Following a decrease in the interest rates and the revival of business after the pandemic-induced lockdown, auto loans increased by 19 per cent, reaching Rs41 billion in December 2020.
The figures issued by the State Bank of Pakistan show that the car loans in December 2019 were recorded at Rs219 billion, which increased to Rs256 billion during the corresponding period in 2020.
It is also reported that the growing demand for 1300cc passenger vehicles is the key factor behind the surge in these loans.
According to media reports, the newly launched Toyota Yaris is responsible for the surge in car loans. Toyota Yaris has outsold Honda City and Civic combined.
Another key driver of the increase in loans is the lowered interest rates. The State Bank of Pakistan had reduced the interest rates by 625 basis points to 7 per cent in 2020. Additionally, a decrease in the rates of soft interests meant lesser instalments for car financing programmes.
It seems like a car price hikes by the automakers in 2020 had the least impact on the rising demand for cars. With new players entering the market before the expiration of the Auto Development Policy (ADP) 2016-2021, the demand for cars is likely to surge even more.
