Islamic hire purchase (IHP) facility is widely used by Islamic banks for car financing in Malaysia. Thus, this research was carried out to determine the factors that influence the customers’ decision to choose Islamic hire purchase facility in Kedah. A total of 105 customers on Islamic hire purchase in Kedah was selected as respondents of the survey questionnaire which was randomly distributed. The obtained data were analyzed using Ttest, ANOVA, Pearson Correlation and Multiple Regressions. The finding shows that
religious obligation, awareness, tenure and age significantly influence the customers’ choice for Islamic hire purchase. Since choosing Islamic hire purchase rests largely on these factors, Islamic banks must emphasis on religious values such as ethics and manners which are friendlier towards the customers. Islamic banks should expand their target market and increase the quality of performance through Islamic values in Islamic banking.
Last but not least, Islamic banks need to transparent and disclose all information to their customers to avoid misconception about Islamic hire purchase