Auto loans hit a record high of Rs 308 billion in FY21

KARACHI: Low interest rates and buyers’ enthusiasm for locally assembled cars lifted auto financing to an all-time high of Rs 308 billion in June 2021, up 3.6% mo. % since June 2020, data released by the State Bank of Pakistan showed on Monday. Total car financing has jumped 97 billion rupees from 211 billion rupees in June last year, according to figures from the SBP.

Despite the high prices of locally assembled cars over the past year and a half, followed by late deliveries and high premiums, buyers remained bullish to take advantage of the opportunity of a low 7% interest rate, which was by 13.5% in March 2020.

“The share of auto financing in total car sales is now between 40% and 45% depending on the car model, up from 15-20% about two years ago,” said Tahir Abbas, head of research at Arif. Habib Limited.

People now have a wide choice of locally assembled cars following the skyrocketing competition between new and old players and the massive slowdown in the arrival of imported used cars, he said. .

“The demand for cars will remain on an upward trajectory over the next six months following a drop in prices announced by car assemblers after the reduction of the federal excise tax (FED) by 2.5 pc, additional customs duties at 2pc from 7pc and general sales tax at 12.5% ​​versus 17% on vehicles up to 1,000cc, he predicted, adding that the SBP would likely keep the interest rate unchanged at 7% in the monetary policy which will be announced on Tuesday.

Car sales of members of the Pakistan Automobile Manufacturers Association in FY21 increased 56.7% from 96,455 units to 151,182 units.

Indus Motor Company Limited CEO Ali Asghar Jamali said auto financing is picking up due to very attractive interest rates. “I think the next six months will be very good in terms of car sales.”

About reserving cars under Roshan Apni Car for overseas Pakistanis who have opened Roshan Digital Account (RDA), he said “the response is reasonable.” The inflow of deposits under the GDR had crossed $ 1.5 billion, or $ 418 million by January 2021.

Pak Kuwait Investment head of research Samiullah Tariq said a number of people who could not travel overseas due to Covid-19 restrictions preferred to buy new locally assembled vehicles for domestic travel. because they were more fascinated by new models and low interest rates.

He said auto financing in total car sales had doubled to 40%, from 15-20% two years ago.

Posted in Dawn, July 27, 2021

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