Banky team Reviewed editorial answerIn a car financing arrangement, the bank or institution first purchases the car and then sells it to you at a predetermined price that includes the purchase cost and an agreed-upon profit margin, which you repay in installments.
Steps
The core principle is that the financing is linked to the sale of a real asset, not simply lending money with interest.
Before signing, review the car's cash price, the final sale price in the financing arrangement, the down payment, installments, expenses, insurance/takaful (Islamic insurance), and the terms for late and early repayment.
Also, ensure that the ownership and sale process is as approved by the bank's Sharia board.
The figures, fees and limits in this answer vary by bank and change over time — confirm them with your bank or the official source before acting.