KARACHI, Oct 18: Auto financing in Pakistan rose for the 22nd consecutive month in September 2026, reaching a record Rs407 billion despite a decline in vehicle sales, according to State Bank of Pakistan (SBP) data cited by Dawn.
Outstanding car loans increased from Rs393.3 billion in August to Rs407 billion in September, representing a monthly rise of approximately Rs13.7 billion.
The increase extended a recovery in automobile financing that has continued for nearly two years, pushing outstanding loans further above the record levels recorded before the previous financing downturn.
An earlier report had placed outstanding auto financing at Rs393.4 billion in August, reflecting the steady growth in borrowing during recent months.
Car Sales Decline Despite Rising Auto Loans
The increase in auto financing came as vehicle sales weakened during September.
Automobile assemblers sold 15,104 cars, SUVs, pickups and vans during the month, down 12% from a year earlier and 3% compared with August, according to figures reported by Dawn.
The slowdown was attributed partly to uncertainty surrounding the delayed automobile policy and confusion over the General Sales Tax (GST) treatment of hybrid vehicles before the issue was resolved.
The September sales report by the Pakistan Automotive Manufacturers Association (PAMA), cited by PakWheels, also recorded a 4.2% monthly decline in passenger car sales, with several leading models experiencing weaker demand.
The contrasting trends in financing and sales do not necessarily indicate conflicting market conditions.
Auto financing figures reflect loans already approved and disbursed by banks, while monthly vehicle sales can be influenced by invoicing delays, policy uncertainty and supply constraints affecting particular models.
Lower Interest Rates Support Auto Financing Growth
The relatively lower interest-rate environment remains a major factor supporting the recovery in automobile financing.
The State Bank of Pakistan maintained its benchmark policy rate at 11.5% during its September 14 monetary policy meeting.
Although borrowing costs have not continued to decline at the earlier pace, interest rates remain considerably below the levels that had previously discouraged vehicle financing.
Topline Securities Chief Executive Officer Mohammed Sohail told Dawn that auto financing was expected to continue growing, although the pace of expansion could slow.
He attributed the possibility of slower growth to a recent increase in the Karachi Interbank Offered Rate (KIBOR) and continued uncertainty surrounding the new automobile policy.
Outstanding auto financing had reached Rs382 billion in June 2026, registering a substantial increase compared with the corresponding period of the previous year.
The September figure indicates that consumers are continuing to use bank financing to purchase vehicles, although the sustainability of this growth will depend partly on future interest-rate movements.
New Car Brands May Support Financing Demand
Growing consumer confidence in new automobile brands could provide further support to Pakistan’s vehicle financing market.
A banker quoted by Dawn said auto financing could improve further from November as new model launches, the entry of additional brands and stronger consumer confidence create more opportunities for vehicle purchases.
The banker also pointed to growing consumer acceptance of Chinese vehicles as a contributing factor.
Traditionally, automobile financing in Pakistan has been concentrated around established Japanese and Korean manufacturers.
However, the domestic market has become more diversified, with Chinese SUVs, hybrid vehicles, plug-in hybrid electric vehicles (PHEVs) and fully electric vehicles increasingly competing for buyers seeking financing options.
For banks, factors such as resale value, dealership support and consumer demand remain important when assessing vehicle financing.
Greater acceptance of newer automobile brands could gradually expand financing opportunities across a wider range of vehicles.
Quarterly Auto Sales Show Broader Recovery
Although September recorded weaker monthly vehicle sales, the overall performance during the first quarter of fiscal year 2026–27 remained positive.
Cumulative automobile sales reached 50,480 units during the quarter, representing a 19% increase compared with the same period a year earlier.
The figures suggest that the automobile market is continuing to recover despite fluctuations in monthly sales.
However, the outlook for vehicle financing and sales will depend on several factors, particularly interest rates, clarity over the upcoming automobile policy and consumer confidence.
The continued increase in outstanding auto loans indicates that bank financing has regained a significant role in Pakistan’s automobile market after the slowdown experienced in previous years.
Whether that momentum translates into stronger vehicle sales in the coming months will depend largely on borrowing costs, policy stability and the availability of new models.