Pakistan’s car loan market shows no signs of recovery, with a troubling trend extending into its 21st consecutive month of decline. Data from the State Bank of Pakistan (SBP) reveals a significant year-on-year (YoY) drop of 24.4% in car financing by the end of March 2024. This translates to a decrease from Rs. 317 billion to Rs. 239 billion compared to the same period last year.
The auto sector grappled throughout the 2023-24 financial year. Automobile sales plummeted during the first nine months of FY24, reaching just 69,078 units – a stark contrast to the 110,898 units sold in the same period of FY23. This slump is attributed to a combination of high lending rates and stricter auto financing limitations imposed by the central bank.
Efforts by some car assemblers to offer discounts on registration and other fees failed to significantly stimulate sales. The high cost of cars remains a significant hurdle for many potential buyers.
Consumer financing for house building displayed a different picture, remaining stable at Rs. 206 billion by the end of March 2024. However, personal loans on credit cards experienced a YoY decrease of 3.6%, dropping to Rs. 242 billion by the end of March.
Overall, credit extended to consumers across all categories (consumer financing) witnessed a decline, reaching Rs. 807 billion in March 2024. This represents an 8.2% decrease compared to the previous year.
The persistent decline in car financing and the broader consumer credit landscape underscores the ongoing economic challenges in Pakistan. High lending rates continue to dampen consumer spending habits.