Leasing Contracts in Israel Lack Specific Law, Costing Consumers Thousands
Israel lacks a specific leasing contract law, leaving consumers to navigate lengthy agreements drafted solely by leasing companies. Instead of a dedicated law, general consumer protection and standard contract laws apply, alongside the company-written lease agreement. A 2016 vehicle services law that regulates importers, garages, and dealers also omits leasing companies as a distinct category, with the sole relevant clause requiring sellers to disclose if a vehicle previously belonged to a rental corporation. Consequently, the financial terms of a lease's conclusion are exclusively detailed within the contract.
Operational leasing for a 150,000 shekel vehicle over three years typically costs between 2,800 and 3,200 shekels monthly, compared to approximately 2,330 shekels for purchasing the same car outright, including depreciation, insurance, and maintenance. This 20-30% premium covers convenience factors like a replacement vehicle, included servicing, and the ease of returning the car instead of selling it. However, three specific contract clauses can significantly inflate these costs, particularly upon vehicle return.
Exceeding the agreed-upon mileage limit can incur substantial charges, with rates per excess kilometer applied at the contract's end. The calculation method, whether cumulative over the entire lease period or annual, can lead to unexpected costs, especially if a driver's actual commute differs from their initial declaration. While the annual mileage cap is negotiable and impacts the monthly payment, an accurate initial estimate is crucial to avoid higher charges for excess mileage.
Another significant factor is 'excessive wear and tear.' Contracts distinguish between normal wear, which is included in the price, and damage that the customer must pay for, as determined by the leasing company's internal assessment and price list. Minor issues like bumper scratches, door dents, or worn tires can be charged to the customer based on the company's definitions. Leasing companies offer an optional 'wear and tear waiver' for an additional monthly fee, which can mitigate these charges.
The declining value of used cars, projected to drop 8-15% by early 2026, may be influencing how leasing companies assess wear and tear during vehicle returns. Early termination clauses and purchase options also present financial considerations. The initial payment is often non-refundable, and early termination can incur additional fees based on a company-defined table. The purchase option price, fixed at the contract's signing, may become higher than the market value if used car prices fall, leading customers to forfeit the option and return the vehicle.
