Is It Permissible to Charge a Higher Price in Installments Compared to Cash?

I want to inquire about taking a car on lease from the bank. That is, people purchase cars through the bank and then make installment payments to the bank over different durations such as 3 years, 4 years, or 5 years. In this process, the bank charges an amount higher than the original value of the car. Is this permissible?

الجوابُ حامِدا ًو مُصلیِّا ً

Fixing a higher price in the case of a sale on credit or installments as compared to cash is Islamically permissible and valid, and it does not fall under interest (riba). Therefore, in the case mentioned, purchasing a car from the bank on installments is permissible provided the following conditions are observed:
1. The bank must first purchase the car from the showroom (or seller), take it into its possession, and then sell it to the customer through a separate contract.
2. At the very time of the contract, it must be clearly decided that the transaction will be on credit and installments.
3. The value of each installment must be fixed.
4. The total number of installments must be determined.
5. No penalty or extra condition should be imposed for any delay in payment of installments. If these conditions are fulfilled, then buying a car from the bank on installments is undoubtedly valid and permissible. However, if even one of these conditions is not met, then such a transaction will not be permissible.

مأخَذُ الفَتوی

کما فی الدر المختار: (وصح بثمن حال) وهو الأصل (ومؤجل إلى معلوم) لئلا يفضي إلى النزاع الخ (4/531)۔
و فی المبسوط: وإذا عقد العقد على أنه إلى أجل كذا بكذا وبالنقد بكذا أو قال إلى شهر بكذا أو إلى شهرين بكذا فهو فاسد؛ لأنه لم يعاطه على ثمن معلوم ولنهي النبي - صلى الله عليه وسلم - عن شرطين في بيع وهذا هو تفسير الشرطين في بيع ومطلق النهي يوجب الفساد في العقود الشرعية وهذا إذا افترقا على هذا فإن كان يتراضيان بينهما ولم يتفرقا حتى قاطعه على ثمن معلوم، وأتما العقد عليه فهو جائز؛ لأنهما ما افترقا إلا بعد تمام شرط صحة العقد الخ (13/7)۔