Eldan Transportation: earnings quality between used-car prices and depreciation assumptions
Eldan’s NIS 40.7 million decline in gross profit for 2025 was explained almost entirely by a NIS 44.9 million drop in vehicle-sale profit, while rental gross profit still edged higher. At the same time, the depreciation-estimate change added about NIS 4.9 million net to earnings, and management already expects the average accounting depreciation rate to decline again in 2026.
Where Earnings Quality Cracked
The main article focused on the gap between the contract book and cash. This follow-up isolates earnings quality, because the core 2025 problem was not weak rental demand. It was the exit price on used vehicles, and the way that exit price flows through the income statement via residual-value assumptions and depreciation.
The first number that matters is blunt. Total gross profit fell by NIS 40.7 million in 2025, from NIS 464.7 million to NIS 424.0 million. Almost all of that decline came from one line, vehicle-sale profit, which dropped by NIS 44.9 million to NIS 91.1 million. By contrast, gross profit from rental activity actually rose modestly, to NIS 332.9 million from NIS 328.7 million. In other words, 2025 did not break in the contractual core of the business. It weakened in the stage where Eldan has to sell the old vehicle at a price that still justifies the economics of the deal.
That is the key point. When almost the entire decline in gross profit comes from vehicle disposals, the central question is no longer how many vehicles the company can place under contract. It is how much value remains when the vehicle leaves the contract and has to be monetized in the market.
The line-item breakdown points in the same direction. Vehicle-sale revenue fell 7% to NIS 478.4 million, but the depreciated cost of vehicles sold still rose 3% to NIS 387.4 million. The result was a 33% drop in vehicle-sale profit. In margin terms, Eldan moved from 28.0% in 2023 to 26.6% in 2024 and only 19.0% in 2025. That is no longer ordinary car-market noise. It is a clear deterioration in exit economics.
The quarterly presentation shows this was not just a single late-year hit. Vehicle-sale gross profit stood at NIS 26.1 million in the first quarter, declined to NIS 21.7 million in the second and NIS 19.8 million in the third, and only partly recovered to NIS 23.5 million in the fourth. Even that relative fourth-quarter recovery still left the company below the pace of early 2025 and below the 2024 run rate.
The bottom line of this section is simple: the operating core held, but the exit price on vehicles became less generous. In a leasing and rental company that earns both during the contract and at disposal, that is exactly where earnings quality gets tested.
Where The Used-Car Market Met Accounting
The company itself described the second half of 2025 as a period of industry inventory surpluses, mainly in electric vehicles, and noted that some importers resorted to aging vehicles onto the road. In its description, that increased competition in the used-car market and indirectly affected both leasing and the sale of new and used vehicles. Eldan also stressed that it does not hold meaningful zero-km inventory and that EV exposure in its fleet is not material, so the direct effect on its own operations is currently assessed as immaterial.
That final caveat matters, but it does not remove the issue. In the same section the company explicitly states that lower new- or used-car prices can hurt the value of vehicles it owns, the proceeds from selling them, its ability to repay financings backed by those vehicles, and even the economic attractiveness of operating leasing for customers. So even if Eldan is not sitting on problematic zero-km inventory, it still lives inside the same pricing system.
The link to depreciation is direct. The company’s accounting policy says fleet depreciation is calculated on a straight-line basis using the forecast residual value of the vehicle at the end of its useful life. That estimate depends on vehicle type and model, production year, physical condition, mileage, age, and timing and method of sale. The company also states explicitly that depreciation estimates are reviewed every reporting period and that changes in residual-value estimates are applied prospectively. The average depreciation rate in 2025 was about 13.5%, versus about 13.9% in 2024.
