Ijarah vs conventional auto loan in Pakistan — which actually costs less?

This is the question every buyer asks our finance desk: *"Bhai, Ijarah hai ya regular?"* (Is it Ijarah or regular?) Below is a worked example, real Pakistani numbers as of mid-2026.

The setup

• Car price: PKR 30 lakh
• Down payment: PKR 6 lakh (20%)
• Financed amount: PKR 24 lakh
• Term: 5 years (60 months)

Conventional bank loan (HBL CarLoan)

Indicative profit rate: **17.5% reducing balance**.

• Monthly instalment: ~PKR 60,300
• Total interest paid over 5 years: ~PKR 12.18 lakh
• Total cost of car: PKR 42.18 lakh

The bank technically holds a charge on the car but you're the registered owner from day one. You can sell it (with bank approval) any time.

Meezan Auto Ijarah

Indicative profit rate: **17.0% effective**. Ijarah is technically a *lease* — Meezan owns the car, leases it to you for 5 years, and you can buy it for a token PKR 1,000 at the end.

• Monthly rental: ~PKR 59,600
• Total rentals over 5 years: ~PKR 35.76 lakh
• Token transfer fee: PKR 1,000
• Total cost of car: PKR 35.77 lakh + your down payment = PKR 41.77 lakh

Wait — that's only PKR 41k different?

Yes. The headline numbers move with rates, but in practice Ijarah and conventional in Pakistan are within 1–2% of each other on cost. The real differences are elsewhere:

Ijarah pros

• Shariah-compliant — if that's a constraint, this is the answer.
• Early-settlement is cheaper — Ijarah charges no pre-payment penalty after year 2.
• Insurance is bundled at Takaful (Islamic insurance) rates — usually 0.4–0.5% lower than conventional motor insurance.

Conventional pros

• You own the car from day one — easier if you plan to sell within 2 years.
• Slightly more flexibility on missed payments — you can negotiate; Meezan's contract is stricter.
• Approval is faster — HBL/Faysal typical approval is 7 days; Meezan Ijarah is 10–14 days.

What we recommend

If you're keeping the car for the full 5 years and Shariah-compliance matters to you — Ijarah, every time. The math is essentially identical and the takaful saving compounds.

If you might sell at year 2 or 3 — conventional. The exit is cleaner.

If you have access to neither because of credit history — that's a separate conversation. WhatsApp us; we know which finance partner approves which profile.