Getting a car is a dream for many Pakistanis. But instead of paying in one go, people often choose a car loan in Pakistan. Picking the right financing makes a big difference for your wallet and peace of mind. In this post, we break down everything: from interest rates to documents, calculators and comparing car loan vs car lease.
Understanding Car Loans in Pakistan
What is a car loan
A car loan is borrowed money from a bank for buying a vehicle. You pay it back monthly with interest or markup.
How car loans work locally
Banks cover a percentage of your car’s price typically 70–85% and you pay the rest as down payment. You then repay over 1–7 years via equal installments. Many loans are hypothecated: the bank holds title until full payment.
Common terms and structures
- Markup: like interest, often based on KIBOR + spread.
- Floating vs fixed rate: Most are floating (changing with KIBOR), few fixed.
- Tenure: 1–7 years, varies by car type and bank.
- Balloon payments: some banks allow lump payments mid‑loan.
- Islamic finance (Ijarah): leasing model, no riba.
Top Banks Offering the Best Car Loan in Pakistan
Below is a snapshot of leading banks:
| Bank | Rate | Tenure | Down-Payment | Special Features | Source |
| Allied Bank | KIBOR + 3–5% (floating) | 1–5 years (up to 7 for Roshan‑Apni) | ≥30% | Balloon Payments, no processing fee if rejected | Allied Car Finance |
| HBL | 11.99% p.a. | 1–7 yrs | 15–20% | 1600 branches, tracker insurance | HBL Car Loan |
| UBL | 10– 13% P.a. | 1–7 yrs | 15–30% | Quick processing, imported cars ok | UBL |
| Bank Alfalah | Floating (KIBOR + 3.50–5%) | 1– 5 yrs | 20–25% | Early settlement w/o fee | Alfalah Auto Loan Markup Rates |
| Meezan Bank (Islamic) | 13.45–13.70% p.a. | 1–5 yrs | 20–30% | Sharia-compliant, variable Ijarah Plans | Meezan Car Ijarah |
| JS Bank | 1 yr KIBOR + spread | 3–5 yrs (≤1000cc), 3 yrs (>1000cc) | 30% | Payrolls holder deal | JS CarAamad Auto Finance |
Car Loan Interest Rate Comparison
Fixed vs variable rates
- Floating: majority—your markup moves with KIBOR.
- Fixed: rare—useful if you expect rising rates.
Interest rates offered by major banks (updated)
| Bank | Rate Type | Rate (Approax.) | Notes | Source |
| HBL | Fixed Markup | 11.99% p.a. | Fixed for locally assembled vehicles only | HBL Car Loan – Official Page |
| Allied Bank | Floating (KIBOR + spread) | KIBOR + 3–4.5% | Varies by employment & account status | Allied Car Finance – Allied Bank |
| Bank Alfalah | Floating/ Fixed | KIBOR + 3.5–5% or 16–17.5% fixed | Based on tenure, vehicle type, and plan | Auto Loan Markup Rates – Bank Alfalah |
| UBL | Floating/ Fixed | Estimated ~10–13% p.a. | Terms vary, mostly for salaried professionals | UBL Drive – UBL Official Site |
| Meezan Bank | Shariah-based (Ijarah) | 13.45–13.70% p.a. | Profit rate depends on tenure & variant | Car Ijarah – Meezan Bank |
Note: SBP’s policy rate is currently at 11% (as of mid‑June 2025) reuters.com. Since auto‑loan caps are tied to policy, banks follow suit. SBP also keeps max financing at Rs 3 m thenews.com.pk.
Using a Car Loan Calculator in Pakistan
How to calculate monthly installments
Use online calculators like Allied Bank’s “Car Finance Calculator” or HBL’s car loan calculator. Enter: loan amount, term, markup, and it’ll spit out EMI.
Tools and resources available online
Allied bank has Official, interactive EMI tool and HBL has Official “Easy Car Loan” calculator
Car Loan Requirements in Pakistan
Eligibility criteria
- Age: ~21–65 yrs (varies); self‑employed up to 70 in some cases
- Income: >PKR 40,000–60,000 net monthly, depending on bank and role
- Employment: minimum work history 6 mo–2 yrs.
