Auto financing improves further on rate cuts, arrival of new variants
KARACHI: The falling interest rate has further raised auto financing to Rs249 billion at the end of February from Rs241.6bn in January.
Buyers are turning towards leasing by the banks for new and used vehicles after a steep drop in interest rate to 12 per cent from 22pc in the last eight months. Auto financing started improving in August 2024, when it was Rs227.3bn. In June 2022, auto financing was at its peak of Rs368bn.
Topline Securities Chief Executive Mohammed Sohail said car financing will continue to rise amid falling interest rates. “After many years, we are seeing sharp recovery in the auto sales,” he added.
Cars, sport utility vehicles, vans, and pickup sales are already going strong and may remain upbeat in the coming months due to price and exchange rate stability, improved consumer confidence, and the introduction of new variants and models.
Total sales of vehicles during 8MFY25 stood at 89,770 units, up by 50 per cent YoY from 59,700 units in the same period last fiscal year.
Another signal of robust auto sales in the coming month is a 23.4pc jump in the import of semi and completely knocked-down (CKD/SKD) kits by the assemblers to $575 million in 8MFY25 from $466m in the same period last fiscal year.
Samiullah Tariq, Head of Research and Development at Pak Kuwait Investment Company Ltd, believed car financing would improve in the coming months due to pent-up demand and a sharp reduction in the interest rate. Besides, new car offerings by the local assemblers have also increased.
Despite a drop in the interest rate, availing financing is still a challenging task for many due to a loan cap of Rs3m, a reduction in payment tenure to five years for cars up to 1,000cc and three years for below 1,000cc and a down payment requirement to 30pc.
As per Insight Research report, Indus Motor Company, in a corporate briefing held last week, said that the company had requested the government to end the Rs3m loan cap and rationalise the taxes and duties on imported and CKD units for fostering fair competition.
Published in Dawn, March 18th, 2025