Auto financing gains momentum as interest rate falls

Following the ease in interest rates by the Monetary Policy Committee of the State Bank of Pakistan (SBP), auto financing showed a positive trend after 27 months in September.

According to the data shared by the SBP, from August to September, the bank loan trend accelerated by Rs245 million to Rs227.541 compared to Rs227.296 in August, showing a 0.2 percent increase month-on-month (MoM).

Last time, auto-financing hit Rs368 billion in June 2022.

The increasing trend was seen after a decline in interest rate from 22 percent to 20.5 percent on June 10, for the first time in three years, followed by a further reduction to 19.5 percent on July 29 and 17.5 percent on September 12 which revived the sales of auto on loan.

Tahir Abbas, head of research at Arif Habib Ltd (AHL), said the trend of auto financing was increasing because the banks were offering fixed rates due to the expectations of further decline in monetary policy rate.

“The market has witnessed a demand uptick in cars following a price drop, which also helped revive auto financing,” Abbas added.

The analysts also attributed the upward trend to a dip in the prices of two and four doors.

“Auto financing should sustain as assemblers are giving discounts while banks also offering fixed rates,” said Samiullah Tariq, head of research and development at Pak-Kuwait Investment Company.

The data shared by the Pakistan Bureau of Statistics (PBS), stated that the assembler witnessed an increase in the import of completely knocked down (CKD) kits by 15.23 percent to $213 million against $185 million in the corresponding period of the previous fiscal year.

However, the car sales swelled up to 20,068 units during the first quarter of the fiscal year 2025, against 16,021 in the same period of the last fiscal year.

Similarly, pickups, jeeps, vans, and SUVs sales increased to 7,517 units compared to 4,961 in the above-mentioned period.