High interest rate drives demand for used cars

Amid unprecedented 22 per cent interest rate and restrictions imposed by the State Bank of Pakistan (SBP) to curb vehicle demand, consumers have increasingly been seeking used vehicles for auto financing over the past two to three years. A number of banks have ventured into the leasing and financing of used vehicles, including models up to nine years old. However, high monthly instalments continue to deter many consumers due to affordability issues. Dealers and banking sources have noted that the availability of used vehicles on monthly instalments has kept auto financing afloat. Otherwise, they said, the demand for new vehicles would have been negligible due to a steep rise in their prices and the shrinking buying power of many consumers, exacerbated by soaring utility bills. Ahmed Shamim, a private banker overseeing auto leasing, said it is challenging to share information regarding imported vehicles and their instalments following the revised prudential regulations by the SBP in September 2021, which also imposed a ban on financing imported vehicles.