KATHMANDU: Nepal’s vehicle financing market has recorded its strongest growth in eight years as lower interest rates encourage more consumers and businesses to purchase vehicles through bank loans.
According to the latest data from Nepal Rastra Bank (NRB), banks and financial institutions increased hire-purchase lending by Rs. 13.22 billion during the first 11 months of the 2025/26 fiscal year (mid-July to mid-June). This marks the largest annual increase since FY2017/18, when hire-purchase lending grew by Rs. 21 billion.
Total outstanding hire-purchase loans rose from Rs. 128.69 billion at the end of FY2024/25 to Rs. 141.91 billion by mid-June 2026, representing an annual growth of 10.3 percent. The increase is significantly higher than the overall banking sector’s credit growth of 5.8 percent during the same period.
Both commercial and passenger vehicle financing expanded over the review period. Lending for commercial vehicles increased by 11.3 percent, while loans for passenger vehicles grew by 8.2 percent.
During the first 11 months of the fiscal year, banks disbursed Rs. 9.70 billion in loans for commercial vehicles and Rs. 3.51 billion for passenger vehicles. By mid-June 2026, outstanding loans stood at Rs. 95.81 billion for commercial vehicles and Rs. 46.10 billion for passenger vehicles.
The growth in vehicle financing comes as Nepal’s auto market continues to recover. Demand for new vehicles has improved, supported by historically low lending rates and easier access to bank financing.
Banks are currently offering vehicle loans at interest rates starting from around 6 to 6.5 percent. Some lenders have introduced promotional schemes with rates below 6 percent to attract customers. With average base rates hovering around 5 percent, several banks are charging premiums of only 0.5 to 1 percentage point on auto loans.
While credit demand from sectors such as agriculture, manufacturing and industry remains subdued following the economic slowdown of recent years, banks have increased lending to sectors with stronger demand, including automobiles and the stock market.
Most banks offer vehicle loans with repayment periods of up to seven years, making financing more affordable for buyers. The competitive lending environment has also encouraged financial institutions to expand their vehicle loan portfolios despite lower interest margins.
NRB data shows that hire-purchase lending last recorded stronger annual growth in FY2017/18, when loans increased by Rs. 21 billion. Lending slowed down over the following years due to tighter monetary policies and weaker market demand.
The trend has reversed over the past two fiscal years. After increasing by Rs. 4.59 billion in FY2024/25, hire-purchase lending has already expanded by Rs. 13.22 billion in the first 11 months of FY2025/26, reflecting renewed momentum in Nepal’s automotive market.
