Dip in November
After two months of consecutive growth, auto loans have experienced a slight dip. According to the State Bank of Pakistan (SBP) data released on Tuesday, loans fell to Rs234.6 billion in November from Rs236 billion in October. Despite the decline, the overall outlook for auto loans had been positive due to a series of factors, including promotional offers and falling interest rates, which helped boost the sector in the previous months.
Growth in October
Auto loans saw an increase in October, rising by 3.7% month-on-month to Rs236 billion compared to Rs227.5 billion in September. This was a continuation of a trend that had seen auto financing grow after a long period of stagnation. The industry saw optimism for a recovery in loans, particularly after it had been at a peak of Rs368 billion in June 2022, but had been on the decline since then.
Impact of Policy Changes on Loans
The SBP’s reduction of its policy rate in recent months has played a role in boosting the demand for auto loans. The central bank lowered its policy rate by 900 basis points from June to December, which led to lower financing costs for loans. However, the implementation of a Rs3 million cap on loans has limited their growth potential.
Future Outlook for Auto Loans
Despite the recent decline in auto loans, experts remain hopeful about a revival in car sales and financing. Mohammed Sohail, CEO of Topline Securities, suggested that loans and car sales could see an uptick starting in January, with many buyers waiting for the new year models. Additionally, industry reports hint that the SBP may raise the auto loan cap to Rs6 million, a move that could stimulate further growth in the sector.
