Price increase of new cars shifts financial institutions CF Parallel focus on used car& SME lending.

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According to study auto financing increased by 19.4% year-on-year in the fiscal year ended June 2022 & similarly gave boost to car sales.

Dear Readers Car sales in June-22 grew 106% YoY and 24% MoM in anticipation of increase in vehicle prices post-imposition of taxes.
Year-on-year increase in auto financing came mainly due to heavy order backlog, on a month-on-month basis, slowdown started to emerge on the back of rising auto financing rates.
Car financing was up only 0.32% month-on-month in June. New budget 2022-23 policies implementation started from July 1st, original equipment makers (OEMs) did not make any significant bookings considering huge dollar inflation & SBP import polies not issuing Letters of Credit (LCs) in compliance with State Bank of Pakistan’s (SBP) instructions to curb imports.

Loan on used car / financing
Buying a used car on loan from bank is a good deal it can reduce borers burden to pay amount upfront. It is obvious that a second-hand car will cost less compared to brand new car, thereafter, the used car loan financing will also be a lesser amount, meaning lesser monthly installments to pay.
When getting a used car, the choice of models isn’t dependent on its current on-road price. The amount you invest in a new car of a particular model can buy you a higher model in the same amount or probably even lesser in case of a second-hand car of the same make. So you may also be able to retain its original value when you intend to resell it in the future.
To get your car on loan, you will also be required to make down payment and pay government taxes as applicable.
Different Banks offer different loan option/ package considering customers profile, since demand of used cars is increasing banks & other financing institutions are introducing optional plans to create ease for customer’s in-accordance to updated SBP PL lending guidelines.

Options offered by Banks on used cars
Buying used cars on residual value, used vehicle up to 9 year can be financed, Minimum markup & insurance rates are being offered on used car by Institutions. Considering recent economic recession some Banks have also started cash loan against pre-owned vehicles as collateral.

Used Car Financing program offered by Assemblers in collaboration with financing institutions.
Toyota &Pak Suzuki in alliance with banks offer New and Used Car financing options for those who wants to own a car. Partnering Banks also offer customer ease of choosing a suitable payment plan.Rumors are that more industry assemblers are working on their Certified used car segment & intend to lunch same in the coming time.

Documentsrequired with regards to SBP PL for financing vehicle.
• Filled Application form
• CNIC copy’s
• 2 passport size photographs (colored)
• Bank Statement/Bank certificates (6 months)
• Recent Salary Slip (3 months)
• Any other documents may be required under the Bank approved policy.

Eligibility
• Minimum income criteria (Monthly installment should be around50% of net per month Income)
• Income segments: Co-applicants (up to 2), Rental Income, Foreign remittance, Saving/Term Certificates
• Age Criteria
o Salaried – min 21 years & max 60 years
o SEB/SEP – min 21 years & max 65 years
o Co-Applicant – min 21 years & max 70 years


Lists of CF Banks in Pakistan*.

  1. Bank Alfalah
  2. Habib Bank Limited
  3. Muslim Commercial Bank
  4. Askari Bank Limited
  5. United Bank Limited
  6. Bank Al Habib
  7. JS Bank
  8. Meezan Bank
  9. Standard Chartered Bank
  10. Summit Bank
  11. Bank Islami Pakistan
  12. Bank of Punjab
  13. Bank of Khyber
  14. Al Baraka Bank
  15. MCB Islamic Bank Limited
  16. Faysal Bank
  17. Dubai Islamic Bank
  18. Allied Bank Limited
  19. Habib Metro Bank

ORIX Leasing Pakistan Limited (“OLP”)
OLP Financial Services Pakistan Limited (“formerly ORIX Leasing Pakistan Limited”) was established in July 1986 as a joint venture between ORIX Corporation, Japan and local investors. The Company is listed on the Pakistan Stock Exchange.
OLP is headquartered in Karachi and has 38 branches situated in 35 cities. Its major shareholder is ORIX Corporation Japan having 49.6% shareholding. Established in 1964, ORIX is one of Japan’s leading integrated financial services groups with operations in 37 countries worldwide.
OLP offers value-added financial products and innovative customized services to a wide array of customers throughout Pakistan. The blend of international experience and local expertise acquired over the last 33 years provides OLP a distinctive competitive edge. OLP is the largest SME focused Non-Banking Finance Company in Pakistan.
OLP Consumer Auto Division offers flexible product range suiting specific requirements and financial needs of individual customers. OLP claims that their plans are as easy to understand as road signs.

Salient Features
• OLP Consumer Auto Division offers both leasing and financing facilities of vehicles.
o Straight Leases
o Cash Back Leases
o Step up and Step Down Leases
o Balloon Payment Leases
o Leases with Grace Period
o Financing against vehicles
• An auto lease contract is a non-cancellable contract for a specific period of time, typically from three to five years.
• The lessee will receive the full benefits of all warranties, guarantees, etc., offered by the manufacturers.
• The vehicle is insured by OLP on behalf of the lessee with Pakistan’s leading insurance companies and OLP’s lessees will enjoy the following distinctive features: No deductible amount on the policy, coverage of terrorism, coverage of life insurance, coverage of third party limited liability insurance.
• The auto lease comes with a complementary Tracking Device option.
• Leasing is acceptable within the Islamic modes of financing as fixed rental payments are made.
• OLP Branch Network is present throughout Pakistan.
• OLP Consumer Auto Division can lease almost all types of vehicles ranging from small to large ones.
Eligibility Criteria
Any individual who relates to:
• Business entity from sole proprietorship and partnership to public and private companies.
• Corporate employees from small and medium-sized enterprises to large corporations.
• Self-employed persons such as doctors, engineers, architects, lawyers etc.
• At least 21 years of age at the time of leasing or financing.
• A resident of Pakistan.

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