Karachi October 22 2021 : Car financing in Pakistan soared to an all-time high of PKR 338 billion as of September 2021, as the latest data released by the State Bank of Pakistan.
This is despite SBP efforts to curb the financing. The State Bank of Pakistan (SBP) had revised Prudential Regulations (PRS) for Consumer Financing last month.
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Imported Cars Are No More Eligible For Auto Financing: SBP – AUGAF
This targeted step was taken to moderate demand growth in the economy, leading to slower import growth and thus supporting the balance-of-payments. The changes in the PRs effectively prohibit financing for imported vehicles, and tighten regulatory requirements for financing of domestically manufactured/ assembled vehicles of more than 1000 cc engine capacity and other Consumer Finance facilities like personal loans and credit cards.
Following changes were made in this regard:
- Maximum tenure of auto finance has been reduced from seven (7) to five (5) years;
- Maximum tenure of personal loan has been reduced from five (5) to four (4) years
- Maximum debt-burden ratio, allowed to a borrower, has been decreased from 50 to 40 percent;
- Overall auto financing limits availed by one person from all banks/DFIs, in aggregate, will not exceed Rs3,000,000, at any point in time.
- Minimum down payment for auto financing has been increased from 15 percent to 30 percent.
With the objective to protect lower to middle income category purchases, these new regulations are not applicable to locally manufactured or assembled vehicles of up to 1,000 cc engine capacity. They are also not applicable to locally manufactured electric vehicles to promote use of clean energy. The financing of these two categories of vehicles will continue to be governed by previous set of regulations.
During the month of September 2021, car loans witnessed an increase of 45.5 percent year-on-year basis, mainly due to lower interest rates.
On month on month basis, car loans also increased by 3.8 percent.
