Installment vs. Cash: What Actually Costs You More

Most car-buying decisions in Pakistan come down to one question: pay cash now, or spread the cost. The honest answer depends less on the monthly instalment and more on the total amount you'll actually pay by the end.

Bank auto-leasing typically markets a KIBOR-plus rate, which moves with the State Bank's benchmark — your instalment on a 5-year lease can look very different in year one versus year four if KIBOR shifts meaningfully. Read the schedule for the specific markup type (reducing balance is standard and fairer than flat-rate calculation, which quietly inflates the effective rate).

Dealer-run or showroom-facilitated instalment plans (increasingly common for used-car purchases, including on individual listings here on Cars Ki Dukan) usually carry a flat markup baked into the total price rather than a published interest rate. The way to compare these fairly against a bank lease is simple: take the total of all instalments plus any down payment, subtract the car's genuine cash price, and you have the real cost of credit in rupees — compare that number across offers, not the advertised monthly figure.

Two costs buyers routinely miss when comparing cash to credit: insurance is usually mandatory (comprehensive, not just third-party) for the full loan tenure on a leased car, adding a real annual cost cash buyers can choose to skip or reduce; and early-settlement charges on some leases erase much of the advantage of paying off a loan faster once you have the cash.

If you can genuinely afford to pay cash without depleting an emergency reserve, it remains the cheapest way to buy a car in Pakistan — no markup, no mandatory comprehensive insurance, no processing fee. Credit makes sense when it lets you buy a meaningfully better or newer car than you could otherwise afford, not as a default because it's available.