As Salam Alikum Brothers
Bro, earnestly speaking, I would want to opt for ijarah any time than conventional leasing as it's nothing but like taking personal loan on interest, both are islamically impermissible. Some major differences between ijarah and conventional leasing are as follows:
1. In ijarah, they will begin charging you the rent after one month of delivery of car, where as in conventional leasing, they charge you interest from the next month, no matter when the car is delivered.
Brother this is not completely correct as they charge you More if the Booking time is More and if its not an Immediate Delivery Case.
Check Meezan Bank Car Ijarah Calculator...If your booking time is more so is your Rental.
2. In ijarah, your monthly rental will immediately be stopped, if the car is stolen, lost, destroyed, or otherwise not worthy of being used, where as in conventional leasing, you would continuously be required to pay the rentals unless insurance claim is settled.
I think they would apply the Same Principal as above here and Charge you more Rental or maybe they have that cost builtin the leasing...Not Sure about that.
3. In ijarah, if you miss out on any rental on time, you won't be charged interest, where as in conventional leasing, if you miss out on any rental, you would be charged interest.
They Charge you an amount for Late Payment just like Conventional but will not include that amount in their Own profit but will disburse it as charity to their choice organization.
4. In ijarah, if the customer dies, the legal nominee can seek title of car by just paying the outstanding principal amount only, where as in conventional leasing, legal nominee would be required to pay the outstanding principal plus markup in order to transfer ownership.
Usually Banks Charge 5% Markup on outstanding Principal as Prepayment Penalty. Dont know about Islamic in this Regard
These four differences should be kept in mind, if one opts to go for ijarah.
I cannot be Held Responsible for any Misunderstanding or Mistake on my part...So please Check with Relevant Banks before coming to any Conclusion...This Information is for Guidance only.Thanks
All Conventional Banks Calculate Payments the Following Way:
Kibor 1 yr + Bank Margin 2.5% to 5.0%
On Average Banks Charge 4.5% Bank Margin
These Days Kibor 1 Yr is 7.37%
So 7.37+4.5= 11.87%
This will be a Floating Rate in Which After the Lapse of Every year the Uptodate Kibor 1 yr Rate Will be taken and Bank Margin will Remain the Same...REvised Either Upwards or Downwards.
If you have good Banking History than the Bank will Give you a Better Bank Margin and its Negotiable and Different Banks Charge Different Margin Rate...Kibor is the Same for all Banks...... Unless you dont want a Shock of Higher Payments in case the Kibor Interest Rates Shoot Up you can have the Markup Rate Fixed But they will charge you more...I am Not Sure that they Use Kibor 2 yr or Kibor 3 Yr Rate for Those....
Conventional and Islamic Both Calculate the Rates in this Manner...The Difference Being
Cost of Vehicle and other Expenses:
1- Car Price
2- Withholding Tax
3- Processing Fee
4- Registration Charges
5- 1st Year Insurance Premium
Total Payment on Booking = Down Payment+ Withholding Tax + Registration Charges + Processing Charges + 1st Year Insurance Payment
Markup Calculated on Loaned Amount Only and Insurance Calculated Separately
Total Payment on Booking = Down Payment + Processing Charges
Markup Calculated on Loaned Amount + Withholding Tax+ Registration Charges + 1st Yr Insurance (Takaful) + Booking Time Charges
Its Also Advised to Pakwheels Member to Wait a Little before Financing their Vehicles as the State Bank Monitory Policy is Due Soon and its Hoped that the Kibor 1 yr Rate will be Reduced by 0.5% to Upto Max 1.0%....Hopefully in the Coming Week but you know its Pakistan so they might not Reduce it just like Petroleum Prices.
PS: Corrections to this Post would be appreciated and can be made a Sticky for other PakWheel Member who are interested in Financing Cars.
PS: I do know ijarah in itself contains many flaws which may not be acceptable islamically, but it at least is a positive initiative towards interest free financial system.