As it has done so for the fourth month in a row this fiscal year, Pakistan’s car loan market is still on the slide. The State Bank of Pakistan (SBP) reported that the amount of vehicle loans in October was 1.4% lower than in September 2022.
Along with the SBP’s numerous attempts to slow down auto finance, purchasers have been compelled to put off purchases due to a sharp rise in car costs, skyrocketing interest rates, factory closures at major automakers in recent months due to import restrictions, and delays in vehicle deliveries.
Samiullah Tariq, the Head of Research at Pak Kuwait Investment Company Ltd., commented on the issue in a conversation:
“The government does not want to keep auto demand brisk. So it’s attempting to curtail the imports of parts and accessories to help the fragile balance-of-payment situation.”
The SBP’s subsequent increase of the benchmark interest rate to 16%, he continued, will result in poor vehicle demand for at least the next year. He noted that it may recover if the benchmark interest rate drops by three to four percentage points in the upcoming months. Mr. Tariq claimed that from September 2021, when it was just 7.25%, the benchmark interest rate has more than quadrupled to 16%, pushing consumers to make larger monthly payments on their vehicle loans.
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