What is economically better: a new car, a used one, or leasing?

A used car aged 2 to 4 years usually enjoys an economic advantage because a large part of the significant depreciation has already occurred. A new car provides a warranty and peace of mind but suffers from very high depreciation; in electric cars, the gap is even larger — within two to three years, one can lose half the vehicle's value. Leasing provides certainty and convenience but can be more expensive in the long run.

When making this comparison, one must analyze the total cost of ownership, not just the monthly payment. Depreciation is the largest expense in car ownership, and it does not appear in any monthly bill. It accumulates quietly and is revealed only on the day of sale. Its pace is uneven, and the largest share is eroded in the first years. This is why a car aged two to four years arrives after the expensive part of the wear and tear has already been absorbed by the previous owner, although it comes with a shorter warranty and a higher risk of malfunctions.

The real price of a new car is measured by the gap between the purchase price and the price actually received at the sale. Anyone who chooses a used car also buys the history of the vehicle, so pre-purchase inspections are part of the price, not an incidental expense. An inspection at an authorized center, ownership history, mileage relative to age, and previous insurance claims are the checks that save tens of thousands of shekels and distinguish a car that has been maintained from one that only looks maintained on the outside.

Economically, a car aged 2 to 4 years saves you thousands of shekels a year, mainly thanks to the purchase price. For an average car, this can be about 10,000 shekels per year.

The monthly payment in leasing includes insurance, maintenance, and licensing, whereas in a purchase, these are paid separately, so a direct "payment-versus-payment" comparison is biased from the start. The correct comparison puts both alternatives on a total monthly cost basis and adds two items that appear only in the leasing contract: the mileage cap with charges for exceeding it, and the residual value that remains at the end for the buyer only. Leasing is more expensive than buying a car, but it is a different product — a much more comfortable one.

When comparing buying a car to leasing, one must also consider the cost of money. 150,000 shekels invested in a purchase could otherwise generate returns, for example, in MAKAM (short-term treasury bills) yielding 3.2%. Buying a car means foregoing about 4,800 shekels per year gross (about 4,100 shekels net after a 15% tax). This is about 340 shekels per month that do not appear in any calculation, whereas in leasing, this capital remains available. However, leasing companies charge for the difference on an ongoing basis and with interest. The monthly payment in leasing is built from the difference between the car price and the expected residual value, plus financing, operation, and profit.

Financing changes the ranking between alternatives. A car loan depends on the prime rate (currently 5%) plus a margin, with interest accumulating over the entire period. A low monthly payment spread over seven years is more expensive than a high payment spread over three, even if the car price is identical.

A practical comparison pits two figures against each other for the same period: the total payments in the contract (including a final payment if it exists) against the purchase price minus the expected value at sale, plus current expenses. In the contract, the insurance deductible and early exit fees should also be checked separately. This exercise provides the real cost of a car over five years.