Car loans in Pakistan increased by Rs. 41 billion in December 2020

After cutting interest rates and rejuvenating businesses following the initial impasse caused by the pandemic, auto loans rose 19 percent to Rs. 41 billion in December 2020.

According to the central bank, car loans will be recorded as Rs in December 2019.219 billion and increase to Rs. 256 billion for the same period in 2020. A media report indicated that the main driver of the increase was increased demand for 1,300 cubic passenger cars.

Although the media did not cite names, the report said the high demand for the new Toyota Yaris was largely responsible for the increase in lending. This is a fair assumption as only the Yaris has together overtaken the Honda City and Civic in recent months.

Another major driver behind the increase in credit is a reduction in interest rates. The state bank of Pakistan is cutting interest rates by 625 basis points to 7% in 2020. Additionally, lower soft interest rates mean lower contributions to the auto finance program.
Some of the fair price increases from manufacturers in 2020 do not appear to be affecting the increase in demand for cars. With new players still entering the market before the 2016-2021 Auto Development Policy (ADP) ends, it can be argued that car demand will likely continue to grow.

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