Auto financing in Pakistan increased to Rs241.6 billion in January 2025, up from Rs235.45 billion in December 2024, as declining interest rates encouraged consumers to take out loans for vehicle purchases, according to data released by the State Bank of Pakistan.
Over the past seven months, the central bank has slashed interest rates from 22 percent to 12 percent, making financing more attractive for both new and used car buyers. Auto financing had previously peaked at Rs368 billion in June 2022 before declining due to high borrowing costs.
Analysts anticipate another 100-basis-point rate cut at the upcoming Monetary Policy Committee (MPC) meeting on March 25 which could further trigger auto financing in an upward trajectory.Â
Car, SUV, van, and pickup sales are expected to remain strong in the coming months, supported by a 16% rise in imports of semi- and completely knocked-down kits. These imports reached $482 million in the first seven months of FY25, up from $415 million in the same period last fiscal year. The sales of these vehicles grew 55 percent year-on-year, reaching 77,686 units in 7MFY25.
Despite the drop in interest rates, obtaining auto financing remains a challenge for many consumers due to strict lending conditions. Banks continue to enforce a Rs3 million cap on auto loans, a reduced payment tenure of five years for vehicles up to 1,000cc and three years for smaller cars, and a 30 percent down payment requirement.
