Sticker Shock: How Rising Car Prices Are Reshaping Israel's Roads

For the first time in Israel’s history, new cars priced under 100,000 shekels have disappeared from the market. In 2015, several entry-level models were available for around 70,000-90,000 shekels, but due to inflation, taxation, and global supply chain disruptions, prices have surged. This marks a significant shift in the country's automotive landscape, pushing consumers to explore alternative mobility solutions and reconsider traditional car ownership.

Why Are Cars Becoming More Expensive?

Owning a car in Israel has always been a financial challenge, but recent developments have accelerated the rise in prices. Unlike countries with domestic manufacturing, such as the U.S. and Germany, Israel relies entirely on imports. This, coupled with an 83% import duty on most new vehicles, has significantly increased costs. Additionally, VAT at 17% and purchase tax further push up final prices.

Hybrid and electric vehicles, once a promising alternative, are also seeing reductions in tax benefits, making them less of a budget-friendly option. The Israeli government initially taxed EVs at 10%, but recent policy changes increased that to 35% as part of a gradual taxation policy shift. Global supply chain issues, semiconductor shortages, and inflation have further contributed to rising car prices, with average new car prices rising 15% from 2020 to 2023.

The Costs of Car Ownership

Buying a car is only the first step—owning one comes with ongoing expenses that add up quickly. Here’s a breakdown: