British PCPs are very similar to the car leases that have been very common in the United States for many years (in both prime and subprime markets). There has been a lot of recent discussion about the risks associated with PCPs is mainly because they are relatively new in the UK, and because they have grown so quickly lately from almost zero. That means assumptions about the “residual value” (to use the American term) of the cars at the end of the contract, which are based largely on data from before PCPs became so popular, may not be so accurate.
That’s probably less of a concern in the US, where the lenders have more experience with these things, although car sales (and leases) have also grown rapidly in recent years, so there is still something to worry about.
In both countries, as I understand it, it is the lender who loses out if the resale value is less than rejected. So at least individual car owners are somewhat protected, and the biggest risk might be having to return the car and not being able to get a new lease/PCP with attractive terms.
"That means assumptions about the “residual value” (to use the American term) of the cars at the end of the contract, which are based largely on data from before PCPs became so popular, may not be so accurate."
When you put it like that, it reminds me of the endowment mortgage situation in the UK which led to people having serious issues at the end of their mortgage term [1]. Obviously not at the same scale, but it'll still alter the market considerably.
That’s probably less of a concern in the US, where the lenders have more experience with these things, although car sales (and leases) have also grown rapidly in recent years, so there is still something to worry about.
In both countries, as I understand it, it is the lender who loses out if the resale value is less than rejected. So at least individual car owners are somewhat protected, and the biggest risk might be having to return the car and not being able to get a new lease/PCP with attractive terms.