Car Financing Slows Down Due to Tough Auto Financing Policy

Asadullah

28 Dec 2021

454

Car Financing Slows Down Due to Tough Auto Financing Policy

The finance of the car was reached at the peak point and now it is becoming less. The main reason of the reduction of car financing is that it has become the challenging for people. The rates of the cars are becoming more and more expensive. The financing policies regarding purchasing of car are becoming difficult and the manufacturing of the cars are getting out of the reach of the common people. The customers can keep in mind that Car financing slows down due to tough auto financing policies.

Auto Finance in 2021

The auto financing in Pakistan is increasing during the whole year and during the month of July 2021, the financing of the car is recorded as high of Rs.314 billion and the numbers of the car financing is increasing to Rs.326 billion during the month of August. The number of the car financing during September was Rs.338 billion, during the month of October, these numbers were reached to Rs.346 billion and these numbers were arisen to Rs.349 billion during November this year.

Month	Car Finance	Monthly Increase
Jan'21	Rs. 262.5 billion	--
Feb'21	Rs, 273 billion	4%
March'21	Rs. 285 billion	4.4%
April'21	Rs. 293 billion	2.8%
May'21	Rs. 297.5 billion	1.5%
June'21	Rs. 308 billion	3.5%
July'21	Rs. 314 billion	2%
Aug'21	Rs. 326 billion	4%
Sep'21	Rs. 338 billion	3.7%
Oct'21	Rs. 346 billion	2.4%
Nov'21	Rs. 349 billion	1%

The customers can check that the slowest growth of the car was only 1%, which was the lowest month-on-month increase during the month of July 2020 due to different reasons, which are mentioned below:

Increasing Car Prices

The sales of the car are dropping in the auto market as the rates of the cars are increasing rapidly. You can find the detailed information about the comparison of car sales ranging from January to December 2021 and they show how the prices of the cars were increased during one year.

Auto Finance Policies

There are different reasons of the slowing down process of the car financing, in which the main reason is introduction of the new auto finance regulations. State Bank of Pakistan (SBP) has banned the auto finance facility for the imported cars and the SBP has revised the financing policies of the cars of 1000 cc and above.

• Reduction in maximum loan tenure from seven years to five years.

• Reduction in maximum personal loan tenure from five years to four years.

• Increase in minimum down payment from 15% to 30%.

• Reduction in maximum debt burden ratio from 50% to 40%.

• Increase in interest rate from 7% to 9.75%.

• Auto financing limit for a person from all banks is Rs. 3 million (in aggregate).

The locally manufactured cars, which are below 1000cc cars and electric vehicles (EVs) are free of these restrictions. SBP has adopted the strict auto finance regulations for reduction in the import bill. But the restrictions have made this process difficult for people to purchase and own cars.

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