Car financing in Pakistan: the SBP rules that decide what you can borrow
What happened
Under the State Bank of Pakistan's Prudential Regulations for Consumer Financing, total car financing per person is capped at PKR 3,000,000 across all banks combined — not per bank. Separately, most auto financing is priced as 1-year KIBOR plus a bank spread, and published spreads currently range from about 2.5% to 6% depending on the bank and product.
Why it matters
The aggregate cap catches people out: taking a second facility at a different bank does not reset it. And because the spread varies by roughly 3.5 percentage points between the cheapest and most expensive lender, shopping the spread matters more than most buyers assume — on the same car, the same tenure and the same benchmark.
Who is affected
- First-time car buyers comparing bank financing offers
- Anyone who already holds auto financing and is considering a second vehicle
- Buyers choosing between conventional financing and Islamic Ijarah or Musharaka products
| Aggregate financing cap (all banks) | — | PKR 3,000,000 | |
| 1-year KIBOR benchmark | — | ≈ 11.83% | |
| Published bank spreads | ≈ 2.5% | ≈ 6% |
What the spread costs on the same car
Illustrative: PKR 2,500,000 financed over 5 years, variable rate
| Item | Before | After |
|---|---|---|
| At KIBOR + 2.5% | — | ≈ PKR 58,600/mo |
| At KIBOR + 3.5% | ≈ PKR 58,600/mo | ≈ PKR 59,900/mo▲ +PKR 1,300/mo |
| Over the full 5-year term | — | ≈ PKR 78,000 difference |
Illustrative estimate at current KIBOR. Variable-rate installments reset when KIBOR moves — confirm the reset frequency and exact spread with your bank before signing.
Fixed or variable?
Most Pakistani auto financing is variable: priced as KIBOR plus a spread, and repriced at each reset. That means your installment moves with the benchmark in both directions. A fixed-rate product removes that uncertainty, but you pay for it — and you also give up the benefit if KIBOR falls. Neither is automatically better; it depends on how much payment certainty is worth to you.
What to compare beyond the rate
- The spread over KIBOR — the single biggest driver of your installment.
- Maximum financing as a share of vehicle value, which sets your required down payment.
- Minimum income requirements, which vary meaningfully between banks.
- Processing fees, insurance arrangements and early-settlement penalties.
- For Islamic products, whether the structure is Ijarah or Musharaka, and how rental is reset.
KIBOR and policy rates sourced from SBP monetary policy announcements.
Last verified: 4 August 2026 · About our data
Frequently asked questions
How much car financing can I get in Pakistan?
SBP's Prudential Regulations for Consumer Financing cap total car financing at PKR 3,000,000 per person across all banks combined. Individual banks may also cap financing as a percentage of the vehicle's value.
How is car loan EMI calculated in Pakistan?
Banks use the reducing-balance method: EMI = P × r × (1+r)^n ÷ ((1+r)^n − 1), where P is the financed amount, r the monthly rate and n the number of installments. Most auto financing is priced as 1-year KIBOR plus a bank spread.
Is Islamic car financing cheaper than conventional?
Not inherently. Islamic auto products such as Ijarah and Musharaka are structured differently but are priced in the same market, and published spreads overlap with conventional products. Compare the total cost, not the label.
What happens to my installment if KIBOR changes?
On a variable-rate facility your installment is recalculated at the next reset date using the new benchmark plus your fixed spread. On a fixed-rate facility it does not change.
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