Israelis love the car and hate it

There is very good news in the summary of the first half of the private leasing market and very bad news.

About what the corona has done to the industry and why the price increases are also there

Kenan Cohen

04/08/2022

Thursday, 04 August 2022, 11:28 Updated: 11:33

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Inventories are decreasing, demand is increasing and private leasing is also benefiting from this (Photo: AP)

The corona virus that burst into our lives in March 2020 caused an explosion in the global and local car market, an explosion whose echoes we feel until now and will continue to feel for a long time.

Disparities in the production capacities of the cars and the resulting local shortages, the increase in the prices of raw materials that make the cars more expensive, these two are just examples that add to other aspects that, in the bottom line, have disrupted the structure of the car market.

Rental companies that stopped activity and purchases at the beginning of the corona virus, have evolved into a situation where even when demand arises - they cannot buy cars because there is no inventory for importers.

They continue to roll the cars they already have, some with lots of miles, out of warranty, their scrap value erodes.

Leasing companies that cannot deliver new cars are extending contracts for cars that were supposed to be released to the market, bringing in money from the back door and so on.

But who does manage to survive in this strange reality is the private leasing route.

which, despite its high cost, manages to work its magic on the Israeli public who may be addicted to the private car, but quite a few of them are struck with a terrible allergy to the thought of the experience of messing around with it.

Due to the reduction in inventory, customers take whatever is available (Photo: Keinan Cohen)

Some of the fingerprints of these phenomena can also be seen in the first median data of the year 2022 of the private leasing arm of the Shlomo Group.

For example, the category of jeeps, the unstoppable hit of the car market actually experienced a significant decrease due to supply problems.

The same story repeats itself with the hybrid cars, but there the blow may not come from a lack of supply but from the general decrease in demand for these cars since the tax on them went up at the beginning of the year.

Another evidence of the artificial conduct of the private leasing market can be found in the 43% increase in the mini and super mini categories, groups that are less popular among private customers, however for private leasing one of the legs of its business model is the purchase of cars in large quantities, cars that are less sought after by customers in the private market They are an opportunity to get a discount from the importer.

Specifically in the field of electric cars, those that require less maintenance, private customers prefer to do it themselves.

Despite a revival and an increase of 8%, considering that in 2021 a few electric cars were sold on Solomon's private leasing route, the numbers are still low.

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The demand for streetcars is increasing, but still on the margins in the leasing sector (Photo: Keinan Cohen)

So where does the growth in this market come from?

Moti Barton, the VP of private leasing in Shlomo, has several directions. The first of them is the transition of employees to a hybrid employment model, which leaves them at home more days and leads them to recalculate a route in regards to the "benefit" of the compact car, when in the private leasing route they are more free to choose a car smaller, which is not derived from the status of the employee in the company and is paid less for it (and you get a less indulgent deal in terms of terms). Although the expectation was for a much greater change following the corona crisis, it is not yet happening on a large scale. "The change has started to unfold," says Burton, "it is happening , but it doesn't happen all at once.

It's sometimes more than the technical aspect, but also psychological, for someone who has been driving with a close-coupled car for 10-15 years, it's suddenly a big change."

What about the specific models people are asking for?

Here Moti has already avoided using specific brand names or models, but does release an interesting insight into the intricacies of the Israeli soul and mind.

"Private leasing neutralizes the marketability aspect and the more functional aspect remains. This leads people to choose the car that is more suitable, and not the one that is chosen based on considerations of future value."

And here is another lost generation that will fall in love with the private car (Photo: Reuven Castro)

Moti Burton, VP of Private Leasing in Shlomo (Photo: Ezra Levy)

Another group with a significant increase is the 18-25 age group, why there?

"This is a transaction method that is suitable when it is a second or third vehicle in the house because of the ability to break down the payment into relatively low monthly payments depending on the amount of the down payment, it is also suitable for someone of these ages who is here this year and two more is somewhere else, or is moving to another place and can pay back early without penalties, or Move to another car."

In truth, this group is the worse news for the state of Israeli transportation if it becomes a trend.

Because it means that another generation of young people will grow up here who, after tasting the private car, will accept the unbearable situation of the traffic jams as a living reality - they will no longer replace its comfort with public transportation, and say goodbye to another generation of 30-40 years of preference for the private car.

In one line, what will be less pleasant for those who intend to enter into such a deal is that right around the corner, after the wave of price increases in the new car market, it is already adding up to increases that are not of a few percent as we are used to, but add up to 10-13 percent - the leasing companies are already expected to roll it on , "As long as the differences are small, it can still be tolerated, but with a significant price increase there is no choice, we will also have an increase in price at the same rate.

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