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Luckily, taxi service has greatly improved over the past few years. All taxis are airconditioned and the driver must accede to your request to switch it on/off. The driver must use the meter (unless you agree on a flat fare in advance). It is probably not a good idea for tourists to take a flat fare, the cab drivers may quote a fare which is the higher than the average fare on the meter. Always ask for a receipt at the end (good advice anywhere in the world!), the receipt will have all the important information about your trip, including the taxi number.
No need to tip in a taxi in Israel, although you may round up the fare by a shekel or so. Hail taxis anywhere. Just get in and tell the driver your destination (usually have to tell them to turn down the radio too!) Smoking in taxis is forbidden. There is a small additional fee for a third passenger, also for suitcases and for exiting the airport. You must wear a seatbelt.
Parking in Tel Aviv and other Israeli cities (and around the world!) can be problematic, trying to figure out where one can and can't park. There are many lots, and prices vary, but the city is small, and good walkers can get almost anywhere on foot (or by convenient and frequent buses). Don't bother to rent during your stay in the city. If you do drive, don't be surprised at somewhat aggressive drivers competing with you.
BEWARE. If you rent a car from Ben Gurion airport, whatever you do, ensure you return the car with a full fuel tank. Also, note there is a NIS200 limit on credit card purchase of fuel (about half a tank full) which can leave you short of full when you say "fill it up". If you return the car with less than a full tank, the fee is eye-wateringly excruciating. Returning a car with fuel three quarters full, ie about 25 to 30 USD worth of fuel short of a full tank, due to the NIS200 limit, the charge on one's credit card for not having a full fuel tank was 319USD from Avis (July 2009 prices), although one might expect the charge may be similar for other hire car providers.