[quote]The only problem is that pretty much no one understands how PCPs work
It is difficult to explain quite how PCPs work,[/quote]
This really pisses me off. Almost always the people saying “X is hard to understand” or “nobody really understands X” don’t even bother trying to explain X.
A little googling shows that a PCP is basically the same as a lease in the US. You pay an up front sum, a monthly payment, and the car has a residual value at the end, which you can either pay to keep the car, or not and return it. You can also “trade it in” which means if the market trade-in value is greater than the contracted residual value, you can use the difference as a credit against a new lease. The fees are subject to mileage limits.
Maybe the terms are typically very bad in the UK, but in the US, it is usually a reasonable deal if and only if you typically want a new car every 3-4 years anyway. You don’t pay much extra to offload the risk of a rapidly depreciating car (for instance if a particular model turns out to be a lemon). Obviously it is far cheaper to keep a car for 10 years or more. Often it is even cheaper to buy a 3-5 year old off-lease car and keep that for 10 years, although in the US, used prices on “practical” cars are often unreasonably high.
Some people in the US definitely get screwed by lease contracts --most commonly by underestimating their required miles. For instance, if you get a new job that is better paying but has longer commute, you can easily burn through a 12,000 mile/year. But I don’t really think that is a symptom of the lease terms being complicated hard to understand, simply that people are bad at estimating future demand.
But if you want to criticize leasing or PCPs, criticize them for problems like that, or dealers not being upfront about the cost structure or insurance requirements, or even just that it is designed to exploit peoples tendency to be bad at considering the future cost in 3 years of paying a lump sum or continuing to pay for another new car. Just saying “shady, complicated financial instrument will lead to doom!” is lazy and not helpful.
