Last update - 00:00 10/05/2007
Spinning the wheels?
By Lior Gutman
When was it easier to buy a car - now, or early last decade? The answer, it appears, is ambiguous. Heshev Information Systems examined this question for TheMarker, using the two indices of average wages, as reported by the Central Bureau of Statistics, compared to the average price of a 1.6 liter, automatic gear vehicle for each year. In 1990 a resident had to lay aside 22.4 monthly salaries to buy a new car, compared to 21.2 salaries in 2006, which seems to indicate that private consumer purchasing power has not substantially improved, in spite of huge progress in the Israeli economy.
Why hasn't the purchasing power of the Israeli consumer changed in the past 16 years? The answer appears to lie in the balance of power between car importers and the demand of the business sector: "In an era of decreasing rates of exchange and reduced purchase taxes, it is reasonable to assume that prices for private consumers would decrease," says Tax Authority deputy director general Boaz Sofer. Had price groups not been established, prices of cars would increase even more, and the private consumer would need a larger number of monthly salaries to buy a new car.
And indeed, between 1990 and until early in the present decade, there was a decrease in the number of salaries required. In 2001 a new car could be bought for "only" 18.7 salaries. The trend began to change the following year, and the number of salaries required began to rise, reaching 23.17 salaries in 2004. A senior source in the treasury explains that importers began focusing on discounts for fleets, and over the years the private consumer has been neglected.
Moshe Katzin, vice president of Heshev Information Systems, explains that recently there has been an improvement in the purchasing power of Israeli consumers, resulting mainly from reduced purchase taxes and a simultaneous increase of average wages: "There will be even bigger changes in the future because the exchange rate contributes to decreased prices of cars. Adding reduced taxes, one day every worker will have a car."