Car Financing Down for 8th Consecutive Month
Following car production and sales, the auto finance sector in the country is facing the same fate – dropped for the 8th consecutive month. As per the data unveiled by the State Bank of Pakistan (SBP), car financing in February 2023 declined by 9%, clocking at Rs. 326 billion against Rs. 357 billion posted in the corresponding period of last year.
Industry analysts have informed that the sector will continue marking such lows in the future. And the reason for the fuss is a hike recorded in monthly payments in the face of burgeoning interest rates, car prices, and production shutdown leading to delays in deliveries.
Mind you, the local car assemblers are announcing non-production days due to a shortage of inventory following the import curbs inflicted by the State Bank of Pakistan on the import of CKD kits to avert car demand (SBP).
Moreover, the SBP also imposed strict conditions in Sept 2021, adding more pain to the sector. The conditions are:
- The minimum required down payment was increased from 15% to 30%.
- The maximum tenure of auto financing was reduced from 7 years to 5 years.
- The maximum debt-burden ratio, allowed to a borrower, was decreased from 50 to 40%.
- Auto financing limits availed by one person from all banks in the aggregate, not to exceed Rs 30 lac at any point in time.
- Financing for imported vehicles is completely prohibited regardless of engine capacity.
Car Sales Falls to 3-year low
As per Pakistan Automotive Manufacturers Association (PAMA) report, month-on-month (MoM) car sales mark a new downtrend – decreased by 47%, selling 5,762 vehicles in February 2023. The episode narrates a series of tale of woes and miseries never ends here – year-on-year (YoY) sales witnessed a decline of whopping 73%.
what do you think about car financing dwindling from last consecutive 8 months? Drop your thoughts in the comments section.