Auto loans reportedly increased by 19% to Rs. 41 Billion in December 2020 after interest rate cuts and resumption of business activities following the initial epidemic-affected lock down.

According to data compiled by the State Bank of Pakistan, Rs 219 billion was recorded in car loans in December 2019, and at Rs. 256 billion during the same period in 2020. A media report said the main reason of the increase was the growing demand for 1,300 cc passenger cars.

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According to media reports, high demand for the newly launched Toyota Yaris was largely responsible for this increase. This is a reasonable assumption because, over the last several months, Yaris sale has crossed over the sale of Honda City and Civic.

Second reason behind the increase of debt growth is low interest rates. The State Bank of Pakistan had reduced interest rates by 625 basis points to 7 percent in 2020. Additionally, lower interest rates means lower installments for car financing programs.

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Rising prices by car makers in 2020 seem to have had little effect on the growing demand for cars. In fact, even before the Auto Development Policy (ADP) 2016-21 expires, new players are still entering the market, it is fair to say that the demand for cars is likely to increase further.

Loan | Financing | Cars | Interest Rates | State Bank of Pakistan |

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