How Strict Auto-Financing Rules will Affect The Industry? | CarMandee Blogs | CarMandee

How Strict Auto-Financing Rules will Affect The Industry?

Ishaq Nabi
by Ishaq Nabi


3 min read


For those who don't know, the State Bank of Pakistan (SBP) has announced a new time span for automotive financing. The notification issued by the State Bank of Pakistan reduced the financing tenure from 5 years to 3 years for vehicles with a displacement of over 1000cc. And the financing tenure for the vehicles with displacement under 1000cc engine has been brought down from 7 years to 5 years.

The exact words were:

“The maximum tenure of auto finance facility is reduced from five (5) years to three (3) years for vehicles above 1,000 cc engine displacement and from seven (7) years to five (5) years for vehicles up to 1,000 cc engine displacement.”

State Bank of Pakistan (SBP)

This notification refers to all the locally manufactured vehicles including the financing for vehicles up to 1000cc displacement as well as electric vehicles. The notification stated

“New amendments are applicable with immediate effect, on new financing facilities where the banks have not given approval yet,”

The reason behind reducing financing tenure

Now if you are wondering the reason behind this decision. The step was taken by the government to fight against the expanding import bills. The government has high hopes that inflation will be controlled through this mighty decision.

Ban on Car Import

Last week, a  total ban on the import of vehicles was imposed by the government of Pakistan. Around 800 items that came under 33 categories were banned. This measure was a huge decision and was taken only for controlling the sky-rocketing import bills. The ban was not implemented on the import of new vehicles but also on the used ones.

Maryam Aurangzeb, the current Information Minister of Pakistan, reported that it is an emergency. She further asked the Pakistanis to cut down the usage of imported goods as they would not be available now. She has high hopes that cutting the imports would help save about $500 million per month.

We all are aware of the fact that Pakistanis are highly dependent on imported goods in their daily lives. It would be a huge sacrifice. But let’s see whether cutting down the imports of vehicles would have a positive effect on the economy of our country or will it make it worse.

CBU Car Imports

Under SRO598, the import of all completely built-up units (CBU units) has been banned by the government. These include all new and used CBU vehicles. The only vehicles that can be imported include the commercial ones. The import of all types of passenger vehicles and luxury vehicles has been banned. None of them will enter the borders of Pakistan.

CBU Car Imports

But what about the vehicles that had been booked already? Will this notice affect them too? Of course, it would! All vehicles booked with the delivery after May 19, 2022, are banned. The only vehicles that will be cleared are the ones that have reached Karachi port. They will be delivered to their customers.

CKD Kits Imports

Except for the ban of CBU units, the duty on the import of CKD (completely knocked-down kits) has been increased too for the locally assembled vehicles. Currently, the regular duty on vehicles above 1000cc and 1300 cc vehicles is 70 percent. Some experts have suggested increasing this regulatory duty to 100 percent. But the ministry has not taken any such decision yet.

Impact on consumers

Reducing the 5-year tenure to 3-years means that the monthly installments will rise by 30-50%. Since the debt burden has been limited to 40% of an individual's salary, most consumers will not be applicable to acquire loans. On top of this, as cars have become so expensive in Pakistan, auto finance was a huge relief for most consumers. Now, even that relief will be taken away from most consumers.


First, the government banned all imported vehicles. Now, the government has reduced the financing tenure. All this is being done to deal with the increasing inflation within the country. Do you think these decisions will help the country’s economy or will they go to waste? Let us know your view in the comment section.

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