Israel – Financing Cars in Israel

Why Olim Can Lease Cars Easier Than Financing

A lease company is not loaning money. They are agreeing to lend the use of their property but will retain ultimate control of that property. This is not a negative, BTW, since cars are depreciating assets.

The lease provider’s concerns are threefold. Does the person have the capacity to fulfill the scheduled payments? Will they take care of my asset? If there is damage, are they likely to be responsible and bring it back to an acceptable condition?

The same dynamic applies in housing, you can rent a house or an apartment easier than you can buy one, if the landlord feels these 3 questions can be answered in the affirmative.

There is a minimum threshold that a lease provider requires. They want to see assets here. Your foreign credit rating abroad has no standing here. Look at it from the other side of the table with these 2 players (UK) and (US).

UK comes to America, wants to buy or lease car, and tells US I have an excellent credit rating back home. Everyone knows me. Here is documentation of my assets in the most highly regarded and stable bank in my home country. US’s position is wow, that is impressive. I understand the UK credit scoring situation. I understand your asset documents, BUT, if heaven forbid, you don’t keep up the payments or if you leave and go back to your home, what recourse do I have? I cannot seize assets or impose payments in a foreign country.

Basic Requirements

1.Citizenship is vital. it’s not an absolute; there can be extenuating circumstances, but for the sake of this conversation, let’s call it an imperative.

2.Move some of your liquid assets to a local Israeli bank account. If you simply open account here to receive your Olim benefits this will do nothing to advance your request for credit.

3.Provide documentation that you have income from sources. Either local or abroad is fine.

And be prepared to increase the down payment – directly reducing the monthly payments. This is not an absolute either. Depending on account balance, length of time the account has been open when applying, and most importantly, if there is activity on the account, both deposits and withdraws, the possibility of an increased down payment fades.

Check tire pressure on a monthly basis

Correct tire pressure is a major safety concern, and will give you maximum fuel efficiency. Tires will lose approximately 1 pound of pressure PSI per month, so you should make it your monthly routine to check your tire pressure.

The correct tire pressure is not listed on the sidewall, as some people think. That is the maximum pressure that the tire can be inflated to. The easiest place to find the correct tire pressure PSI is on the sticker on the driver’s doorjamb, although you can also find it in your owner’s manual. Pay attention –your car may have different ratings for front and back pressure, please check the diagram.

The best time to check your tire pressure is in the morning, while the tire is still cold. The definition of cold is that the car has been parked for at least three hours. The reason the morning is preferable is because there is no chance that one side of the car’s tires have been heated by the daytime sun.

Low tire pressure, besides costing you fuel efficiency, can be very dangerous. Low-pressure tires create more heat and therefore make the tires more susceptible to exploding, especially in hot weather, not to mention the accelerated deterioration of the sidewalls. It also causes poor handling as the sidewalls will be flexing more, especially noticeable on cornering.

Overinflated tires will put more pressure on the centerline of the tire, therefore causing it to wear quicker, as well as causing you to lose some connection with the road, since the outside edges of the tire might not be making full contact with the road surface.

If you live within 1.5 km of a service station that has a compressor with a built-in pressure gauge, you can check your tire pressure there in the morning and get a correct reading. If you live further than 1.5 km, it would be best to invest in a tire pressure gauge. They are relatively inexpensive. Take your tire-pressure reading in the morning and record each tire’s reading independently. Then when you are at a service station, you can adjust the pressure according to your morning readings. NOTE: After 1.5 km of travel, the service-station pressure reading will be higher, therefore incorrect.

Happy driving – Keep the shiny side up and the greasy side down.

SUV’s / Crossovers Capturing Our Imaginations

SUV/Crossovers, above all, capture our imaginations. There is a promise of possibilities; the promise of outdoor adventure, doing inspirational activities, and helping us connect with the life we want to lead.

SUV is a term we use, but today’s cars are more crossovers than SUV. An SUV was originally built on a truck platform; therefore, they tended to be on the larger side and not so fuel efficient. Today’s Crossovers are built on car platforms (unibody), which are lighter, more maneuverable, and very important here in Israel because they’re easier to park.

