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Return of the Car.The customer takes out a loan to purchase the car, which he cannotreturn under any circumstances whatsoever, unless he pays off theloan.The buyer has the right to return the caranytime during or at the end of the lease period. Since this is a lease agreement, and the lessee has been paying rentals, he can return the car to the bank and take back the security deposit any time he wishes.Penalty ofLatePayment ofrent:Conventional leasing companies charge a certain amount of penalty for late payment and benefit as a revenue.The bank or financial institution is not allowed to charge the customer an additional amount in case of delays in payment of the rentals since it is considered Riba (Interest). Therefore, in the case of delay lessee has to pay a penalty as it is clearly defined in the agreement and Leasing Company cannot consider as a revenue since it has to be transferred to charity as this isclear instruction of the Islamic scholars
Insurance ofthe asset:The asset is insured through insurance companies.Asset is insured through TakafulTimeperiod:Conventional leasing is also applicable to long and medium term assets like vehicles, houses and land.Ijara is commonly used for long and medium term fixed asset financing, project financing and for retail productssuch as homes, commercial real estate and automobiles.Prematureterminationofleasecontract:Lease can be terminated in the event that the lessee fails to meet his obligations, notably the obligation to pay rent. The lessor must then pay legal proceedings involving the bringing of a claim, where equipment is concerned. Lessee cannot terminate lease if contract does not contain cancellation clause.If any term of the agreement is violatedby lessee then the lessor has the right toterminate the Ijara contract unilaterally. However, if no term is violated then theIjara cannot be terminated without mutual consent.Determinant of rent:Lessors consider market related forces while scheduling lease payments. The market rate of interest provides a basis for lease determination.Rent is determined by market given forces. In practice, the market rate of interest is used to determine the rental rate, although this is not explicitly statedSaleandlease backasonetransaction:Its transaction involves the sale of the property by one company to another which in turn leases the same property back to the original seller.Sale and lease back are allowed, but only as two separate transactionsEffectofprematuretermination:On termination of lease contract,all obligations that are stillexecutor on both sides areFrom the time of termination, the lesseeis not obliged for rental payment.