Against that, one more fact matters. As of December 31, 2025 the company stated that it had not identified signs of impairment in the fleet. That means the pressure in 2025 did not show up first through a one-off write-down. It showed up first through lower vehicle-sale profit, and then through the debate around residual values and depreciation rates.
| Layer | What happened in 2025 | Why it matters |
|---|---|---|
| Market | The second half brought inventory surpluses and more intense competition in used vehicles | Exit economics became more fragile |
| Accounting | Depreciation is built on forecast residual value and reviewed each reporting period | A weaker market feeds directly into the depreciation question, not only into the sale line |
| Reported outcome | No fleet-impairment signals were identified at year-end, yet vehicle-sale profit fell sharply | The pressure sat first in earnings quality rather than in one large write-down |
That is exactly why the right question is not “did the company impair the fleet” but “are the assumptions supporting the depreciation path still conservative enough for the market that now exists.”
What The Estimate Change Did To 2025, And Why 2026 May Look Cleaner Than It Is
This is where the story becomes more subtle. The company not only describes a more competitive market, it also explains that with the help of an independent external expert it re-examined its depreciation-rate estimates and the methodology behind them as of the start of the fourth quarter of 2024. According to the note, the updated methodology grouped vehicles into homogeneous depreciation groups, usually by model, while drawing a basic distinction between the operating-leasing fleet and the rental fleet. The company also states that no model was assigned an updated depreciation rate below its economic depreciation rate.
That point matters for balance: this is not proof of aggressive accounting. But it is proof that accounting provided some support in 2025. According to the note, implementation of the updated methodology increased the group’s 2025 net profit by about NIS 4.9 million after tax.
That number does not explain the whole weakness, not even close. Vehicle-sale profit deteriorated by NIS 44.9 million. Still, it changes how the year should be read because of scale. The entire year-over-year increase in rental gross profit was only NIS 4.2 million. So the positive effect of the depreciation-estimate change was of the same order of magnitude as the entire annual improvement in the rental core.
What is more interesting is that the story does not stop in 2025. The company says that at year-end 2025 it again reviewed the assumptions used to set depreciation rates, especially residual value, based on actual vehicle-sale observations from 2025. Following that review, it updated depreciation rates from January 1, 2026 and estimates that the average accounting depreciation rate in 2026 will decline by 0.8% relative to 2025.
That is where the 2026 question begins. If the used-car market remains competitive but the accounting depreciation rate keeps falling, the next report may look cleaner before the market truly gets better. The company did not quantify the expected shekel effect, so there is no basis to manufacture one. But it did give a clear directional signal: after a year in which disposal profit weakened, the average accounting depreciation rate is expected to fall again.
This is not an argument that any future improvement would be “only accounting.” It is a more precise argument: in 2026 it will matter much more to separate improvement driven by better disposal prices from improvement driven by slower accounting depreciation. As long as those two forces move together, readers have to be careful about what actually improved.
What Has To Be Checked In The Next Reports
The right way to read 2026 will not begin with net profit. It will begin with three simpler checks:
- Vehicle-sale profit: if that line does not stabilize, it will be hard to argue that earnings quality truly improved.
- The depreciation path: if the average depreciation rate declines again, it will have to be judged against actual disposal prices.
- Impairment or a change in tone: at year-end 2025 there were no identified impairment signals. If the environment stays weaker, it will matter whether the pressure remains only in the disposal-profit line or starts to appear in more cautious residual-value language as well.
In that sense, 2026 may become a confusing year for anyone reading only the bottom line. Better net income would not necessarily mean a friendlier used-car market. It could also mean the company slowed the accounting depreciation path while disposal profitability remained relatively weak.
Conclusion
The 2025 picture becomes much clearer once Eldan’s vehicle economics are split into two stages. The rental stage still held up. The disposal stage weakened. At the same time, the depreciation-estimate change did not create the problem, but it did cushion part of the hit and also set up 2026 with management expecting another decline in the average accounting depreciation rate.
So the key question in this follow-up is not whether Eldan is “managing earnings.” It is whether reported earnings still reflect the economics of vehicle exits with the same sharpness. As long as vehicle-sale profit does not stabilize, any improvement in 2026 will first have to pass a simple test: is the company really selling better, or is it simply depreciating more slowly.
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