Ruling on buying by hire-purchase

Firstly: 

This contract is a form of
hire-purchase, concerning which a statement has been issued by the Islamic
Fiqh Council, stating that it is permissible if the rental contract is
accompanied by a separate contract giving the item to the renter so long as
he pays off all the rent, or a promise to give it to him after he has paid
all the rent. End quote. 

See the text of the
statement in full in Fiqh al-Nawaazil by Dr. Muhammad Hasan
al-Jeezaani (3/301). 

Giving something for free
subject to a condition has been ruled to be valid by some scholars. This is
the view favoured by Shaykh al-Islam Ibn Taymiyah (may Allaah have mercy on
him). But that is subject to the condition that the contract of giving is
separate from the rental contract, which states that the item is to be
rented for a certain amount of money, for a certain length of time, then
states that it is to be given subject to certain conditions,  such as
saying: The two parties agree that the first party (the company for example)
will give the second party (the customer) the item for free, if he pays off
the instalments that he owes. 

It is also essential that
the rental be a real rental and not just a cover for selling. So the one who
rents it out is liable for the rented item, not the one who is paying rental
for it.  Similarly the costs of basic maintenance other than running costs
are to be borne by the one who rents it out, not the one who is paying
rental for it, for the duration of the rental period. This is different from
a sale, when the liability and mantenance are all borne by the purchaser
because he takes possession of the item as soon as the contract is
completed. 

Secondly: 

What you say about “If
payment is made before the first day of every month, it will be considered
paid for 3 months, while if you pay after the first day of the month then it
will be considered paid for only one month” is known to the fuqaha’ as
“waiver with early payment”, i.e., if the borrower hastens to pay what he
owes, some of the debt will be waived for him. 

If you hasten to pay off
the debt ahead of time, two instalments of the amount you owe will be waived
for you. 

The fuqaha’ differed as to
whether this is valid or not. Most of them are of the view that it is not
permissible, because it is akin to riba. Ahmad and al-Shaafa’i, according to
one of their two views, were of the view that it is permissible, and this is
the most correct view. For a detailed discussion on that, please see the
answer to question no. 13945. 

In a statement issued by
the Islamic Fiqh Council it says: Waiving part of the debt that is not due
yet, whether it is at the request of the lender or the borrower, which comes
under the heading of “waiver with early payment”, is permissible according
to sharee’ah, and it does not come under the heading of forbidden riba so
long as it is not based on prior agreement. End quote from Majallat
Majma’ al-Fiqh (2/217). 

Hence it is known that this
form of waiver with early payment is not permissible, because there was
prior agreement to that at the time when the contract was drawn up. 

And Allaah knows best.