Car loans in Pakistan hit 5-month high as financing increases in October

ISLAMABAD: Car financing in Pakistan reached Rs235.88 billion in October, marking 3.67 per cent increase from Rs227.54 billion in September, according to the State Bank of Pakistan (SBP).

This increase comes after a small but significant 0.11 per cent uptick in September which ended a 26-month downward streak in car financing.

Experts attribute this positive trend to banks’ efforts to meet the 50 per cent Advances-to-Deposits Ratio (ADR) requirement, a move designed to avoid additional taxes by encouraging private sector lending.

As of October, car financing has reached its highest level since May 2024. However, looking at year-on-year data it’s still down by 10.66 per cent compared to Rs264.03 billion in October 2023.

The decrease is largely owing to a combination of high interest rates, rising car prices, tighter regulations on loan acquisition and increased taxes on imported vehicles and parts.

In terms of consumer financing overall, the SBP’s data shows that loans for house building stood at Rs201.46 billion by the end of October, a 2.64 per cent drop from the same period last year. Month-on-month, house-building loans saw a slight 0.17 per cent decline from Rs201.8 billion in September.

Personal financing, however, saw a significant boost, reaching Rs281.69 billion—up 14.42 per cent year-on-year and 17.05 per cent compared to the previous month.

Overall, consumer credit climbed 3.84 per cent year-on-year, totalling Rs861.02 billion by October, and recorded a 6.4 per cent month-on-month increase from Rs809.25 billion in September.

The central bank’s data also highlighted growth in credit to the private sector which increased by 15.21 per cent year-on-year, amounting to Rs9.33 trillion in October 2024. On a month-on-month basis private sector loans rose 10.93 per cent, up from Rs8.41 trillion in September.

Within the private sector, manufacturing loans reached Rs5.33 trillion, marking an 18.14 per cent increase year-on-year and a 12.96 per cent rise month-on-month. The construction sector’s borrowing stood at Rs201.25 billion, reflecting a 3.4 per cent increase year-on-year, though down 2.06 per cent compared to the previous month.

Loans to agriculture, forestry, and fishing grew by 6.75 per cent year-on-year to Rs409.41 billion, with a 3.06 per cent increase month-on-month.

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