In recent months, car financing in Pakistan has seen a significant surge, with more consumers opting for bank-financed cars, reflecting the broader vehicle financing trends across the country. According to the latest PAMA car sales report, car sales statistics in Pakistan for March 2025 recorded an 18% increase compared to the same month in 2024. PAMA (Pakistan Automotive Manufacturers Association) further highlights that during the first nine months of the current fiscal year (July 2024 to March 2025), car sales rose by 46% compared to the same period last year. The data indicates that over 150,000 vehicles have been sold so far this fiscal year, up from under 100,000 during the same span in the previous year—pointing to notable growth in the auto industry in Pakistan. On the financing side, the State Bank auto loan data reveals that consumers borrowed PKR 257 billion by the end of March 2025 for car purchases, up from PKR 249 billion in February, signaling robust car loan growth in Pakistan. This increase in auto loans in Pakistan (2025) and vehicle sales comes amid improving economic indicators in Pakistan, such as falling interest rates and inflation, along with rising remittances and car purchases. However, despite these positive signs, challenges remain—unemployment in Pakistan (2025) is on the rise, industrial output is slowing, and household incomes are under pressure. Experts in the auto and banking sectors stress that individuals considering leasing, financing, or opting for Islamic car financing in Pakistan, such as Ijarah, should carefully evaluate their financial position to avoid long-term debt burdens associated with bank-financed vehicles in an unpredictable economic environment.
According to State Bank data, by the end of March, consumers had borrowed Rs257 billion from banks to purchase vehicles.
In recent months, the rise in consumer borrowing from banks for car purchases in Pakistan has been attributed primarily to the decline in interest rates in Pakistan, according to auto sector expert Mashhood Ali Khan. He explained that in June 2022, the interest rate in Pakistan stood at a record high of 22%, whereas by March 2025, it had dropped to 12%, contributing to the growing car loan trend in Pakistan. Mashhood noted that as interest rates fell, auto financing became more affordable for consumers. At the same time, inflation also slowed down, and the exchange rate of the US dollar stabilized, leading to relatively stable car prices in Pakistan 2025. This reduction in interest rates and inflation had a direct impact on auto loans, making car loans in Pakistan 2025 more accessible to a wider audience. He added that small car sales trends have shown a significant increase, with more people opting for smaller vehicles, while at the same time, the sales of SUVs, particularly those priced between PKR 6 million to 9 million, have also risen due to the availability of low markup car financing options.
According to the auto financing policy 2025 and consumer financing regulations issued by Pakistan’s central bank, consumers can obtain a maximum car loan amount in Pakistan of PKR 3 million for purchasing a vehicle through bank financing. This car loan limit in Pakistan was introduced about two and a half years ago to manage rising inflation and currency fluctuations. Auto sector expert Mashhood explains that the central bank imposed this cap to regulate borrowing during a time of economic pressure. However, stakeholders in the automobile industry are now calling for an upward revision of this limit to support growth in vehicle financing. Not everyone can afford to pay for a car upfront, which is why many turn to banks. But what is the auto loan process in Pakistan, and how can consumers apply? Aamir Qureshi, Head of Products, Transactional Services, and Solution Delivery at Habib Bank, outlines the bank car loan procedure. Applicants can apply through a nearby branch, the mobile app, or by calling the help line. Overseas Pakistanis can apply via the Roshan Digital Account car loan facility. After submission, the bank evaluates the application and checks car loan eligibility in Pakistan. Once approved, the customer must make a down payment for the car loan, after which the loan is disbursed as part of the formal vehicle financing steps.
When taking out a bank loan to purchase a car, consumers should be mindful of several key factors. Banking expert Rashid Masood Alam explains that banks typically require customers to provide bank statements, income tax returns, and other relevant information during the application process. Rashid Masood emphasizes that consumers should pay attention to the prevailing interest rate in the country. “Banks generally charge a higher annual percentage rate, and it’s important for customers to be aware of this. For instance, the current policy rate set by the central bank is 12%, but banks add their own margin on top of this when charging the customer,” he said. He added, “It often happens that private banks quickly pass on any increases in the central bank's interest rate to the customer, but when the rate decreases, the benefit is not passed on.” He further advised that customers should have some level of financial literacy, so they can calculate how much profit or markup the bank is actually charging on the loan. Most banks inform their customers about the down payment, monthly installment amount, and other charges. Additionally, banks and car companies often provide car loan calculators on their websites to help with these estimations. Rashid pointed out that many people don’t read the loan agreement terms and conditions, which tend to be lengthy and complex. “Still, it’s important to read them to understand whether they’ll realistically be able to pay the installments on time in the future.” He also mentioned that if customers have any complaints regarding the bank, they can contact the Consumer Protection Department of the central bank for assistance.
According to the directives of the Central Bank of Pakistan, consumers can obtain a maximum loan of up to Rs 3 million from the bank for the purchase of a vehicle.Aamir Qureshi explained that in leasing, the ownership rights of the car remain with the bank until the loan is fully repaid. In contrast, in conventional financing, the ownership is shared between the bank and the customer. He further noted that in Islamic financing, or Ijarah, the installment is referred to as a rental payment, while in conventional banking, it is simply called a monthly installment. Additionally, in conventional banking, the car is insured under a standard insurance policy, whereas in Islamic financing, it is covered under Takaful. Sameel Nauman Qureshi, Head of the Products Department at Bank Islami, explained that in Islamic financing, the rent for the asset (i.e., the car) is only charged once the vehicle is handed over to the customer. On the other hand, in conventional banking, the bank starts charging installments immediately after disbursing the loan, even if the asset hasn’t been transferred to the customer yet. He also added that in Islamic financing, the risk of the asset is borne by the financier (bank), whereas in conventional financing, the risk is passed on to the customer.
Aamir Qureshi explained that in a fixed interest rate car loan, the interest rate remains the same for the entire duration of the repayment period. This means the borrower has to repay the loan at that fixed rate regardless of market fluctuations. On the other hand, a variable interest rate is linked to the Karachi Interbank Offered Rate (KIBOR), which changes from time to time. KIBOR is the rate at which banks lend to each other and can fluctuate based on market conditions. Annual insurance, vehicle registration, and other charges are also included in the total cost of the car. Muhammad Abbas, associated with a car dealership, mentioned that registration is handled by the provincial excise department, which charges a fee for registering the vehicle. Similarly, vehicle taxes are also collected by the provincial government’s relevant department. He added that different provinces have different methods and fee structures for tax collection. Insurance is typically bundled with car financing as a mandatory requirement.
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