KARACHI: Outstanding auto loans increased to Rs305 billion by the end of September, up from Rs294bn in August, marking the 10th consecutive month of growth, according to the State Bank of Pakistan (SBP).

Despite the rise, auto financing remains below the record high of Rs368bn seen in June 2022. However, rising demand for vehicles — reflected in surging imports of semi- and completely knocked-down (SKD/CKD) kits — is expected to sustain momentum in the coming months.

Pakistan Bureau of Statistics (PBS) data show that imports of SKD/CKD kits in the first quarter of FY26 jumped 114pc to $458 million, from $231.4m in the same period last year.

Samiullah Tariq, Head of Research at Pak-Kuwait Investment Company, attributed the increase in auto financing to improving purchasing power and the launch of new models. Mohammad Sohail, CEO of Topline Securities, said auto leasing is becoming more attractive, with rates now below 10pc in some cases.

The policy rate cut from 22pc in June to 11pc has also contributed to stronger auto demand, despite higher car prices following the implementation of the New Energy Vehicle policy from July 1, 2025.

However, structural constraints remain. The existing cap of Rs3m on auto loans continues to restrict higher-end financing. Some market analysts suggest raising the limit to Rs6m, though the SBP is reportedly cautious, fearing that increased demand may strain foreign exchange reserves through higher imports.

Other regulatory restrictions, such as a 30pc down payment requirement and shorter loan tenures — five years for vehicles up to 1,000cc and three years for smaller cars — also deter potential borrowers.

Published in Dawn, October 17th, 2025