The Issue of Own Money (Policy)

Charging own money on vehicles has become a norm in Pakistan’s automobile * industry. Own is a form of premium charged by the car dealers over and above the price of the vehicle for express delivery of the vehicle. An artificial shortage, primarily due to low production numbers, allows dealers and other investors to pre-book vehicles and charge own from end buyer for immediate transfer of ownership once the demand for vehicle rises in the market.

As per our estimates, in the last five years at least PKR 150-170 billion was paid as own money on cars in Pakistan, with own being charged on 80 to 90 percent of vehicles. This means, Pakistani car consumers pay an additional PKR 30-34 billion annually in undocumented transactions under the disguise of own money for the purchase of cars. In the last five years, Pakistan produced less than a million vehicles under the cars and jeeps category (See Fig 1). During the same period, Morocco produced twice as many vehicles while Turkey’s production remained over six times more than Pakistan. Moreover, Brazil’s vehicle production remained nearly thirteen (13) times more than vehicles produced in Pakistan.

In addition to low production numbers, lack of effective regulations allows the automobile companies, dealers, and other investors to foster the own money culture in the automobile market. While the invoice amount of vehicle is paid through banking channels directly to the automobile manufacturer, the own money transactions occur through cash only, thus, creating a significantly large black economy in the automobile sector of Pakistan. PIDE Knowledge Brief No. 41:2021 details the ground realities of the nuisance of the own money culture.