Wednesday, April 07, 2010

Looking for a new car?

Buying a new car in Israel can be like taking out a second mortgage. The prices can be twice as much as what you would pay in the US for a similar vehicle (and without all the options). And even a used car, one year old, is unusually expensive.

New Olim and tourists have the advantage (or had at least) of tax breaks and buying passport to passport (I am not up to speed on the law at the moment, so don't quote me on that). But Israelis pay a lot more than they should.

And forget about leasing. It's expensive as anything, and the the amounts you need to put up at the beginning (and potentially at the end) means it would have been smarter to have bought the car in the first place (and don't get me started on the car leasing companies...).

Unfortunately I don't have a link, but around a year ago someone investigated the new car market (to absolutely no resulting fanfare) and found evidence of collusion between some of the car leasing companies (and perhaps some of the importers) that helped not only keep the price of cars high when they were first bought in, but to keep them high during the period that the leasing companies still had the cars to sell. Leasing companies were selling their used cars for as much as it cost them to buy them new. And since they represent the majority share of new car purchases, they controlled the market.

But yet another monopoly in Israel is about to be (partially) broken - today!

Transport Minister Yisrael Katz (Likud) changed the law on car imports. No longer will only the official importer be allowed to import new cars, but other companies as well.

As far as I can tell, the change is limited to only one secondary importer per vehicle model (but I could be wrong on that point) and it certainly places a lot of restrictions on who is allowed to receive authorization from the government to become a new car importer - so it doesn't create a real free market here on car imports, but (collusion aside) it does create competition where none existed or was allowed before.

The government expects that breaking the car import monopolies will drive down prices for Israeli consumers by up to 1.2 billion NIS a year.

That's a start.

If you're interested in becoming a new car importer, you can download (PDF in Hebrew) the changes in the law here and see if you'd qualify (you also need NIS 10,000,000 in the bank).

If only they would really go after the car taxes next.

(Hattip: A7)

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Gee a Moron said...

I happen to be in the market right now for a new (gently-used) car to replace my wife's ten year old troublemaker (Hyundai Elantra '01) that blew its radiator and engine just before chag.

Since we paid for the repairs (better to sell a running clunker than a dead one) it's no longer unrgent. Any idea how long till this will percolate down into lowering used car prices?

Shira said...

Olim still save something nowadays - something like 75% tax versus 97%. in 2008 we bought a Mazda 5 for 125k nis while the "regular" price was 148k nis. Yes, every little bit helps.

JoeSettler said...

I suspect it will take a while. The new companies will need to win distribution contracts with the manufacturers, and then set up showrooms and garages. Not to mention, pass the approval process.

(I'm wondering how many existing importers will use this to gain access to their competitor's manufacturers).

Leah Goodman said...

I'm guessing it won't affect prices much, but if it's a 10K difference on a car, that's already serious.

gih said...

Well, it's up to a person who deal with it.

JoeSettler said...

What bothers me here is how much government regulation there is here.

Don't the manufacturers know how to select the distributors they want based on what they consider to be important?

Why must the government regulate the capabilities, the showroom, the garage, and the amount in the bank for the distributor?

The whole thing is so anti-free market I'm astounded that Bibi didn't get rid of it in his previous round of privatization.

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