KARACHI: Low interest rates continued to attract buyers towards auto financing, with outstanding car loans rising to Rs276.6bn by the end of June — up from Rs271.2bn in May — marking the seventh consecutive month of growth, according to data released by the State Bank of Pakistan (SBP).
Despite the recent upward trend, the current volume remains well below the peak of Rs368bn recorded in June 2022.
The decline in interest rates — slashed to 11pc from 22pc since June 2024 — has played a critical role in reviving consumer demand for auto loans. However, the recent increase in car prices, following the imposition of the NEV adoption levy from July 1, may dampen financing activity in the future.
Market analysts held differing views on the impact of higher vehicle prices. Samiullah Tariq, Head of Research and Development at Pak-Kuwait Investment Company, stated that July may experience slower activity due to pre-buying in June.
In contrast, Topline Securities CEO Mohammed Sohail anticipated continued growth in both car sales and auto financing, citing economic recovery and low borrowing costs as key drivers of this growth.
Financing hits Rs276.6bn in June; SBP urged to raise lending cap to Rs6m
Auto assemblers attributed the recent surge in financing largely to the drop in interest rates, despite the existing Rs3 million cap on auto loans. Industry players suggest that the SBP could help sustain the momentum by raising the cap to Rs6m, thereby enabling more low- and middle-income consumers to access financing options.
Car leasing, however, remains a challenge for many due to stringent terms, including shorter repayment tenures — five years for vehicles up to 1,000cc and three years for smaller cars — and a 30pc down payment requirement.
Sales of cars, pickups, SUVs, and vans surged by 43pc year-on-year to 148,023 units in FY25 from 103,829 units in FY24. The rise was driven by a broader range of vehicle options, easing inflation, and a favourable interest rate environment.
Topline Securities projects total car sales — including those from members and non-members of the Pakistan Automotive Manufacturers Association (PAMA), as well as imports — to exceed 217,000 units in FY25, up 31pc YoY. However, this figure would still be 33–38pc below the FY18 peak of 330,000–350,000 units.
For FY26 and FY27, the brokerage expects growth of 14pc and 13pc, respectively, with volumes reaching 248,000 and 280,000 units. Even then, FY27’s projected sales would remain 15-20pc lower than the historic high achieved in FY18.
Published in Dawn, July 18th, 2025
