Auto Financing Sees Very Small Drop Despite Price Hikes

Despite sky-high inflation and tightened restrictions on auto-sector imports, the impact on auto financing in September seems insignificant.

According to the latest report, auto financing came in at Rs. 350 billion in August 2022, observing a month-over-month (MOM) decline of just 0.7%. Whereas, on a year-over-year (YOY) basis, it went up by 3.5%.

Arif Habib Limited (AHL) highlights in its report that car financing has reached the lowest level since January 2022. However, given that the decline is not as substantial as originally anticipated, chances are that it may rise in the coming days due to the persistent demand for new cars.

On the other hand, consumers are of the view that the State Bank’s restrictions have made it impossible to get a good financing deal. While talking to ProPakistani, a customer stated:

If you buy an average car that costs Rs. 3.8 million, and pay Rs. 1.5 million upfront, then monthly installment is Rs. 98,000, which is horrendous to say the least. Because if one waits and accumulate the same amount for 2 years then there is no need for financing. The last year is just to pay markup. So why even bother with financing?

Is Car Demand Actually Falling?

It bears mentioning that, the current decline in sales is due to the unavailability of cars. Despite that, the Secretary of Industries and Production highlighted that the local car assemblers have collected around Rs. 217 billion from customers in advance bookings this year.

He mentioned that Toyota Indus Motors Company (IMC) has collected Rs. 112 billion while Pak Suzuki and Honda Atlas have collected Rs. 41.66 billion and Rs. 23 billion respectively.

This implies that people are still eager to purchase new cars, and are awaiting their availability, which will result in another massive surge in sales.