Car Loans Hit Rs407 Billion in September, a 22nd Straight Monthly Rise

Outstanding car loans in Pakistan rose to Rs407 billion in September, the 22nd consecutive monthly increase, even as new car sales from assemblers fell 12 percent year-on-year to 15,104 units, Dawn reported, citing State Bank of Pakistan data.

The SBP's own figures, reported in more detail by Mettis Global News, put auto financing at Rs407.12 billion at the end of September, up 3.49 percent from August's Rs393.3 billion and 33.61 percent higher than the same month last year.

A loan stock that doesn't move with monthly sales

The two figures are not a contradiction. The Rs407 billion measures the outstanding stock of auto loans still being repaid across the market, which keeps growing as long as new disbursals outpace the loans being paid off each month — even as fewer new cars are sold in that same month. Sales, by contrast, count only the vehicles assemblers moved in September itself.

What's behind the sales slump

Dawn's report attributed September's drop to uncertainty over a delayed new auto policy and confusion over the sales tax rate applied to hybrid vehicles, which was unsettled for weeks before being fixed at 18 percent for engines up to 2,000cc, down from 25 percent. Despite the September dip, cumulative car sales for the first quarter of the 2027 fiscal year were still up 19 percent year-on-year, at 50,480 units, pointing to a slump concentrated in the single month rather than a reversal of the year's broader recovery.

Financing may slow from here

Mohammed Sohail, chief executive of Topline Securities, told Dawn that auto financing is likely to keep rising but at a slower pace, as the Karachi Interbank Offered Rate (KIBOR) — the rate banks charge each other, and the base for most consumer and business loans — has edged up. The State Bank's Monetary Policy Committee held its policy rate at 11.5 percent at its September 14 meeting, but Topline's research flagged the possibility of a 50-basis-point hike, a view that lines up with separate analyst commentary this month warning the SBP could miss its inflation target for the fiscal year.

An unnamed banker involved in auto lending told Dawn that financing activity should pick up from November, pointing to rising consumer confidence, growing trust in Chinese-made vehicles, and new models and brands entering the market. The same banker expected sales to stay subdued in the near term, given a large rise in assemblers' imports of semi-knocked-down and completely-knocked-down kits, which take time to convert into finished vehicles on dealer lots.

Why it matters beyond car buyers

Auto financing is one of the more interest-rate-sensitive corners of household borrowing, so how it behaves over the next few months is a live signal of how Pakistanis are responding to borrowing costs that remain high by historical standards even after two years of rate cuts from their 2023 peak. That signal sits alongside a wider inflation picture that has been uneven this year: weekly inflation eased to 11.38 percent in mid-October even as some staples kept rising, the kind of mixed reading that leaves both consumers and the central bank weighing competing pressures heading into its next policy meeting.

Build Better Pakistan's Economy Desk is tracking State Bank of Pakistan's monthly financing data and will update this piece when October's figures are released.