Israeli Consumers Advised on Smart Car Buying Strategies
Purchasing a vehicle in Israel involves numerous hidden costs beyond the sticker price, according to a report by Channel 12. The true cost of ownership is often significantly higher than initially perceived, influenced by factors like depreciation, maintenance, insurance, and financing.
Economically, buying a car that is two to four years old is often the most rational choice. New cars experience their steepest depreciation in the first few years, with the first owner absorbing the majority of this loss. By purchasing a slightly used vehicle, consumers can avoid this sharp decline in value, potentially saving around 10,000 shekels annually. This effect is even more pronounced with electric vehicles, which can lose up to half their value in just two years. However, used cars may have shorter warranty periods and a higher risk of minor repairs, necessitating thorough inspection at a licensed center and review of the vehicle's history and mileage.
Leasing offers convenience and predictability, often including insurance, maintenance, and registration in monthly payments. While typically more expensive than outright purchase, leasing shifts the risk of market value depreciation to the leasing company. Consumers should carefully review mileage limits, excess mileage charges, and early termination clauses.
When calculating the total cost, the opportunity cost of the money spent on a car purchase must also be considered. Funds used for a car could otherwise be invested, potentially yielding returns. For example, 150,000 shekels invested at 3.2% could generate about 340 shekels in monthly profit. Additionally, financing terms, such as car loans tied to the prime rate (around 5% plus bank margin), can significantly increase the overall cost over a loan's duration. The most accurate way to determine a car's true cost is to calculate the Total Cost of Ownership (TCO) over a set period, factoring in depreciation, operating expenses, insurance, and financing costs.
