher monthly payments, prefer to build up some trade-in or resale value, like the idea of having ownership, like paying off your loan to be payment-free for a while, don't mind the unexpected cost of repairs after warranty has expired, drive more than average miles, prefer to drive your cars for years to spread out the cost, like to customize your cars, and don't like the risk of surprise lease-end charges — then you should buy

What this report is basically saying is that if you make 50k or more a year than you ought to lease but if not then stick to buying.

My personal advice on this matter is if you dont have lavish cash laying around then you should look for a car that may be 2 to 3 years old nothing to luxurious maybe like a VW Gti or VW Jetta 1.8t in the price range of 12k to 14,000k. so your payments would be around 350-370 a month with a interest of maybe 6.5% depending on your credit*. but you also have to take into account that you have to get full coverage insurance and thats another 100 dollars a month depending on your age the younger you are the more the insurance premium is. (the reason i put the 1.8t is because it wastes less gas than the V6 or V8 but that enormous power due to its turbocharger.) Again i hope this is some help to the issue and follow your instincts and really research the buying factor and the leasing factor too. Go to a couple of dealers feel them out look at some cars (*Dont let them run your credit before you are certain that you are buying or leasing.*) And dont let the salesperson pressure you into anything make sure you know what you are looking for because your are picking the car not the salesperson.

If you have any questions anyone reading this reply post feel free to ask me i hope i can help.

"May Allah guide you to the right path"

Sellam aleikum.:)
 

Globalpeace

Banned
Buying/Selling Cars!

Asslamo Allaikum,

Mrs, family & friends are JUST SICK of me dealing in cars. Every time she gets used to a car I sell it; which annoys the hell outta her… :) I don't know really whats up with "Women getting used to a Car"

I tell people Car is not a Wife...Dump her when you get bored!

In Summary:

Buying a brand-new car is VERY bad idea because of instant depreciation. You lose money like theres no tomorrow.

Leasing is a bad-idea because of three simple reasons:

1. You have no equity built-up because you are simply renting
2. Most leases have Interest involved, which is Haram
3. If you exceed the mileage then there are heavy penalties.

Best ideas for US:

Buy a 12-24 month car which has already depreciated but it is still NEW enough

If you know about Cars; then get one from the Auction; thats the best.

Best idea for Europe for personal use:
Buy a 3 year old ex-lease car because it has depreciated and just come off lease…well maintained and average miles!

If you know about Cars; then get one from the Auction; thats the best.


Best idea for Europe for Company use:
Buy a 2 ½ year old car; wait 6 months and write it off in your taxes; sell it & keep the money (personally).

If you know about Cars; then get one from the Auction; thats the best.

If you don't have money to buy a new'ish car upfront; then buy a bangor & don't get involved in Interest...Allah (SWT) will give you Barakah in it for avoiding Haram...
 

somewhatinspired

Junior Member
added question

my wife and i have 2 really bad cars.

is it incredibly haram to take out finance payment on a slightly used car?

we are planning on moving away and will only need one car.

we cant afford to buy anything reliable with cash.

we were planning on selling my truck and trading her car in.
using the money from my truck to put towards the car as well.

our goal would be a payment of under 200 dollars.

we only need to share one car as there is reliable public transportation in the area we plan to move.

but we would like a car that is reliable while we attend college, so we can drive back home to visit family, and not have to worry about our cars like we do now. it would also be nice to have a vehicle to go to jummah in, and buy groceries.

there is a large Muslim community where we plan to move, and we are moving to that area primarily to increase our iman while going to college.

( we are young )

we were planning on leasing but after reading about it it seems like a rip off, and actually more expensive because of the insurance costs.

my mother says it is forbidden.
but at the same time wouldn't mind if i took out a loan for college.
i know we could afford the payments, and i know life would run about 50 times smoother with a newer car that had less problems.

i think it would increase our chances for success after moving out of my fathers house.
 

Globalpeace

Banned
Interest is HARAM & a very serious Issue!

Asslamo Allaikum,

We all have been through hard times in life, brother.

I had a nice 2-seater RED Sports car before practising Islam; because chicks dig that sort of stuff….After learning about Islam; I was driving around in a battered old Ford Escort because INTEREST in Islam is HARAM (whether its for car, college or Home); and I couldn’t afford a decent enough car.

Please note that there is NO distinction in the type of loan; if its based on Interest, its HARAM and there is no difference of opinion on this in Islam. Look at the warning from Allah (SWT):

O you who believe! Fear Allah and give up what remains of your demand for usury if you are indeed believers. If you don’t, take notice of war from Allah and His messenger. But if you turn back, you shall have your capital sums. Deal not unjustly and you shall not be dealt with unjustly.” (Al-Baqarah: 278-279)

I got made fun of by family who all had nicer cars; I also had no house because of Interest (Mortgage) and also got taunted because of that! But my intention was the pleasure of Allah (SWT).

You can still get a bangor in America for a few hundred Dollars and run around in it, fairly trouble free. I paid a lot of my college/university fees in America by buying/selling cars from Auctions so I know the market and cars pretty well e.g. for a few hundred you can buy a Chevy and have trouble or you can get a Mitsubishi or a Subaru (both with almost no resale value) and drive it around fairly trouble free.

You can ALWAYS ask Muslims for a Loan!

As I tell Brothers/Sisters the sign of your financial prudence is HOW YOU BUY!

