In cases of payment default, or if the borrower faces financial difficulties that hinder repayments to the Lender, what are the lender’s rights regarding vehicle repossession?

Specifically, does the lender sell the vehicle solely to recover losses up to the contract value, or are they entitled to retain all proceeds from the sale? How does this structure align with Sharia compliance?

In the event of payment default in a Murabaha-based auto finance contract, the lender has the right to repossess the vehicle to recover the outstanding balance of the contract. If the vehicle is sold, the proceeds are used to cover the remaining amount owed by the borrower.

If the sale amount exceeds the outstanding debt, any surplus is returned to the borrower, as retaining excess funds would not be compliant with Sharia principles. This approach ensures fairness and aligns with Sharia by only allowing the lender to recover the agreed-upon contract value, not profiting beyond that.