Banks Increase Installment Rates for Car Financing

Cars are becoming unaffordable for a big section of Pakistanis these days, even through bank financing which is now beyond the reach of many customers.

High-interest rates coupled with the increasing prices of various brands of cars are diminishing the trend of leasing a vehicle from commercial banks.

According to the State Bank of Pakistan, car financing dipped by Rs. 9 billion to Rs. 11.7 billion during H1-FY19, showing a YoY decline of 43.5 percent. It shows that the number of consumers applying for auto-financing is going down due to high monthly installments.

As per an estimate, car financing cost per month for an average customer increased by over Rs. 10,500, which proved to be too high for the borderline consumers. Accordingly, a customer has to pay an installment of Rs. 35,000 per month for a car worth Rs. 1.7 million instead of Rs. 25,000.

Also, the average cost of interest/financing rate of the banks increased from 10.3 percent to 14.4 percent, including the down-payment.

Installments for cars worth more than Rs. 1.7 million have increased further due to the impact of a price spiral made by the car assemblers and a repeated increase in interest rates by the banks.

A customer that availed the bank financing facility earlier last year is now paying comparatively high installments thanks to high interest rates being charged by their respective banks.

Car financing via banks was on the rise from 2015 till 2017. Customers not only purchased cars for personal use but they also bought cars for commercial purposes, employing them in Careem and Uber. Hence, the auto-financing portfolio of the banking industry showed remarkable growth, crossing Rs. 200 billion for the first time in 2018.

However, the gradual increase of policy rates from the beginning of 2018, along with a price spiral on local and imported cars, has taken its toll on the purchasing power of the customers and the banks’ business.


  • Although I am under great stress due to increase in rate of my home and car finances. But looking at the road traffic situation in Lahore its positive impact is the lesser new cars on roads. Use taxi service or public transport. I urge govt to increase excise tax too high to discourage the trend of buying new cars until infrastructure is improved.

    • What a stupid logic.
      Instead of boosting the work for infrastructure, decrease the buying power so business will fly away from country, How pathetic!
      Thank god, its just ProPakistani site.

  • Slap on those who are supporting this Riba System by being part of it, Good Work Govt

  • This is “Naya Pakistan”, everything.g going out of reach a common man. Not a single penny has been recovered from looters.
    Million thanks Mr. prime minister.

  • Banks’ increase in financing rate is directly related to the increasing policy rates (KIBOR). Banks’ have not increase their margin, just that the base rate has increased the end result has been high.


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