State Bank of Pakistan reports 24% auto loan decrease

Auto loans in April 2024 in Pakistan have experienced a significant decrease of 24% compared to the previous year, amounting to Rs236 billion. This decline marks the 22nd consecutive month of decrease, mainly due to higher borrowing costs and economic constraints affecting consumer demand.

The State Bank of Pakistan (SBP) has recently released data showing a 2% month-on-month reduction in auto loans for April, with car financing dropping from Rs239 billion in March. This decrease can be attributed to various stabilisation measures implemented over the past two years, such as increased interest rates and stricter prudential regulations.

Despite a 16% increase in passenger car sales in April compared to the previous month, with 7,672 units sold, the year-on-year sales have surged by 212%. However, total passenger car sales for the first 10 months of the fiscal year 2023-24 have plummeted by 29% to 63,000 units. This decline is due to factors like rising costs, high loan rates, increased tariffs and taxes, and a sluggish economy.

Analysts attribute the drop in car financing to the rise in borrowing costs and broader economic constraints. The challenging economic environment has significantly impacted the auto loan sector, leading to a prolonged period of decline in borrowing for vehicle purchases.

The ongoing decline in auto loans in Pakistan reflects the challenges faced by consumers in accessing financing for vehicle purchases. With borrowing costs on the rise and economic constraints persisting, the auto loan sector continues to face hurdles. It is essential for policymakers and financial institutions to address these issues to support the revival of the auto financing market and boost consumer confidence in the automotive industry.