People become confused about purchasing and selling things on installments because many banks are offering such contracts such as Car Ijarah & leasing and they call it Islamic.
Islam allows purchase & sell in installments but there are certain rules which make it different from the normal installment contracts which are available in market.
1) The first major difference is that in Islam the parties are bound to decide the installments and the payment period at the time or agreement, and it should not be based on KIBOR/LIBOR or any interest rate.
2) Their cannot be any increase in payment if the payment is delayed, Islamic system allows the seller to file a case against the debtor but Islam doesn’t allow charging extra amount if someone fails to pay the liability. If anyone charges penalty amount on late payment then it is Riba (Soodh).
3) There cannot be any discount or penalty on early payment.