Auto financing in Pakistan fell to Rs228 billion in July 2024, marking a 1.09% decrease from the Rs230.5 billion recorded in June 2024, according to data from the State Bank of Pakistan (SBP).Â
On a year-on-year basis, this represents a 20.06% decline compared to Rs285.19 billion in July 2023.
Despite a reduction in interest rates, the financing of new locally assembled vehicles has continued to decline, marking the 25th consecutive month of falling figures. The outstanding auto loans have dropped significantly from Rs368 billion in June 2022, reflecting a decrease of Rs140 billion.
The central bank had maintained its policy rate at a high level for nearly four years before implementing a cut of 150 basis points in June 2024, bringing it down to 20.5%, followed by a further reduction to 19.5% in July.Â
Private banks have responded with offers to attract buyers through reduced interest rates and discounted insurance, but the high prices of locally assembled vehicles remain a significant barrier, with many consumers unable to afford the resulting monthly loan payments.
The downturn in auto financing is linked to a range of factors, including rising vehicle prices, high interest rates, stricter loan regulations, and increased taxes on automobile imports and parts.Â
The SBP data further indicated a decline in consumer financing for house construction, suggesting a broader slowdown in the consumer credit market.
The impact of these rising costs is particularly evident in the automobile market, where even the most affordable vehicles are now out of reach for many consumers. For example, the Suzuki Alto, once considered an economical choice, now costs over Rs3 million for the top variant, making it increasingly difficult for potential buyers to justify purchasing a new car.
The continued decline in auto financing highlights the ongoing economic challenges in Pakistan, where rising costs, higher interest rates, and stringent regulations are making it harder for consumers to afford new vehicles.
