Low interest rates continue to attract buyers towards auto financing, pushing outstanding car loans to Rs 276.6 billion by the end of June. This marks the seventh consecutive month of growth, according to a report by Dawn. Despite this growth, current loan volumes remain below the record Rs 368 billion seen in June 2022.
The drop in interest rates from 22% in June 2024 to 11% now has revived demand for auto loans. However, a recent levy on new energy vehicles starting July 1 may raise car prices and slow future financing activity. Market experts have mixed views on this impact.
Some analysts, like Samiullah Tariq of Pak-Kuwait Investment Company, expect slower sales in July due to June’s high purchases. Others, including Topline Securities CEO Sohail, believe economic recovery and cheaper loans will sustain growth in both car sales and auto financing.
Auto assemblers attribute recent financing increases to the lower interest rates, despite the Rs 3 million loan cap. They suggest the State Bank raise this cap to Rs 6 million to help more low- and middle-income buyers access financing. However, many still find car leasing difficult due to strict terms, including short repayment periods and high down payments.
Car sales, including pickups, SUVs, and vans, rose 43% year-on-year to 148,023 units in fiscal year 2025. Topline Securities forecasts total vehicle sales, including imports, to surpass 217,000 units this fiscal year—a 31% rise. Yet, this figure remains 33-38% below the peak sales seen in fiscal year 2018.