Car Loans in Pakistan Rise to Rs407bn in September Despite Sales Slump
Outstanding car loans in Pakistan climbed for the 22nd consecutive month to Rs407 billion in September, up from Rs393.3 billion in August, Dawn reported, citing data released by the State Bank of Pakistan. The rise came even as showroom sales slowed sharply.
Assemblers saw a 12 per cent year-on-year and 3 per cent month-on-month drop in sales of cars, SUVs, pickups and vans, which fell to 15,104 units in September.
Why car loans in Pakistan keep rising as sales fall
Dealers and analysts blame the sales dip on uncertainty over the delayed new auto policy, followed by confusion over the general sales tax on hybrid vehicles. The GST question has since been settled at 18 per cent for vehicles up to 2,000cc, down from 25 per cent.
Yet financing kept growing. Topline Securities chief executive Mohammed Sohail said auto financing is likely to keep rising, but more slowly, amid uncertainty over the new auto policy and rising borrowing costs. The Karachi interbank offered rate, or KIBOR, has edged higher over the last few weeks.
At its September 14 meeting, the State Bank’s Monetary Policy Committee kept the policy rate unchanged at 11.5 per cent. But Topline warned in a recent report that the central bank may raise the rate by 50 basis points, citing global geopolitical uncertainty, pressure on energy supply chains, and rising inflation expectations driven by high oil prices and food inflation.
What it means for car buyers
For buyers, the message is mixed. Credit is still flowing, and a banker dealing in auto loans told Dawn that car financing should improve further from November. He pointed to rising consumer confidence, greater trust in Chinese-made vehicles, new model launches and the entry of new brands into the market.
But borrowing is getting costlier. Any policy-rate hike would feed straight into monthly instalments, which are typically priced off KIBOR plus a bank margin. Buyers signing up now could see their payments rise if the State Bank moves in the coming months.
The cumulative picture is brighter. Auto sales rose 19 per cent to 50,480 units in the first quarter of FY27, and assemblers have imported large volumes of semi- and completely knocked-down kits, which should keep the next few months calm on the supply side.
Auto policy talks have been under way at the highest level, and the industry is watching for the new policy’s final shape. Inflation pressures remain a wider concern for the economy.
FAQs
How much did car loans rise in September?
Outstanding auto financing reached Rs407 billion in September, up from Rs393.3 billion in August. It was the 22nd straight monthly increase, according to SBP data.
Why did car sales fall in September?
Assemblers sold 15,104 units, down 12 per cent year on year, amid uncertainty over the delayed new auto policy and confusion over GST on hybrid vehicles.
What is the GST on hybrid vehicles now?
The rate was settled at 18 per cent for vehicles up to 2,000cc, reduced from 25 per cent.
Will car financing get cheaper?
Not necessarily. KIBOR has risen in recent weeks and analysts say the SBP could raise the policy rate by 50 basis points, which would push up monthly instalment costs for borrowers.
