Easier car financing is increasing car-loan applications in Bangladesh, with demand increasingly favouring hybrid and electric vehicles over conventional and reconditioned cars.

Under Bangladesh Bank directives issued in May, banks can lend up to BDT 8 million (US$ 65,200) to buyers of electric, hybrid and domestically assembled cars, covering up to 80% of the vehicle's purchase price over a maximum repayment period of eight years. For conventional octane-run cars, the borrowing limit remains BDT 6 million.

The change has increased demand for auto loans, with City Bank reporting a 30% rise in applications over the past two months. "The increase has been driven predominantly by applications for hybrid and electric cars, with demand for these vehicles significantly outpacing non-hybrids," said Arup Haider, deputy managing director at City Bank. The bank's average monthly auto-loan disbursement volume rose by nearly 35% during the period, while the number of loans disbursed increased by around 20% and the average loan size by about 12%.

Arup said, "Whatever growth we are seeing can be attributed entirely to the changes in circular; however, we think we have not seen the best of it yet as only two to three months have passed."

Mutual Trust Bank (MTB) has also recorded an increase in applications, with auto-loan file submissions rising 84% during May-August 2026 compared with January-April, while the underwriting approval ratio improved from 73% to 75%.

BRAC Bank has also recorded growth, with auto-loan disbursements more than doubling year on year and increasing by 32% since the Bangladesh Bank directive. Non-performing loans in its auto-loan portfolio remain below 2%. "Customers are increasingly considering auto loans as a financing option," said Md Mahiul Islam, deputy managing director and head of retail banking at BRAC Bank.

Customers currently borrow an average of BDT 3 million to BDT 4 million to purchase cars, while the bank offers loans of up to BDT 8 million. The bank has also expanded its lending capacity and partnerships with car dealers, he said.

An MTB official said the growth reflects both the new 80:20 debt-equity facility and rising domestic fuel prices, which are encouraging consumers to move away from fuel-inefficient vehicles. Hybrid and plug-in hybrid electric vehicles (PHEVs) now account for the majority of MTB's applications, while EVs maintain a small but steady share because of limited charging infrastructure and model availability.

Hybrids see increased demand

Hybrids are among the vehicle types seeing increased demand following the financing changes. They have an established market and offer lower running costs without depending on the public charging infrastructure required by fully electric vehicles.

Arif Khan, managing director of Motors Bay, a Japanese car importer, said the revised financing rules have benefited hybrid vehicles by allowing customers to access higher amounts of financing. He said the established market, lower operating costs and greater convenience have contributed to demand for hybrids compared with fully electric vehicles, which remain at an earlier stage of adoption.

EV interest increases, but adoption remains slow

Electric vehicles have also seen increased interest following the financing changes, with buyers able to access loans of up to BDT 8 million and banks financing as much as 80% of the purchase price.

Amid Sakif Khan, director of Runner Automobiles and the BYD Bangladesh wing, said the higher loan limit and financing ratio have increased customer interest and financing enquiries. However, he said it was too early to assess the full impact on sales because purchasing a vehicle involves a longer consideration cycle.

The higher financing ratio reduces the upfront cost for buyers, but financing is only one factor in an EV purchase, Sakif said. Consumers also consider driving range, charging availability, after-sales service, reliability and overall ownership costs. Runner is working to expand the wider EV ecosystem, including charging facilities, servicing capacity and customer awareness, Sakif said.

Reconditioned cars face competition

The shift towards new hybrids and EVs is affecting the reconditioned-car market. Abdul Haque, president of the Bangladesh Reconditioned Vehicles Importers and Dealers Association (BARVIDA), said easier financing was supporting overall car sales, but the benefits were being felt more strongly by new-vehicle buyers, particularly those purchasing hybrids and EVs.

New cars are also benefiting from fiscal incentives, which he said were affecting the competitive position of reconditioned vehicles. "This is more biased towards new cars."

Haque said the combination of more favourable financing and tax treatment for new locally assembled and electric vehicles had created an uneven competitive environment.