Is it permissible to lease items/equipment?

As-salāmu ʿalaykum,

I wanted to know whether it is permissible to lease items. For example, if I paid $20,000.00 for a piece of equipment and a person wants to purchase the said equipment.

I would lease the item for a year at $2500.00 per month for one year, which would make the cost of the said item to be $30,000.

A contract would be done then done with the above details and both parties would sign the agreement.

I acknowledge that riba is totally haram and wanted to know if the following transaction would be ḥalāl with regards to deen. Jazāk Allāh.

Wa Alaikum Assalaam,

الجواب و بالله التوفيق

Yes, it is permissible to lease items. If you have purchased an equipment and then wish to lease it to a person for a specific period of time with a fixed monthly payment, this is permissible.

In the example which you have given, leasing the equipment for a year with a monthly payment of $2,500.00 will be permissible even though the total sum collected at the end of the year will be more than that which you paid for the item.

However, if the person wanted to purchase the item, then a contract of sale will be done not that of lease. Both types of contract cannot be done at one and the same time. Before you and the other person can enter into an agreement, the nature of the contract must be made clear to each party. If it is a sale, then the laws of sale will be applicable and both must agree on the sale. If it is a lease agreement then the laws of leasing will be applicable and both parties must agree on the lease agreement. It will not be permissible for the other party to have an understanding that he is purchasing the item, while you have an understanding that it is a lease which you are doing. Both parties have to agree upon only one transaction at a given time.

Therefore, in the example your have given, if a person wants to purchase the equipment from you which had cost you $20,000.00, then it is permissible for you to add a profit to it and sell it to him. In adding a profit, you cannot put an exorbitant mark-up on the item which is above the market price/value. So, if the selling price is agreed at $30,000.00 (which both parties see as being reasonable), then you can sell it to him for this price and allow him to pay a monthly installment for a given amount of months until he pays out for it.

If on the other hand, you want to lease the item in a manner that you can also make a profit, then this is also permissible. In the example given, you and the person can enter into a lease agreement for the one year period at $2,500.00 per month. At the end of the year, you will collect $30,000.00 which will include the monies you paid for the equipment plus a profit. However, because this is a lease agreement, the person will not automatically become the owner of the item. Until this time (at the end of the lease period) you will still be the owner. Seeing that you have collected the amount you wanted, you can either hand over the item to him and make him the owner without charge, or you may sell the item at a very low price to him, which will now make him the owner of the item.

And Allah Knows Best.

Mufti Waseem Khan.