New car prices in Pakistan have gone past the level of sanity with prices being revised after a frequent interval of less than 3 months reflecting a huge disproportion in forex fluctuations versus the impact on per unit price for end users.
Honda Civic and Toyota Corolla which are known as ordinary cars for middle class buyers around the world are reaching PKR 5 million to up to PKR 6.5 million whereas the flurry of expensive crossovers are well beyond that. Most of the new cars have already become more expensive than residential property and it just doesn’t make sense to spend such a huge amount of money only to buy a “car” which lacks quality & features when compared to the ones sold in other markets.
A lot of people believe in these tougher economic times, car financing is the key to buy new cars. Yes it certainly used to be this way, however with the sort of price tag new “local assembled” cars currently bear, the estimated monthly installments (EMI) will be enough to boggle your mind. Keep in mind there were amendments made by the State Bank last year in the prudential regulations for auto financing, as per which:
- Minimum required down payment has been increased from 15% to 30%.
- Maximum tenure of auto financing has been reduced from 7 years to 5 years.
- Maximum debt-burden ratio, allowed to a borrower, has been decreased from 50 to 40%.
- Auto financing limits availed by one person from all banks in aggregate, will not exceed Rs 30 lac at any point in time.
- Financing for imported vehicles has been completely prohibited regardless of engine capacity.
Based on the above, suppose if someone is willing to buy a new Honda Civic RS via car financing, the minimum we would need to pay in terms of 30% down payment will PKR 19.5 lac, and then will come the hefty monthly installments. In order to show you how tough the EMIs are, we have compiled below, a list of different local assembled cars to reflect their EMI against 30% down payment and 5-years (60 months) payback period. Do note that the below mentioned rates will vary depending on the bank you opt & the markup applied. Have a look:
|Model||Price||30 % downpayment||EMI|
|Honda Civic RS||PKR 64.99 lac||PKR 19.5 lac||PKR 104,170|
|Honda City 1.2||PKR 32.49 lac||PKR 9.74 lac||PKR 52,150|
|City Aspire 1.5 CVT||PKR 37.49 lac||PKR 11.24 lac||PKR 60,150|
|Toyota Yaris 1.3||PKR 31.09 lac||PKR 9.32 lac||PKR 49,800|
|Yaris Ativ X 1.5||PKR 34.99 lac||PKR 10.49 lac||PKR 56,250|
|Toyota Corolla Altis X 1.6||PKR 39.29 lac||PKR 11.78 lac||PKR 62,850|
|Corolla Altis Grande 1.8||PKR 46.89||PKR 14.06 lac||PKR 75,300|
|Toyota Hilux Revo V||PKR 88.39 lac||PKR 25.1 lac||PKR 141,800|
|Toyota Fortuner Diesel||PKR 114.89 lac||PKR 34.46 lac||PKR 163,950|
|Kia Sorento 3.5||PKR 82.03 lac||PKR 24.60 lac||PKR 131,130|
|Kia Stonic EX+||PKR 44.5 lac||PKR 13.35 lac||PKR 71,200|
|Peugeot 2008||PKR 58.5 lac||PKR 17.55 lac||PKR 94,150|
|Hyundai Staria GLS||PKR 92.99 lac||PKR 27.89 lac||PKR 149,600|
|Hyundai Tucson AWD||PKR 62.99 lac||PKR 18.89 lac||PKR 101,200|
|Chery Tiggo 8 Pro||PKR 65.99 lac||PKR 19.79 lac||PKR 105,750|
|Changan Alsvin||PKR 29.39 lac||PKR 8.81 lac||PKR 47,200|
|Changan Karvaan Plus||PKR 19.44 lac||PKR 5.8 lac||PKR 31,650|
|Suzuki Wagon R AGS||PKR 21.58 lac||PKR 6.47 lac||PKR 34,450|
|Suzuki Cultus AGS||PKR 24.22 lac||PKR 7.46 lac||PKR 39,100|
|Suzuki Alto||PKR 17.47 lac||PKR 4.34 lac||PKR 27,900|
|Suzuki Swift DLX||PKR 28.99 lac||PKR 8.69 lac||PKR 46,500|
|DFSK Glory 580 Pro||PKR 50.40 lac||PKR 15.12 lac||PKR 80,950|
|Prince Pearl||PKR 13.34 lac||PKR 4.02 lac||PKR 21,800|
The above table only shows the down payment and estimated monthly installments. Other costs such as registration, insurance, taxes, bank fees & processing charges and of course the premium/ on-money will have to be added to the final cost a user will have to bear in order to bring a new car on road.
Looking at the above figures, its hard to evaluate how a common man, say salaried person, will be able to bear these costs and with such hefty EMIs, how can one be able to bear other cost including fuel & maintenance of the vehicle, not to mention the obvious expenses (education/ food/ healthcare etc) and to feed the family within a specific monthly income.
Another interesting thing is the 4th clause of the SBP regulations (Auto financing limits availed by 1 person from all banks in aggregate, will not exceed Rs 30 lac at any point in time). By looking at the prices, most of the vehicles listed above require more than Rs 30 lac financing based on 30% downpayment, thus making them unable to get processed unless the purchaser increases the downpayment in order to bring the financing limit within the mentioned cap.
Related: New Cars Sales: Booked vs Delivered
Simply put, a person cannot take a car loan of more than Rs 3 million. Lastly, the maximum debt-burden ratio has also been decreased from 50 to 40%. This means if a person earns Rs 100,000 a month, then he will be eligible for a monthly installment of maximum Rs 40,000. Now see the table again and do the math, how much you need to earn if you wish to purchase an ordinary Toyota Corolla via bank financing.
To sum it up, the above scenario bring two situations in front of us, first is the widening economic divide. In simple words, the rich are getting richer, while the poor becoming poorer. Second once again shows the presence of scalpers in the market, since the above calculations renders that even a person with handsome salary is not able to buy most of new cars via financing, so who is buying these cars after all? Since sales shown are in fact just “booked” units & not deliveries, the number of new car registrations will perhaps show how much of these new cars are actually going into the hands of genuine buyers.
A 3d animation professional with over 20 years of industry experience having served in leading organizations & production facilities of Pakistan, an avid car enthusiast and petrolhead with an affection to deliver writings to help shape opinions. Formerly written for PakWheels as well as major publications including Dawn. Founder of CarSpiritPK.com