Short Answer

Interest (riba) is forbidden in Islam. Interest refers to the additional money charged/paid on a loan. When you lease a car, you are renting it from the owner and pay a fee for that. It is allowed to pay a fee to rent something from the original owner. When you finance a car, you’re buying it, and the finance charge is the interest on the loan. In a lease, you’re renting, and the finance charge (known as the money facror) is a fee for using the vehicle and its depreciation. So, since the “interest” on a lease is not a fee for borrowing money, it is not really forbidden interest (riba) and is therefore allowed.

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Certainty Level: 4 (out of 5) What is this?

Shaykh Mustafa Umar