If you want to start a business LEARN HOW TO BUY! If whatever you are selling is good quality and good price; people will buy it!

But learning HOW to BUY is the key!

my wife and i have 2 really bad cars.

is it incredibly haram to take out finance payment on a slightly used car?

we are planning on moving away and will only need one car.

we cant afford to buy anything reliable with cash.

we were planning on selling my truck and trading her car in.
using the money from my truck to put towards the car as well.

our goal would be a payment of under 200 dollars.

we only need to share one car as there is reliable public transportation in the area we plan to move.

but we would like a car that is reliable while we attend college, so we can drive back home to visit family, and not have to worry about our cars like we do now. it would also be nice to have a vehicle to go to jummah in, and buy groceries.

there is a large Muslim community where we plan to move, and we are moving to that area primarily to increase our iman while going to college.

( we are young )

we were planning on leasing but after reading about it it seems like a rip off, and actually more expensive because of the insurance costs.

my mother says it is forbidden.
but at the same time wouldn't mind if i took out a loan for college.
i know we could afford the payments, and i know life would run about 50 times smoother with a newer car that had less problems.

i think it would increase our chances for success after moving out of my fathers house.
 

somewhatinspired

Junior Member
i know

i didn't really think anyone would tell me it was ok.

and if they did, i knew they would be wrong..

anyone wanna give me a loan?

heh.

how do Muslims usually benefit from helping someone with a loan if they cant take interest?

i have heard about Islamic house financing



like they buy the house with you, and you rent it from them until you have paid back the amount agreed upon, which would naturally amount to more than the price you bought it for. , and honestly it just sounded like interest, just like another way of going about it

Cuz when you finance a house, the bank holds the title (owns it) and you don't get the title untill you pay them back for the house plus the interest, which you could just say was rent for being able to live in the house...right


so i am assuming that cash is king.

thanks

i know it was a very dumb question.

a little vain because i would like a nicer car than i can afford.

also what is your opinion on a student loan...which charges interest.

?is my mom just nuts??

and if so, how shall i pay for school because i have been planning on using loans....??
 

Aapa

Mirajmom
Salaam Brother,

I do the following and it works:

1. I pray
2. I usually buy a used car, from a dealer, for $1500 to $4000. They have passed inspection etc. I was blessed with a beauty right now. And it was a gift from heaven..because my job entails driving 100 to 250 miles a day.
3. Please look at www.craigslist.com. I have seen some wonderful cars. You may have to drive a distance for the value..I look at mileage...it seems 100,000 miles is my magic number...but I have seen cars w. 50,000 miles for as low as $2000.00
4. I told the brohter to check out the estate sales. Often families are in need of getting rid of cars and they are in a hurry for cash. You can get good deals.

Housing.

The Islamic banks in the US are in large areas. The problem with housing depends on where you live. There are restrictions on where these institutions can work. If you want I can dig up information. There is an organization in Orange County, CA. and one in Texas.
If worse comes to worse as a college student you can qualify for HUD housing. Apply for HUD before you move. Sometimes it helps if you apply in one locality and get your status. Trust me, on that one. You may qualify for an apartment and pay as little as $100.00 a month. If you are a poor student..you can get telephone service for as little as $2.00 a month. Contact the division of social services.The paperwork is a mess; but some housing is rent to own. The HUD website has several programs. You can contact the housing authority in your area. States have varying programs. Thanks to Mr. Bush the housing authorities are now private contractors and there is more paperwork. You have to research on your own..they will tell you we don't have any programs. They do.

Hope this helps. Feel free to ask questions. I fight with HUD constantly to get my clients homes to live in.
 
Salaam Brother,

I do the following and it works:

1. I pray
2. I usually buy a used car, from a dealer, for $1500 to $4000. They have passed inspection etc. I was blessed with a beauty right now. And it was a gift from heaven..because my job entails driving 100 to 250 miles a day.
3. Please look at www.craigslist.com. I have seen some wonderful cars. You may have to drive a distance for the value..I look at mileage...it seems 100,000 miles is my magic number...but I have seen cars w. 50,000 miles for as low as $2000.00
4. I told the brohter to check out the estate sales. Often families are in need of getting rid of cars and they are in a hurry for cash. You can get good deals.

Housing.

The Islamic banks in the US are in large areas. The problem with housing depends on where you live. There are restrictions on where these institutions can work. If you want I can dig up information. There is an organization in Orange County, CA. and one in Texas.
If worse comes to worse as a college student you can qualify for HUD housing. Apply for HUD before you move. Sometimes it helps if you apply in one locality and get your status. Trust me, on that one. You may qualify for an apartment and pay as little as $100.00 a month. If you are a poor student..you can get telephone service for as little as $2.00 a month. Contact the division of social services.The paperwork is a mess; but some housing is rent to own. The HUD website has several programs. You can contact the housing authority in your area. States have varying programs. Thanks to Mr. Bush the housing authorities are now private contractors and there is more paperwork. You have to research on your own..they will tell you we don't have any programs. They do.

Hope this helps. Feel free to ask questions. I fight with HUD constantly to get my clients homes to live in.

Asalaamalikum,

100-250 miles a day??!!! What kind of work do you do? Doesn't that "drive" you crazy? I think brother AmericanMuslim drives his truck and is on the road alot too.

Jazakallah khair for the HUD information, I didn't know this.
 
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