So, we get the rugged and sporty SUV look in a more practical vehicle package because let’s face it; for the most part, it is going to be driven on a flat, paved road, air conditioning on, Spotify playlist kicking out tunes on the media system, the young ladies voice on Waze telling us to turn right in 2 km, Mobileye reminding us we did not use our turn signal to change lanes, all the while sipping on a latte.

There is also the prestige effect — you don’t “sit down into” as one would in a sedan, as much as you “step inside” a crossover/SUV.

Safety: They are not necessarily safer than sedans of comparable weight class, but here is a more confident feeling. This is because you are raised higher off the road, giving better visibility. But this effect is waning somewhat as more people are driving crossovers, so the average vehicle height is rising.

Take one for a test drive if you haven’t already, they are fun to drive!!

Pseudo leases in Israel

We received a request for clarification last week regarding the pseudo leases offered by Israeli dealers. Since this is a common question we decided to post the reply in a blog. We have paraphrased the request and split the request into sections to enable us to elaborate on points individually.

Question: A relative recently did a dealer purchase. He mentioned his deal was apparently similar to a lease where he could put down 15-30% of the price.

Response: 15-30% down why so much? The whole concept behind leasing, or in this case similar to leasing, is to conserve cash. A real American style lease should require no more than 8% down for most cars offered today.

Question: After the 30 monthly payments the loan balance is about 50% of the original price, but the expected value is perhaps about 75%.

Response: For a salesperson to make the suggestion that a car possibly will enjoy a 75% retention of its original value is pure salesmanship, it’s laughable. The most aggressive residual value issued from leasing companies today (who are managers of large fleets and know the market intimately) is only 64% and this is on just one specific model from one manufacturer. The average forecast residual amount at the end of 30 months for most popular cars is 56-60%, a long stretch from a suggested 75%.

Question: The dealer guarantees to buy it for market price

We underlined this portion in the question for this is a remarkable promise. Anyone in Israel who has attempted to trade in their car when buying a new car from a dealership, has been exasperated by the amount offered for their trade-in. This will be the same scenario; the new car dealer cannot pay the market value. They have to sell the car to a used car facility when you trade it in because dealers here in Israel do not have used car departments. The used car company even if affiliated with the new car dealer franchise is a separate company and as such needs to buy from the new car dealer at a low level to make a profit. The used car facility doesn’t have any connection to the selling dealers promise.

Question: use the net proceeds toward a new vehicle and start over, or pay the loan and own the car outright, or or sell the car on his own.

Response: “net proceeds” there cannot be net proceeds; “towards a new vehicle” this is the catch. You are now trapped you cannot move to another make. You want the guarantee buyback at his stated fair market value; you must stay with his brand. What if in 30 months you no longer need a car? Maybe you now work for a company that supplies a vehicle; your promised guarantee won’t work. What’s the dealer going to do with a used car that he supposedly paid fair market price for? What if you decide to buy used next time? Same problem no guarantee. This promise only can be useful if you intend to purchase new from the same manufacturer and from the same dealer.

Summary: You have really only two real options when you take this pseudo lease. The first is to sell the car yourself but then that is not really a guarantee. Second is to buy new from your selling dealer again and on paper he can show you the numbers for your trade that you are looking for. This is possible by holding on the sale price of the next car that you’re going to be taking. Dealers all over the world have been doing this for decades but there comes a time when you the customer will find you are unable to make this type trade again. Eventually you will be so far “in the bucket” “upside down” that your only option is to sell it by yourself and maybe even then at a loss.

Dealers new and used cannot offer fair market value for cars they all consider trade ins a service. To stay out of the fray and enjoy low monthly payments the real solution is a closed end American style lease. We have a 30 minute video explaining leasing at this link if you want to learn more.

They call it a “lease” it may not be a lease at all

What passes as a car lease today in Israel many times is not a lease at all; it’s a residual note or balloon financing plan. To be clear, we have these types of plans too and some of our customers opt for them; we call it LAP (lease alternative purchase). There are indeed circumstances where this is the best option. The difference is our clients know exactly how the plan works and their responsibilities at the end of the contract.