Allied Bank Car Finance – Eligibility Details
Documents needed
Common documents (see Allied, Al Habib, JS Bank etc):
- CNIC, 2 photo
- Last 6 months bank statements
- Salary slips or business proof
- Filled application form, employment proof
Required Documents for Car loan
Steps in the application process
- Check eligibility & save 15–35% down payment.
- Compare banks via calculators.
- Apply online or visit branch.
- Submit docs, get offer letter.
- Pay down payment + fees + insurance.
- Car hypothecated until loan repaid.
HBL Car Loan – Full Application Process
Car Loan vs Car Lease: What’s the Difference?
Definitions and pros/cons of each
- Car loan: You own the vehicle, pay it over time + interest.
- Pros: full ownership, modify the car.
- Cons: interest cost, maintenance risk.
- Pros: full ownership, modify the car.
- Car lease (Ijarah): You pay rent, bank owns title. Option to buy or return at end.
- Pros: no riba, structured payments, option to return.
- Cons: must return or balloon, less flexibility on use.
- Pros: no riba, structured payments, option to return.
Which is better suited for different buyer types
- Want ownership → go for car loan.
- Prefer Shariah compliance or lower initial burden → Ijarah works.
Reddit users say:
“Meezan bank is the best choice because of its 0% interest. Meezan Bank does not charge penalties in case someone misses their installments on anything, instead they ask you to donate a certain amount to charity”
And for Islamic leasing:
“Bank Al Habib’s Islamic option… allows balloon and bullet repayments”
Tips for Choosing the Best Car Loan in Pakistan
What to look for
- Markup & type: floating vs fixed vs Islamic.
- Loan limit & tenure: ensure enough coverage & manageable monthly EMI.
- Down‑payment requirement: typical 15–35%
- Processing & hidden fees: ask about pre‑payment charges, insurance add‑ons.
- Bank reach & service: HBL & UBL have country‑wide branches; Islamic banks may have fewer.
How to negotiate better terms
- Leverage salary routing: sending salary to bank may get spread discounts (~1% lower).
- Pay attention to partial payment options: e.g., Allied allows 2 balloon payments mid‑tenure.
- Ask about waiving fees: sometimes banks waive processing if you maintain account.
Expert Quote on Car Loan Trends
After interest rates peaked at 22% in June 2022, any drop even to 17.5% by September prompted a revival in car financing. Consumers regained confidence, and we saw a clear uptick in auto loan applications,” said Aamir Shafaat Khan, a senior business reporter covering Pakistan’s auto-finance sector (Dawn Business)
FAQ’s
Which bank is best for car finance?
Meezan Bank is top-rated for Islamic car financing; for conventional, HBL and UBL are widely trusted.
Which car has the lowest installment?
Suzuki Alto and United Bravo usually have the lowest monthly installments due to low prices.
What is 0 interest on car finance?
It means no riba offered by Islamic banks under Ijarah or Musharakah models.
How to calculate EMI for car loan?
Use bank EMI calculators by entering loan amount, markup, and tenure.
Which is better: car loan or finance?
Car loan gives ownership; Islamic finance (Ijarah) is riba-free but with conditions.
Conclusion
Final recommendations
- For lowest markup: HBL (11.99%) or Allied with strong salary routing.
- For Islamic, Shariah‑compliant: Meezan or Bank Al Habib’s Ijarah, with flexible bullet/balloon options.
- Good all‑rounders: UBL, Alfalah, JS Bank.
Use a car loan calculator, compare markup vs tenure, and don’t forget: save at least 15–35% as down payment. Always read the fine print!
Disclaimer
This blog is just for info purpose, not some official car loan advice banks have their own terms. Things like markup rate, documents, or fee can change anytime, so better you check directly before applying. We tried our best to give right info, but if anything’s missing or goes wrong, we won’t be responsible for that.
