Auto Financing Rises in February Amid Falling Interest Rates

Auto financing in Pakistan has increased to Rs. 249 billion at the end of February, up from Rs. 241.6 billion in January, as buyers increasingly turn to bank leasing for new and used vehicles. This shift comes in the wake of a significant drop in interest rates, which have fallen from 22% to 12% over the past eight months. The trend of improving auto financing began in August 2024, when the total stood at Rs. 227.3 billion. However, it is still below the peak of Rs. 368 billion reached in June 2022. Sales of cars, sport utility vehicles, vans, and pickups are currently strong and are likely to remain robust in the coming months. Factors contributing to this positive outlook include price and exchange rate stability, improved consumer confidence, and the introduction of new vehicle models. During the first eight months of the fiscal year 2025, total vehicle sales reached 89,770 units, marking a 50% increase from 59,700 units sold in the same period last year. This surge in sales is further supported by a 23.4% rise in the import of semi and completely knocked-down (CKD/SKD) kits, which increased to $575 million in 8MFY25 from $466 million in the same period of the previous fiscal year. Despite the favorable conditions, accessing financing remains a challenge for many consumers. The loan cap is set at Rs. 3 million, with a reduced payment tenure of five years for cars up to 1,000cc and three years for vehicles below that threshold. Additionally, a down payment requirement of 30% poses further hurdles for potential buyers.