Auto financing experienced a slight increase, rising to Rs 235.454 billion in December 2024 from Rs 234.6 billion in November.
After a decline in November 2024, when auto financing dropped from Rs236 billion in October to Rs 227.541 billion in September and Rs 227.296 billion in August, data from the State Bank of Pakistan (SBP) revealed that December’s numbers marked a slight recovery. The peak for auto financing was in June 2022, reaching Rs 368 billion.
In response to economic conditions, the State Bank of Pakistan reduced its policy rate multiple times: from 22% to 20% on June 10, to 19.5% on July 29, followed by 17.5% on September 12, 15% on November 4, and finally 13% on December 16—resulting in a cumulative decline of 900 basis points over six months.
Mashood Ali Khan, Director of Mehran Commercial and an auto parts maker/exporter, expressed optimism for the first half of 2025. He believes that banks and vehicle assemblers are likely to roll out promotional offers, fueled by the ongoing downward trend in interest rates.
Related: How Viable is Car Financing Today?
Mashood highlighted that employees working in multinational companies and large private firms are benefiting from auto financing due to their relatively high salaries. However, he pointed out that even individuals earning Rs 250,000 a month are struggling to afford a 660cc Suzuki Alto through a bank loan, as monthly installments of over Rs 50,000 are difficult to manage alongside rising expenses for education, groceries, and utilities. He added that the private sector salaried class is still under significant financial pressure, compounded by high tax burdens.
Looking ahead, Mashood noted that the auto sector’s outlook will largely depend on upcoming budgetary measures, the political climate, foreign exchange reserves, and the rupee-dollar exchange rate. He observed that the high demand for imported goods often leads to a foreign exchange crisis, which then results in measures to curb consumption.
Market analysts are also predicting a further 100 basis point reduction in the SBP policy rate to 12% in the upcoming Monetary Policy Committee meeting on January 27, citing the continued decline in the Consumer Price Index. Bear in mind that previously, car financing faced pressure due to high interest rates, a loan cap, reduced repayment tenures—five years for cars up to 1,000cc and three years for vehicles below 1,000cc—and an increased down payment requirement of 30%.
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