Auto financing in Pakistan maintained its upwards trajectory, reaching an all-time high at Rs349 billion in November 2021, up 42% YoY.

However, on a monthly basis, the growth slowed to 1%, the lowest increase on a monthly basis since July 2020. Financing stood at Rs346 billion in October 2021.

“This is the lowest monthly increase after July 2020. This monthly slowdown can be mainly attributed to the amendments made by the SBP in prudential regulation regarding auto-financing,” said brokerage house Arif Habib Limited (AHL) in a note.

Back in September, the State Bank of Pakistan (SBP) announced revision in Prudential Regulations (PRs) for consumer financing to moderate import and demand growth. As per revised regulations, the maximum tenure of the auto finance facility was reduced from seven (7) years to five (5) years. In addition, new as well as used imported vehicles will not be eligible for auto financing from banks/DFIs.

Consumer financing: SBP revises PRs to moderate import, demand growth

The changes in the PRs effectively prohibit financing for imported vehicles, and tighten regulatory requirements for financing of domestically manufactured/ assembled vehicles of more than 1,000 cc engine capacity and other Consumer Finance facilities like personal loans and credit cards.

As per amendments, maximum tenure of auto finance has been reduced from seven (7) to five (5) years and the maximum tenure of personal financing, except the financing extended for educational purpose as prescribed in the regulation, is decreased from five (5) years to four (4) years.

Maximum debt-burden ratio, allowed to a borrower, has been decreased from 50 to 40% and overall auto financing limits availed by one person from all banks/DFIs, in aggregate, will not exceed Rs3,000,000, at any point in time. However, the financing limit of borrowers whose approved limit already exceeds Rs3,000,000 may be amortized as per existing terms and the same shall not be further increased. Minimum down payment for auto financing has been increased from 15% to 30%.

Month-on-month: Pakistan's overall auto sales decline 11% in November

Meanwhile, Pakistan auto sales in November clocked in at 23,863 units compared to 26,847 units in October, showing a decline of 11% on MoM, but a growth of 32% YoY.

As per data released by Pakistan Automotive Manufacturers Association, the sale of passenger cars stood at 15,351, growing by 29% YoY but declining by 12% MoM.