Auto financing up 36.4pc on soft interest rates

KARACHI: Auto loans increased 36.4 percent year-on-year in April as low interest rates and signs of economic recovery pushed up the demand for vehicles from consumers.

Loans for transport, such as purchase of cars stood at Rs293 billion in April, compared with Rs215 billion in the corresponding period of last year, the latest data from the State Bank of Pakistan (SBP) showed.

Auto loans marginally rose 2.8 percent month-on-month. These loans stood at 285 billion in the previous month. Consumer financing is benefiting from a relatively accommodative policy environment. The SBP cut interest rates by 625 basis points to seven percent last year.

Car financing and consumer loans continued to rise, and even the price increase in the locally produced vehicles did not restrain consumers from buying cars.

Consumer financing rose 24.1 percent to Rs677 billion in April.

The manufacturing activity is picking up and the economy shows signs of recovery from the impacts of coronavirus pandemic. This is apparent in the car sales numbers

Car sales in 10 months (July-April) of the ongoing fiscal year registered a rise of 54 percent. Automobile sales during the 10-month period came in at 151,178 units against 97,900 units in the corresponding period of last year.

Pakistan’s economy is expected to grow around four percent this fiscal year, as post-Covid recovery underway since last summer has strengthened.

Analysts said the containment of the third Covid-19 wave, launching of coronavirus vaccination drive, strengthening of the economic recovery and positive consumer sentiment would boost the auto demand, increasing car financing in the coming months.