A few years back, the automotive industry faced a double blow with declining sales and financing options. Meanwhile, car sales revived but auto loan doesn’t follow the pattern. It’s been more than two years; the financing sector witnesses new low each month.
According to the latest data from the State Bank of Pakistan (SBP), car financing in Pakistan observed a significant decline (year-on-year) of 20.06 in July 2024.
Key Factors
This downturn is primarily attributed to a confluence of factors, including soaring vehicle prices, elevated interest rates, stricter loan regulations, and increased taxes on automobile imports and parts.
The State Bank of Pakistan (SBP) data revealed that car financing decreased from Rs285.19 billion in July 2023 to Rs228 billion in July 2024. This sharp decline is indicative of the challenges faced by consumers in affording new vehicles.
The rising cost of living, coupled with increased interest rates, has made it difficult for many to commit to long-term financing plans.
While the month-on-month decline in car financing was relatively modest, the overall trend remains downward. The SBP data also highlighted a decline in consumer financing for house construction, indicating a broader slowdown in the consumer credit market.
Impact on the Automobile Market
The impact of rising costs is particularly evident in the automobile market. Even the most affordable vehicles have become increasingly out of reach for many consumers.
For instance, the Suzuki Alto, once considered one of the cheapest options, now costs over Rs3 million for the top variant. This significant price increase has made it challenging for potential buyers to justify the purchase of a new car.
In conclusion, the decline in car financing in Pakistan is a reflection of the broader economic challenges faced by the country. The combination of rising prices, higher interest rates, and stricter regulations has made it difficult for consumers to afford new vehicles.
