Car loan growth hits Rs276.6bn despite financing challenges

LAHORE: Pakistan’s auto financing market continued its upward momentum in June 2025, with outstanding car loans rising to Rs 276.6 billion, according to the State Bank of Pakistan (SBP). This marks the seventh consecutive month of growth, up from Rs271.2 billion recorded in May.

Despite this trend, the sector is still struggling to reach its pre-2022 peak of Rs368 billion.

Lower Interest Rates Fuel Demand

The increase in auto financing is largely credited to the sharp drop in interest rates, which have come down from 22% to 11% since June 2024. This significant decline has reinvigorated consumer interest in car loans.

However, concerns are rising that escalating car prices, mainly due to the newly implemented NEV adoption levy effective from July 1, may cool down future demand.

Borrowing activity is increasing. But the Rs3 million cap on auto loans is limiting growth. Experts want the SBP to raise the cap to Rs6 million. This would help low- and middle-income buyers get easier access to financing.

Leasing remains tough. Buyers face shorter repayment periods. High down payment requirements also make access difficult.

Meanwhile, auto sales in the country have shown a promising recovery. Sales of cars, pickups, SUVs, and vans reached 148,023 units in FY25, reflecting a 43% year-on-year increase from 103,829 units in FY24. This growth was supported by a wider range of vehicles, lower inflation, and favorable financing conditions.

Future Outlook

Analysts at Topline Securities estimate that total auto sales in FY25, including both PAMA and non-PAMA members as well as imported vehicles, may hit 217,000 units, showing a 31% year-on-year increase.

Projections for the following years suggest continued growth:

• FY26: 248,000 units (14% growth)
• FY27: 280,000 units (13% growth)

Yet even with this upward trend, sales in FY27 would still be 15-20% below the historic highs of FY18, when annual figures ranged between 330,000 and 350,000 units.