Title

I want to start a part time business in which i will purchase used cars and then will sell them at a margin. kindly inform me any source from where i can learn them easily.

Question

I want to start a part time business in which i will purchase used  cars and then will sell them at a margin. For that purpose i want to know the principles/rules of trading provided by islamic sharia. Therefore kindly inform me any source from where i can learn them easily or is there any book written on this topic, which can be bought and read online.
 

Answer

Assalāmu `alaikum Warahmatullāhi Wabrakatuh,

If you purchase and sell cars at a profit and you referred to the cost price then that is a muraabahah deal.[1] The cost price may include expenses incurred by you in the car.[2] In this case, the purchaser knows what is your profit margin. If the seller deceives the purchaser with regards to the cost price, the purchaser will have recourse.[3]

If you did not refer to your cost price, then this is a general sale.[4] In this instance, the purchaser does not know your profit margin. You are not obliged to divulge your cost price to the purchaser.

You may sell the car for cash terms or on credit.[5] The price between the two, cash and credit may differ. The credit price may be higher than the cash price.[6] The longer the period of installment, the higher the price could be. The mode of transaction, cash or credit must be specified. You may also sell the car voetstoots. That is you absolve yourself from any claim of any defect in the car.[7]

If the customer enquires of any defect in the car and you know of the defect then you should inform him. Inspite of selling the car voetstoots, providing this information is a moral issue.

If you sell your car on credit you may demand a security for payment from the purchaser. The security may be through Rahn or Kafaalat.

Rahn is the debtor places an item as collateral to you. If he does not pay, the item may be sold to recover your debt.[8]

Kafaalat is a person stands guarantee to pay the debt on behalf of the debtor.[9] You may also consider withholding the car until the price of the car is paid in a cash sale agreement or partly cash sale agreement.[10]

Khiyaar Naqd is another option of securitization. That is you say to the purchaser pay within for example one month. If you do not pay, then the transaction is cancelled.[11]

And Allah Ta’āla Knows Best

Ali bin Cassim
Student Darul Iftaa

Checked and Approved by,
Muftī Ebrahim Desai.
www.daruliftaa.net