Are Cars a Good Investment?

With Kia releasing its increased rates for the third time in only 92 days since the beginning of the year 2022, car costs in Pakistan are once again on the rise. It's conceivable that other automakers will follow suit. The loss of the Pakistani rupee versus the US dollar, as well as increased freight costs, have resulted in a rise in the cost of 'imports' needed to 'assemble' the automobiles locally.

The price revision period turns out to be 30.6 days, which indicates that new automobile costs are now being changed every month technically. Car pricing may be updated every 15 days in the future, similar to gasoline prices, based on the Rupee-Dollar parity and the large number of parts that must be imported to bring locally produced automobiles to life.

Most legitimate purchasers have already been priced out of the market due to rapidly rising costs, strict automobile financing restrictions, inflation, and worse economic conditions. However, assemblers continue to announce record sales (bookings), possibly owing to the presence of scalpers in the market, whose main purpose is to resell booked automobiles for a premium/on-money. According to a study by the Pakistan Institute of Development Economics, up to 90% of passenger automobiles in Pakistan are sold for a premium/on money (PIDE).

Cars are now costlier in Pakistan than residential property, as ludicrous as that may seem. Today, a customer who purchases a Rs 3.7 million automobile must pay up to Rs 60,000 per month on a 5-year loan at the current interest rate, assuming a 30% down payment of about Rs 1.15 million. How many do you believe will be able to pay this large sum only to settle the payments, leaving gasoline and maintenance out of the equation? This is true for a regular sedan; simply double this by the number of costly automobiles in our market, the majority of which are priced above Rs 5.5 million.

The prices of new automobiles have a direct impact on the prices of old cars on the market, which are presently accessible at exorbitant rates. For example, a brand new Honda Civic Oriel cost PKR 24.99 lakh three years ago, but it now costs PKR 56.49 lac. As a result, used vehicle markets and online classified websites are now asking for PKR 45.0 lac to up to PKR 50.0 lac for the 2018 model Civic with roughly 50,000km on the odometer.

Even after driving the automobile for many thousand kilometers, this results in a Rs 2.0 million premium above the original price. And perhaps this is why the vehicle industry, whether new or used, is controlled by people looking to profit from each transaction rather than real buyers. Even a ten-year-old Toyota Corolla 1.6L is currently being sold for over Rs 3 million on the used automobile market, and instead of depreciation, the vehicle is making up to Rs 1.3 million profit after ten years of service. (Rs 17.56 lac for a Corolla Altis 1.6L in 2012).

Due to a lack of restrictions in the auto industry, new car costs are escalating like wild monsters in a forest, influencing the prices of used automobiles in the process. The government has stated that it would perform a forensic audit to evaluate if the impact of rising input prices is properly passed on to consumers in the form of price increases, but the conclusions have not yet been released. We'll have to wait and see whether it makes a difference for automobile consumers in Pakistan.

Top Brands

Toyota Cars
Suzuki Cars
Honda Cars
Daihatsu Cars
Mitsubishi Cars
Nissan Cars
Mercedes Cars
Hyundai Cars
BMW Cars

At MyWheels you will find the solution to all of your automotive requirements. With a team full of car experts, we are giving you a bundle of choices for new and used cars that are just a click away. We have put up all the necessary efforts to provide our customers with quality services.