Auto financing in Pakistan surged to a 25-month high, reaching Rs. 286 billion in July 2025, according to the latest data released by the State Bank of Pakistan (SBP) and compiled by Topline Research.
This significant increase in car financing is a positive sign for Pakistan’s economy, indicating a potential boost in consumer spending and economic activity.
Consumer Demand Rebounds
The July figures reflect a 25% year-on-year increase and a 3% month-on-month rise, signaling a rebound in consumer appetite for car purchases amid easing interest rates. This marks the highest level since June 2023, when financing stood at Rs. 285 billion.
Despite the recovery, auto financing remains 22% below the record high of Rs. 368 billion set in June 2022. The previous decline was fueled by soaring borrowing costs, import restrictions on automotive parts, and a slowdown in the broader economy that dented car sales and leasing activity.
These challenges led to a significant drop in auto financing, making the current recovery all the more noteworthy.
Monetary Easing Drives Recovery
The revival is attributed to the SBP’s monetary easing cycle, characterized by declining interest rates, a stable exchange rate, and improving supply chains. The recovery reflects stronger consumer demand amid lower borrowing costs and is expected to further lift auto sector sentiment, with a brighter sales and earnings outlook for listed companies.
The consistent monthly growth suggests that demand is gradually returning, with auto assemblers and allied industries, such as parts manufacturers, expected to benefit from stronger sales volumes and earnings in the coming quarters. This growth potential is a source of hope for the industry.
Context: Why It Matters
The revival in auto financing comes at a time when Pakistan’s economy is seeking growth drivers. The automotive sector contributes around 3% to GDP and directly supports over 3 million jobs across assembly plants, dealerships, and the auto parts ecosystem. A sustained rebound in financing could therefore have positive spillover effects on employment, tax revenues, and consumer confidence.
Globally, rising auto demand is being reshaped by the push toward electric vehicles (EVs) and fuel-efficient models, trends that are slowly gaining traction in Pakistan. Easier financing could accelerate consumer adoption of new technologies if supported by government incentives and infrastructure.
With auto financing back on the rise after two years of contraction, the sector may be entering a new growth cycle, offering much-needed support to Pakistan’s struggling economy and its key industries. This positive trend is a reason for optimism in the economic landscape.
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