Car leasing is an ideal and cost effective way of owning a brand new car every 2 or 3 years, without the risk of negative equity.
The majority of cars come with road tax built in for the contract duration and don't need a MOT until they are 3 years old, therefore leaving the customer to get on with their busy lifestyle as they need minimum management and give budget control as you know you have one set payment for the lease term.
As all leases have a set monthly payment for the lease term, you know what you're paying from the outset and as the finance company take the car back at the end of the lease period, this totally eradicates negative equity for the consumer.
When buying a brand new car, most of us have to take out some form of finance package even if we have the money to put down a large deposit. If you're a customer who likes to keep your car for a long period and intend to pay off the full finance package and then keep the car through its older years to gain some motoring years cost free, then leasing is probably not for you. However the majority of us need to finance at least 90% of the brand new car and then we'll be looking to change it again for a newer model within 3 years.
If you're one of the majority who likes to change regularly, the issue this poses is that nobody can forecast what your car will be worth in that timeframe however it is extremely likely that you will be left with a chunk of negative equity on the vehicle you've financed, therefore having to transfer it onto the finance for your next vehicle, leaving you in a minus situation before you even start out, this circle continues to grow (unless you win the lottery) until it becomes unfeasible to get a new car and carry the negative equity forward.
Some customers shy away from leasing as they never own the car, however if you compare it to buying a car with finance, realistically the finance company own the car until the final payment is made anyway. Therefore unless you pay your car off in full there is very little difference as most people choose to part ex their car before the purchase finance contract has ended anyway.
In addition, whether you lease or buy, the car depreciates in value at the same rate regardless, if you're buying the car then as the customer you lose out when you either part ex or sell it on. On leasing, the finance company takes the car back after the lease term has ended, therefore as the customer you don't feel any shortfall or take the hit if the car has depreciated faster than estimated. You can start again on a new lease of a brand new vehicle without any negative equity finance having to be carried forward.
You will normally find that most cars have a cheaper monthly payment when leasing compared to buying, so you can get 'more car for your money'.
It is important that the car you lease will lose as little value as possible over the term of your lease agreement. Generally speaking, cars made by German manufacturers depreciate far less than other makes. For example, the Mercedes Benz A Class Hatchback and the Volkswagen Golf are extremely popular due to the high residual value remaining at the end of the lease. This also leads to cheaper monthly payments. The Mercedes Benz A180d Sport 5dr is available for as little as £199+vat a month compared to a similar specification Mazda 3 at £258+vat for example.