Karachi July 23 2022: Car financing in Pakistan soared to PKR 368 billion as of June 2022, as the latest data released by the State Bank of Pakistan.
The pace of Auto financing slows down sharply during the year which was reflected by disbursement of PKR 45 billion in first half of fiscal year while less than PKR 15 billion disbursement with just PKR one billion in financing during last two months.
During the month of June 2022, car loans witnessed an increase of just 0.32 percent when compared with the previous month. The main reason for decline in Auto Financing could be higher policy rate set by SBP, tightening of financing rules by Central Bank and abnormal surge in car prices over the period of last one year.
During fiscal year 2022, Auto financing increased by PKR 60 billion from disbursement of PKR 308 billion at June 2021. This helps Auto Industry to attain highest ever sales number during the fiscal year 2022.
Pakistan Automobile sector sales increase 24% during the month of June when compared with sales of previous month, according to the data published by Pakistan Automotive Manufacturers Association on Friday.
In the last meeting, the Monetary Policy Committee (MPC) decided to raise the policy rate by 125 basis points to 15 percent. The monetary tightening underway since last September, which is aimed at ensuring a soft landing of the economy amid an exceptionally challenging and uncertain global environment.
"Monetary tightening should help cool economic activity, prevent a de-anchoring of inflation expectations and provide support to the Rupee in the wake of multi-year high inflation and record imports." says Pakistan's Central Bank.
In May 2022, the maximum tenure of auto finance facility is reduced from five (5) years to three (3) years for vehicles above 1,000 cc engine displacement and from seven (7) years to five (5) years for vehicles up to 1,000 cc engine displacement by SBP.
The total monthly amortization payments of consumer financing facilities, should not exceed 40% of the net disposal income of the prospective borrower on engine displacement and locally assembled / manufactured electric vehicles. The minimum down payment is increased from 15 percent to 30 percent of the value of vehicle for vehicles of all engine displacement and locally assembled / manufactured electric vehicles.
Overall auto loans/financing limits availed by one person from all banks/DFIs, in aggregate, shall not exceed Rs3,000,000/-, at any point in time. However, the financing limit of borrowers whose approved limit already exceeds Rs3,000,000/- may be amortized as per existing terms and the same shall not be further increased.