In May 2024, auto financing in Pakistan continued its 23rd consecutive month of decline, totaling Rs233 billion, marking a 22.5% decrease year-on-year and a slight 1.2% drop from the previous month. Despite the State Bank of Pakistan (SBP) reducing the interest rate to 20.50% on June 10, down from 22% held for nearly a year, this move did not stimulate interest among buyers to purchase new cars.
The outstanding loan amount has steadily decreased from Rs300 billion in May 2023 to Rs236 billion in April 2024. Since June 2022, when auto financing stood at Rs368 billion, there has been an overall decline of Rs135 billion.
While sales of cars, jeeps, LCVs, and pickups surged to a 17-month high of 10,949 units in May — a 100% increase year-on-year and 4% rise month-on-month — the broader trend shows a decline. Sales for the first 11 months of fiscal year 2024 were down 25%, totaling 90,542 units compared to 120,845 units in the same period of fiscal year 2023.
High monthly loan instalments, the persistently high 20.50% interest rate, elevated vehicle prices, and SBP’s stringent financing regulations have deterred consumers from purchasing new vehicles. However, private bank financing for used cars up to nine years old has provided some resilience to the auto financing sector over the past few years.
