Ijara vs Murabaha: Who Holds the Title While You Pay
These two structures are often described as alternatives, and the practical difference comes down to one question: whose name is on the title while you are making payments? Everything else that surprises buyers follows from that.
Murabaha: You Own It Immediately
The financier buys the car and sells it to you at cost plus disclosed profit. You are the owner from that moment, and the car is registered to you. The financier holds a lien as security, exactly the way a bank does on a conventional loan.
Ijara: They Own It, You Rent It
The financier buys the car and leases it to you for a fixed term at a fixed rent. Ownership stays with the financier. A separate purchase option can transfer the car to you at the end, and in a diminishing arrangement your share of ownership grows with each payment until you own it outright. Both versions are common, and they behave very differently if you exit early.
What That Changes in Practice
- Registration and plates usually follow the owner, so an Ijara may register the car to the financier rather than to you.
- Because the financier owns the car, major maintenance and some insurance obligations can sit with them. Check what the lease actually assigns to you, since it varies.
- If the car is totaled, the insurance settlement goes to the owner. Your exposure to the gap between that settlement and the remaining obligation depends entirely on the contract wording.
- Mileage caps and wear charges that appear in ordinary leases can appear here too. Look for them before you assume otherwise.
- Ending an Ijara early usually costs more than paying off a Murabaha, because you are breaking a lease rather than settling a sale price.
Which One Fits You
A Murabaha looks and feels like a purchase, because it is one: you own the car, you can sell it, and the total price is fixed. An Ijara looks and feels like a lease, because it is one: lower monthly commitment in some cases, more contractual restrictions, and no ownership until the option is exercised. Neither is automatically better. The question is whether you want to be an owner or a renter for the next five years, and what each contract charges you for the privilege.
Carummah explains how contracts work and does not issue religious rulings, so ask a qualified scholar.
Frequently Asked Questions
Who owns the car in an Ijara?
The financier, for the term of the lease. Ownership transfers only if and when a purchase option is exercised, or gradually in a diminishing arrangement where your ownership share grows with each payment.
Is an Ijara cheaper than a Murabaha?
Not reliably. A lease can show a lower monthly payment because you are not buying the whole car, but the total paid over the term plus any purchase option can exceed a Murabaha price. Compare the total cost to own the car at the end, not the monthly payment.
What happens if the car is totaled during an Ijara?
The insurance settlement generally goes to the owner, which is the financier. What you still owe, and whether gap coverage applies, depends on the contract wording, so read that clause before signing.