How the installment is calculated
P is the financed amount (price minus down payment), r is the monthly rate (annual rate ÷ 12 ÷ 100) and n is the number of monthly installments. This is the standard reducing-balance method used by most banks.
Actual installments can differ because of insurance, processing fees, taxes, or a floating rate linked to KIBOR that changes over time. Islamic banks use rental or profit rates instead of interest, but the monthly amount is usually calculated in a similar way. Confirm the final figures with your bank.
Frequently asked questions
How is car installment calculated in Pakistan?
Banks calculate it on the financed amount (car price minus down payment) using the reducing-balance formula with a monthly markup rate. Insurance and fees are added separately.
What down payment do banks require?
It varies by bank and current State Bank rules; typically a minimum percentage of the car price is required. Check with your bank.
Does a longer tenure reduce my total cost?
A longer tenure lowers the monthly installment but increases the total interest you pay.