What rate do banks charge for car loans?

Most conventional car loans are priced at 1-year KIBOR plus a spread of 2–4%. Islamic banks quote a profit rate that tracks the same benchmark.

Is a bigger down payment better?

A larger down payment reduces both the instalment and total mark-up. Banks reward it with lower spreads too.

Yes, most banks allow early settlement after a lock-in period (often 1 year) with a small penalty of 1–3% of the outstanding amount.

Does this include insurance?

No. Comprehensive insurance is mandatory during the loan and costs roughly 2–3.5% of the vehicle value per year.

Carsv1.0.0Last reviewed 15 Sept 2026

Car Financing Calculator Pakistan

Work out your monthly car loan installment, total mark-up and total cost for bank car financing or Meezan car Ijarah at KIBOR-linked rates.

Monthly instalmentRs 76,669

Pre-filled from Searchable Data: 1-year KIBOR + 3% spread 16.04 (30 Oct). Rates last reviewed 15 Sept 2026. How this is calculated

Financing Rs 3,150,000 over 60 months at 16% costs Rs 1,450,131 in mark-up. The car ends up costing Rs 5,960,131, 32.2% more than the cash price.

Loan

Car price: Rs 4,500,000
Down payment (30%): Rs 1,350,000
Amount financed: Rs 3,150,000

Cost of financing

60 instalments of: Rs 76,669
Total mark-up: Rs 1,450,131
Mark-up in first year: Rs 473,367
Processing fee: Rs 10,000
Total cost of car: Rs 5,960,131

Warning: Banks also charge insurance (typically 2–3.5% of the car value per year) and may adjust the rate as KIBOR moves on floating-rate products.

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How this is calculated

The instalment uses the standard reducing-balance (amortising) formula:

instalment = P × r ÷ (1 − (1 + r)^−n)

where P is the amount financed, r the monthly rate (annual ÷ 12) and n the number of months. Each payment covers that month's mark-up on the remaining balance first; the rest reduces the principal, so early payments are mostly mark-up.

Islamic products (Ijarah / Diminishing Musharakah) are structured differently in contract but usually produce a comparable monthly figure at a comparable profit rate, so this calculator is a fair estimate for both.

Frequently asked questions

What rate do banks charge for car loans?: Most conventional car loans are priced at 1-year KIBOR plus a spread of 2–4%. Islamic banks quote a profit rate that tracks the same benchmark.
Is a bigger down payment better?: A larger down payment reduces both the instalment and total mark-up. Banks reward it with lower spreads too.
Can I pay off early?: Yes, most banks allow early settlement after a lock-in period (often 1 year) with a small penalty of 1–3% of the outstanding amount.
Does this include insurance?: No. Comprehensive insurance is mandatory during the loan and costs roughly 2–3.5% of the vehicle value per year.

Sources

Standard amortisation formula; KIBOR reference from SBP: State Bank of Pakistan
Meezan Bank Car Ijarah: profit rates, security deposit, processing charges: Meezan Bank

Version 1.0.0 · reviewed 15 Sept 2026. Rates change with the Federal Budget and regulator notifications; we update this tool when they do. Confirm with the primary source before making financial decisions.

Topics:Honda Meezan Bank Toyota