KARACHI: The downward trajectory in the interest rate continued to lure buyers towards auto financing, which increased to Rs257.3 billion at the end of March from Rs249bn in February.
A 1,000bps cut in the interest rate to 12pc from an unprecedented 22pc in June 2024 and price stability are encouraging buyers towards new and used cars.
Auto financing started improving in August 2024, when it was Rs227.3bn. In June 2022, it was at its peak of Rs368bn.
Rising auto financing is also evident from the soaring sales of cars, pickups, vans and jeeps, which surged by 46pc in 9MFY25 to 100,868 units versus 69,081 in the same period last year.
Mashood Ali Khan, an auto expert and parts manufacturer, predicted strong auto sales until June due to stable prices, a steady exchange rate, improved consumer confidence, and the launch of new models and variants.
Afterwards, he added that budgetary proposals for FY26 would determine auto sales prospects.
He said the State Bank may maintain a cautious approach by keeping the policy rate unchanged in the upcoming Monetary Policy Committee meeting.
He said low financing costs play a crucial role in propelling auto sales, but vehicle demand can be boosted further if the interest rate comes down to a single digit in the second quarter of 2025. Mashood urged the State Bank to consider increasing the loan cap to Rs6 million from Rs3m to encourage more buyers towards auto financing.
However, car buying through leasing still looks difficult due to a reduction in payment tenure to five years for vehicles up to 1,000cc, three years for below 1,000cc, and a down payment requirement of 30pc.
Published in Dawn, April 17th, 2025
