Will Car Prices Drop in Pakistan as Interest Rates Fall? Experts Weigh In

Islamabad:In the wake of rising interest rates in Pakistan, purchasing a vehicle has become nearly impossible for the middle class. For instance, a car that was priced at PKR 1.2 million with an interest rate of 9% shot up to PKR 2.3 million when the interest rate climbed to 22%. However, 2024 has brought some hope, as interest rates have now decreased to 13%. This has led many to ask: will car prices now become more affordable?

Speaking to *V News*, auto industry expert Mashood Ali Khan shared his insights, stating that while the reduction in interest rates will undoubtedly have an impact on the industry, it is important to note that car prices have surged so high that they remain unaffordable for the middle and lower-income groups. He explained that the high prices may take time to come down, adding that while wealthier individuals might experience some immediate relief, the middle and lower classes will likely have to wait longer. He suggested that car prices might decrease in the coming year, especially as the interest rate stabilizes at 13%.

Mashood Ali Khan expressed optimism, stating that with the current interest rate, 2024 could prove to be a better year for the auto industry, providing some relief to consumers as well.

On the other hand, Abdul Razzaq Bajwa, a car industry businessman, noted that although the decrease in interest rates is bringing some relief to inflation, it hasn’t yet led to a reduction in car prices. He pointed out that while the pace of price hikes may have slowed, there has been no significant price reduction in vehicles. He also emphasized that the ordinary Pakistani, especially from the lower-income groups, still finds it impossible to buy a car.

For instance, Bajwa explained, the price of the smallest car, the Alto, has now reached PKR 2.9 million. Even if there is a price reduction of PKR 100,000 or PKR 200,000, it would only bring the price down to PKR 2.7 million, which is still far beyond the reach of most people. He further pointed out that only about 2% of the population from the upper class could afford to purchase cars priced at PKR 20 million.

He concluded by acknowledging the hope that falling interest rates might eventually lead to cheaper cars, but added that the timeline for such a change remains uncertain. For now, the idea of cars becoming truly affordable seems to be a distant prospect for the majority of Pakistan’s population.