Why Cars Are So Expensive in Israel
A new Toyota Corolla that costs around €25,000 in Germany will cost roughly twice that on the road in Israel. A used BMW that's a bargain in the Netherlands is a luxury purchase here. It's one of the first things people notice when they move to the country, and the reasons are specific, structural, and unlikely to change soon.
Purchase tax is the big one
Israel applies a purchase tax (mas kniya) on top of the vehicle's import value before VAT is added. For most passenger cars the effective rate lands somewhere between 50% and 83% of the pre-tax value, scaled by a green-score formula that rewards low emissions and punishes everything else.
That single tax is the biggest reason cars cost what they do here. A car with a CIF (cost, insurance, freight) value of €20,000 can easily have €12,000–€16,000 of purchase tax added before anything else happens to the price.
Then VAT goes on top
VAT (currently 18%) is then applied to the total — including the purchase tax. So you're paying VAT on the tax. That compounding effect adds thousands more to the sticker price of every car sold in the country.
By the time the car reaches the dealer, its landed cost is already significantly higher than the equivalent car in most of Europe.
Import duties, licensing, and dealer margins
On top of taxes there are smaller costs that add up: import duties on cars from countries without a free-trade agreement, mandatory licensing fees, a compulsory annual road tax (agra), and dealer margins that have to cover the cost of running a small market with limited volume.
Every one of these is modest individually. Stacked together they add another meaningful chunk to the final on-road price.
The market is small
Israel sells around 250,000–300,000 new cars a year — a fraction of Germany or France. That small volume means manufacturers don't homologate every model for the local market, importers don't get the same wholesale prices the big European chains do, and dealer networks are smaller and more expensive to run per car sold.
Small markets are always more expensive markets. Israel is no exception.
Used cars stay expensive too
Because new cars start so high, used cars depreciate from a higher base. A three-year-old car that lost 40% of its value is still expensive in absolute terms. And because importing a used car personally is also taxed (with the same purchase tax structure based on the original vehicle value), the used market can't easily be undercut by imports.
The exception is cars old enough to qualify for classic-vehicle treatment, where the tax math changes — which is why you suddenly see clean 1990s Japanese coupes and 25-year-old German sedans appearing on Israeli roads.
What it means for enthusiasts
Owning anything interesting in Israel is genuinely expensive — not just a little more than abroad, but often double. That's the cost of entry, and it filters who shows up at meets and what ends up in driveways.
It's also why the cars that do make it here tend to be loved: nobody pays Israeli prices for a car they're not serious about. Walk a parking lot at a Cars and Coffee meet in Caesarea or HaYarkon Park and you'll see the result — a smaller scene than Germany or Japan, but a remarkably committed one.