The number of outstanding auto loans declined for the fourth consecutive month at the end of October, according to data issued by the State Bank of Pakistan (SBP).
At the end of November, the total amount of outstanding vehicle loan was Rs345 billion, which is Rs0.1 billion less than the Rs346 billion number for October 2021. The most recent amount owed on auto loans is 1.4 percentage points less than it was in September 2022.
Buyers have been compelled to put off making purchases due to a sharp rise in car prices, skyrocketing interest rates, different SBP efforts to slow down auto financing, factory closures of several assemblers in recent months due to import restrictions, and delays in the delivery of vehicles.
However, a few new automakers have recently begun to provide immediate delivery of cars in exchange for full payment following the port clearance of their imported auto kits. However, their sales may still be hampered by high pricing and a sharp rise in the benchmark interest rate last month.
The SBP is forecasting another 100 basis point increase in the key interest rate to 16 per cent, which will cause auto demand to remain subpar for at least the coming year.
Consumers must now make larger monthly payments on auto loans because the benchmark interest rate has increased from 7.25 per cent to 16 per cent since September 2021.
The average 40 per cent increase in car costs since September 2021 is one of the key causes of buyer concerns.
For instance, the price of a Honda City manual is now Rs3.77 million as opposed to Rs2.59 million in September 2021.
In order to prevent the sale of expensive vehicles, auto loans were limited to a maximum of Rs3 million, and the length of time it took to repay them was also shortened.
