As China gets used to buying on credit, it remains important for GM financing arm even as new car sales soften

As concerns are increasing about rising delinquency rates among car buyers in the United States, GM Financial, the car loans arm of US carmaker General Motors, is increasingly looking to mainland China for potential growth.

Not only is China the world’s biggest market for car purchases, but Chinese buyers make larger down payments and pay off their loans quicker than their US counterparts when they borrow money for new or used cars.

Beijing, pushing its electric vehicle market, is making it harder for start-ups to enter as it fights overcapacity

SAIC-GMAC Automotive Financial, GM Financial’s joint venture in China, originated US$12.3 billion in new retail loans last year and had a much better performance in terms of net charge-offs than GM Financial itself, the company said this month.

“Credit quality continues to be extremely strong in China,” Dan Bearce, GM Financial’s president and chief executive, said on a conference call on February 9.

As a result, China has plenty of room to grow, particularly when it comes to vehicle financing, according to GM Financial.

Most vehicles in China are bought with cash, with only about 40 per cent being financed, according to GM Financial. In comparison, 80 per cent of vehicles in the US are bought using car loans.