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Taxis in Israel are always white colored cars (no special shape/car type) with a sign on the rooftop. Taxis are quite abundant in the city (as the city has a relatively low per capita car ownership), and on the big streets you'll have no trouble in catching one. Also, you can order a taxi from the many taxi companies in the city (there will be an extra charge of less than a dollar) – if you are staying in a hotel, ask the reception to order one for you.
It is of course best to ask the driver to put the meter on. In some instances, you can agree with the driver on a fixed price, if you have reason to believe there will be traffic jams. Never agree to go on the taxi if the price has not been settled in advance or if the meter is not on, as this is almost always an attempt to rip you off. If there are more than two passengers, there will be an extra charge of less than a dollar. There is also extra charge on suitcases. If you need a big taxi (more than a compact car) – state it clearly while ordering the taxi. At any rate, in western standards, taking a taxi in Israel is not expensive.
Taxis should have near the door of the driver a sign with their name and the name of the owner of the taxi and their I.D. numbers. You can write it down if you have a serious complaint and ask the hotel to help you in filling a complaint to the ministry of transportation (although they will probably deal with it long after you're gone…).
Currently the starting price on the meter is 12.3 shekels (A little more than $3.5). The meter will "go faster" after 21:00 and on the weekends (Friday afternoon-Saturday).
Some phone numbers of recommended local stations:
Hapisga – 02-6421111 (don't work on Saturdays)
Hapalmach – 02-6793333
Beit Hakerem – 02-5000101
Bar-Ilan (the biggest station in Jerusalem ) – 02-5866666As the public transportation is quite good and taxis abundant, you don't need to rent a car. Also, Israeli drivers are not known for their politeness and traffic is quite heavy. Also, Jerusalem's streets are not a grid, so this also makes finding your way around a little difficult. However, if you do have a map, then street signs are also in English, and most Israelis know basic English, and will be helpful if you get lost.
A good local company for car rentals is Eldan – and you can find them in the Holiday Inn Crown Plaza (02-6513113) and on 24 King David St. (02-6252151) (they also have a website). Hertz also has a local branch in Jerusalem. Be forwarned, parking is a major problem in Jerusalem unless you are just going to museums with mega parking lots.