The difficulty today is that new car dealers and local banks are selling these balloon finance plans as “leases” and we English speakers from the west are expecting a very different reality when we hear the word lease. Simple rule of thumb, if the car is put in your name it’s not a real lease.

Why Are Israeli Dealers Promoting These Plans?

#1. It sells cars. Payments using this plan are cheaper than conventional 60 month purchase contracts.

#2. It’s also a cash flow issue. The dealer receives all the money for the car at closing from the bank-because you are ultimately responsible for it. In a real lease the residual value of the car is not paid to the lease company they must carry this value on their books until the end of the contract.

In a real American style lease, which is what you are probably accustomed to and is what we suggest in most instances, the lease company is the bank. They will agree to let you have use of the car in turn you will make the the scheduled payments while they hold the remaining 48-62% residual balance on their books at no charge to you. At contracts end, if you do not exercise your option to buy it, then the leasing company will sell the car to recoup the rest of their investment. This is a very important feature for you.

Another Variation

There is another kind of lease being sold today by some lease companies. This plan is more comparable to an American style Lease in that the car remains the property of the company, but there is a small catch. You have no obligation at the end of the contract if you take another lease contract. Should you not contract with them again, the chickens will come home to roost — you will have penalties. You must read the fine print.

They are pushing these plans today, not for your benefit but for theirs. Be careful to ask a lot of questions.

The reasons you are taking or at least considering a lease beyond the affordability is:

Protection from rapid and certain asset depreciation
Avoiding the hassle of liquidation of the car when it has finished its service for you.

It would be a shame to find out at the end of the contract that you accomplished neither, due to a misunderstanding of what you were actually signing. If you require an American style lease, one which allows you to walk away at the end with no further obligations, should you desire to do so, please visit this link where you will find new and used cars for lease just like the ones you were accustomed to in the West.

Leasing and Its Perceived Black Eye

Leasing and Its Perceived Black Eye

It’s ironic that leasing has such detractions associated with it, when in reality it’s probably the most useful tool we have to maintain a vehicle for our personal use. We have listed three reasons we think leasing gets a bad reputation from those not familiar with the benefits.

Non-Ownership – It’s possible that there is a comfort level we experience with ownership, which is absent in leasing, that is off putting; however that comfort or familiarity comes at a price. With ownership you experience a brisk depreciation of your asset and must you engage in the process of selling the vehicle when it has completed its service.

You must ask yourself what you are trying to achieve. Do you want to own another asset, or do you want to make use of an asset in the most economical way possible? If it’s the second, then ownership is not necessarily the best option.

Remember this: no one really buys a car. They really buy its use, which is why as soon as its usefulness is diminished they sell it.

No equity Build-up: This is a big misconception to which we devote a full page. It’s called “Elephant in the Room and No One is Talking About It” please visit that page. It should clear some of the reservations people usually voice.

Common Misuse of the Program: Maybe it’s because leasing was initially designed by manufacturers to move an ever price-increasing inventory, or in our opinion, the reluctance to considering leasing is a result of what the popular western culture morphed leasing into. Pop culture used the affordability to enhance their perceived net worth, to look more affluent.

Leasing made it possible for someone who could normally only afford a Toyota to drive a Lexus, or if you had a Nissan Maxima level salary you could now drive an entry level Infinity. We call this “plastic fantastic” because it’s all about the show, but it’s not the same here in Israel.

In Israel we live within a more reality-based existence, we don’t experience the same “keeping up with the Jones/Cohen’s” phenomenon that we did in the west. Here leasing is more a function of protection of assets than that of embellishment of financial or social stature.

Our income generation here in Israel is not at the same level as it was in the west and our cost of living is more. Leasing gives us the ability to pay only for the use of the car and protects our cash reserves at the same time. Down payments are less as are the monthly payments. Since leasing is for new or 1-3 year old used cars we experience less repairs, enjoy better fuel consumption’s and best of all the depreciation that all cars experience are no longer factors. Visit our site please at this link Ianglo Leasing to continue your investigation of this fantastic financing option.