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Auto Financing in Pakistan Surges to Rs. 249 Billion Amid Declining Interest Rates

March 18, 2025
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Pakistan’s auto financing sector is experiencing a remarkable rebound, with outstanding auto loans reaching Rs. 249 billion by the end of February 2025, up from Rs. 241.6 billion in January. This surge reflects a growing dependence on bank leasing for both new and used vehicles, fueled by declining interest rates and increasing consumer demand.

Why Auto Financing is Growing?

The primary driver behind this rising trend is the sharp decline in interest rates, which have dropped from 22% to 12% over the past eight months. With lower borrowing costs, more consumers are turning to banks and financial institutions to finance their vehicle purchases.

The demand for cars, SUVs, vans, and pickups has remained strong, and industry experts predict continued growth in the coming months.

Several factors contribute to this positive market outlook, including:

  • Stabilized car prices due to controlled inflation.
  • Steady exchange rates, making vehicle imports more predictable.
  • Rising consumer confidence as economic conditions improve.
  • New vehicle launches, encouraging buyers to consider financing options.

Auto Sales and Import Growth

Between July 2024 and February 2025, Pakistan’s total vehicle sales reached 89,770 units, marking a 50% increase compared to 59,700 units in the same period last year.

This surge aligns with a 23.4% rise in imports of semi and completely knocked down (CKD/SKD) kits, which increased from $466 million to $575 million in the same timeframe. These figures indicate a strong recovery in Pakistan’s auto industry.

Challenges in Auto Financing

Despite favorable market conditions, many consumers still face financing challenges due to strict lending policies:

  • Loan limits are capped at Rs. 3 million, restricting options for those wanting to buy mid-range and high-end vehicles.
  • Maximum repayment periods are limited:
    • Up to 5 years for vehicles up to 1,000cc.
    • Just 3 years for smaller vehicles.
  • A 30% down payment requirement makes it difficult for middle-income buyers to secure financing.

The Road Ahead

Although auto financing is on the rise, current levels remain below the all-time high of Rs. 368 billion recorded in June 2022. However, with interest rates at a multi-year low and demand growing, the sector is poised for further expansion.

To sustain this momentum, financial institutions may need to introduce more flexible financing solutions, such as:

  • Lower down payment options to improve affordability.
  • Longer repayment tenures for small and mid-sized vehicles.
  • Higher loan limits to accommodate rising car prices.

If these measures are implemented, Pakistan’s auto sector could see even stronger growth in the coming months, making vehicle ownership more accessible for a broader segment of the population.


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