Auto financing rises to Rs249bn in February amid falling interest rates

Auto financing in Pakistan has surged to Rs249 billion by the end of February, up from Rs241.6 billion in January, as falling interest rates continue to drive consumer demand for vehicle leases. 

Auto financing began recovering in August 2024, when the figure stood at Rs227.3 billion, though it is still far from the Rs368 billion peak in June 2022.

The decline in interest rates, from 22% to 12% over the past eight months, has led many buyers to opt for bank leases for both new and used vehicles. 

Vehicle sales reached 89,770 units in the first eight months of the fiscal year 2025, marking a 50% year-on-year increase from 59,700 units in the same period last year. 

This growth is also reflected in a 23.4% increase in the import of semi and completely knocked-down (CKD/SKD) kits, which rose to $575 million in 8MFY25, compared to $466 million in the same period the previous year.

Market analysts expect car financing to keep rising due to the lower interest rates, pointing to a noticeable rebound in auto sales. However, challenges remain for some buyers, as financing options are still limited by a Rs3 million loan cap, reduced loan terms (five years for cars up to 1,000cc and three years for cars under 1,000cc), and a 30% down payment requirement. 

Indus Motor Company has requested the government to lift the Rs3 million loan cap and adjust taxes and duties on imported and CKD units to encourage fair competition in the market.