Sharia Financing for Used Cars: Requirements & Application Tips

Buying your dream car often requires a large sum of money, making it difficult for many people to pay in cash. Fortunately, there’s an alternative: sharia-compliant financing, which allows you to purchase your car in installments while staying true to Islamic financial principles.

Through this system, transactions are carried out under Islamic contracts such as murabahah, ensuring every step aligns with sharia values. So, how exactly does sharia used car financing work? What are the requirements, and what tips should you know before applying? Let’s explore the details below.

What is Sharia Used Car Financing?

Sharia used car financing is a vehicle financing facility that uses murabahah contracts and adheres to Islamic principles, ensuring freedom from riba (interest), gharar (uncertainty), and maysir (speculation).

The process works on a buy-and-sell or profit-sharing basis. Here’s how it typically works:

The financing institution purchases the car you choose.
The car is then resold to you at an agreed price, which already includes a profit margin.
You pay the total amount in installments according to the agreed tenure.

This means there are no fluctuating interest rates as in conventional loans—the price is fixed and transparent from the start.

How the System Works

The most common model is murabahah (cost-plus sale), where the financial institution buys the car first and then sells it back to you at a price plus a predetermined margin.

Other contracts sometimes used include:

Ijarah Muntahiyah Bittamlik (lease-to-own)
Musyarakah Mutanaqisah (diminishing partnership)

Still, murabahah remains the most popular for car financing because of its simplicity and clarity.

In short:

You select a used car.
The sharia financing company buys it in cash.
The car is sold back to you at a fixed price plus profit margin.
You pay in installments until the agreed period ends.

The key difference from conventional loans: your monthly installment amount is fixed from start to finish, unaffected by market interest rate fluctuations.

Requirements for Sharia Car Financing

The requirements are quite similar to conventional loans, though the contracts follow Islamic law. Common requirements include:

Indonesian citizen (WNI), at least 21 years old or married.
Maximum age: 55 (employees) or 60 (entrepreneurs/professionals) at loan maturity.
Personal documents: ID card, Family Card, Tax ID, marriage certificate (if applicable).
Employment or business documents: salary slips (last 3 months) for employees, or business license/financial records for entrepreneurs.
Bank statements from the past 3–6 months.
Down payment (usually at least 20% of the car’s price).

Financial institutions will also conduct a credit assessment to evaluate your repayment capacity, ensuring fairness and transparency.

Tips for Applying for Sharia Used Car Financing

1. Choose a Trusted Institution

Make sure the financing provider is regulated by the Financial Services Authority (OJK) and supervised by a sharia advisory board. A credible institution ensures that all contracts are truly sharia-compliant.

2. Understand the Contract Details

Before signing, review the type of contract, profit margin, repayment tenure, and penalties. Clarity at the beginning prevents future misunderstandings.

3. Prepare a Sufficient Down Payment

A larger down payment (above 20%) will ease your monthly burden and make approval easier.

4. Match Tenure with Your Financial Condition

Longer tenures lower monthly installments but increase the total cost. If your income is stable, a shorter tenure helps you repay faster.

5. Inspect the Car Thoroughly

For used cars, check the vehicle’s condition, documents, and service history to ensure the price matches its value.

6. Maintain Timely Payments

Even though late penalties in sharia financing are directed to social funds, late payments can harm your credit record.

7. Compare Multiple Offers

Different institutions offer varying profit margins, admin fees, and benefits. Compare before deciding to get the best deal.

Sharia used car financing provides a safe, transparent, and Islamic-compliant way to own your dream car without bearing the burden of interest.

If you’re planning to buy a car in installments the sharia way, BFI Finance Syariah can be your trusted solution. Through its Sharia Business Unit, BFI Finance offers financing based on murabahah and ijarah contracts—transparent, fair, and in line with Islamic principles.

Whether for a new or used car, BFI Finance Syariah helps you achieve your goals with flexible repayment options. Backed by more than 40 years of experience and regulated by OJK, BFI Finance guarantees safe and reliable transactions.

So, what are you waiting for? Make your dream car a reality with BFI Finance Syariah—because with us, you can finance your car #WithPeaceOfMind the Islamic way!