Car Financing Increases After 27 Months

Jawad

19 Oct 2024

229

Car Financing Increases After 27 Months

Car financing in Pakistan saw a notable increase, rising by Rs. 245 million to reach Rs. 228 billion by the end of September 2024, according to data released by the State Bank of Pakistan (SBP). This increase marks the first rise in auto financing after 27 months, indicating a potential shift in the automotive financing landscape. The growth is primarily attributed to a decline in interest rates, making borrowing more affordable for consumers.

Despite this recent uptick, auto financing has experienced a year-on-year decline of approximately 16 percent compared to September 2023. This stagnation reflects broader challenges in the sector, as consumer inflation remains a concern and the central bank's key lending rate has only recently begun to cool. As a result, the overall growth of the automotive financing market remains constrained, highlighting the complex interplay between interest rates and consumer demand.

In contrast to auto financing, personal loans on credit cards surged significantly, climbing by 27.6 percent year-on-year to Rs. 132 billion by September 2024. This sharp increase suggests that consumers are seeking alternative financing options amid the current economic climate. The rise in credit card loans may also indicate a shift in consumer behavior as individuals look for ways to manage their financial needs more effectively.

Meanwhile, consumer financing for house building saw a decline of 3.1 percent, dropping to Rs. 202 billion during the same period. This decrease suggests that potential homeowners may be facing challenges in securing financing for new construction, further contributing to the overall sluggishness in consumer credit growth.

Overall, the total credit issued to end-users (consumer financing) fell to Rs. 809 billion in September 2024, representing a 3.6 percent year-on-year decrease. This decline reflects the ongoing challenges in the financing landscape, emphasizing the need for supportive measures to stimulate consumer confidence and drive growth in the vehicles and housing sectors, while the market for cars and bikes also requires attention to enhance consumer accessibility.

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