KARACHI: Outstan­ding auto loans rose to Rs285.6 billion in July, up from Rs276.6bn in June, marking the eighth consecutive month of growth, according to data released by the State Bank of Pakistan (SBP). While the trend is positive, the current level remains well below the all-time high of Rs368bn recorded in June 2022.

Industry experts attribute the uptick in auto financing to improved consumer sentiment and a more favourable interest rate environment. The current lending rate stands at 11pc, significantly down from 22pc in June 2024. This has helped offset the recent increase in car prices, triggered by the imposition of the New Energy Vehicle (NEV) adoption levy from July 1.

Samiullah Tariq, Head of Research at Pak-Kuwait Investment Company, noted that auto financing is likely to continue its upward trajectory if the SBP maintains the current policy rate in the upcoming Monetary Policy Committee (MPC) meeting. Mohammed Sohail, CEO of Topline Securities, echoed this view, adding that stable economic conditions and growing car sales could further enhance financing opportunities.

However, auto sector expert Mashood Ali Khan cautioned that inconsistent government policies continue to undermine industrial confidence. While lower interest rates support car financing, persistent inflation and a lack of clarity on the rupee-dollar parity pose ongoing challenges.

Mashood added that although foreign exchange reserves remain below desired levels, the rupee has been relatively stable. Rising imports, however, could pressure the currency in the coming months.

Auto assemblers believe that while the 11pc interest rate is encouraging demand, the existing cap of Rs3 million on auto loans remains a hurdle. They argue that increasing the limit to Rs6m could unlock further growth in financing.

Car leasing also faces constraints, with strict terms such as a 30pc down payment and shorter repayment tenures — five years for vehicles up to 1,000cc and just three years for smaller cars.Despite these challenges, vehicle sales remained strong in July. Sales of cars, pickups, SUVs, and vans reached 11,034 units, up 28pc year-on-year. In FY25 so far, total sales have surged by 43pc to 148,023 units from 103,829 units in FY24, buoyed by a wider range of vehicle options, lower inflation, and a more favourable lending environment.

Published in Dawn, August 27th, 2025