Auto Financing Dips for 17th Consecutive Month

For the 17th straight month, the total amount of outstanding vehicle loans fell, from Rs 264 billion in October to Rs 257 billion at the end of November 2023. This is a decrease of 2.6% month over month and 24.4% year over year.

According to data made public by the State Bank of Pakistan (SBP), there has been a cumulative decline of Rs 111 billion over the past 17 months. Do note that the amount of auto financing stood at Rs 368 billion as of the end of June 2022.

Declining bank vehicle financing reflected a lack of buyer interest as a result of a sharp spike in automobile prices caused by the rupee’s depreciation versus the dollar. The rest of the harm was caused by insanely high interest rates (currently at 22%, compared to 7% in March 2020), which were followed by SBP limitations on auto finance to taper demand for vehicles to minimize the current account deficit through reduced imports of parts and accessories.

Related: How Viable Is Car Financing Today?

Some assemblers, in addition to cutting prices, offered incentives such as discounts, installment payments, and after-sales service packages, but this did not stimulate demand. The implementation of the Rs 3 million upper limit on auto loans, together with a shorter payment time frame has also deterred buyers of brand new locally assembled cars. Analysts believe auto financing will remain on a decline until interest rates go down or the State Bank relaxes limits.

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