18.104.22.168 Termination of Contract
The buyer of the car has the option and right to terminate the contract and return the
car before the contract reaches its maturity in both the conventional and Islamic mode of car
financing. The difference lies in the post-termination phase.
In the conventional car financing scheme, if the customer wants to terminate the
contract the only option he has is to buy the car by paying the rest of the instalments.
In the Islamic car financing scheme, the customer has two options: either return the
car and get back the security deposit or buy the car from the bank at the market value plus a
certain percentage of spread for the bank.
22.214.171.124 Documentation Differences
Islam considers the procedure in which any transaction takes place as a significant
factor in all modes of financing. The underlying difference between the Islamic and
conventional modes of financing is that of the process. To Muslims, not only the end result
but also the means to it are important.
If the result is correct and the steps are wrong, or vice versa, the entire process is deemed
invalid, from a
perspective. According to
principles, lawful steps to lawful
results are very important.
The most important financial difference between Islamic permitted leasing and
conventional financial leasing is that the leasing agency must own the leased object for the
duration of the lease. Ownership of the asset is the prerequisite for leasing out its usufruct. As
mentioned, Islam places great emphasis on the sequencing.
1.3.5 The Meezan Bank Car
Meezan Bank’s Car
has been designed according to the principles of Islam and
is completely interest-free. Moreover the
contract and other documentation also comply
requirements. In contrast, a conventional car-financing scheme is actually an
interest-based loan given by the financial institution with interest being charged on the loan.
Also, in conventional car-leasing schemes, the lease contract is not in compliance with
law and has
and other un-Islamic elements in it.