Hello David
AFAIK there is no law in Israel forbids sleeping in cars, though it does sound very uncomfortable.
I can suggest two other alternatives that are not that pricey :
1)Buy a tent and camp outdoors. In most areas of Israel you can even camp without the need of a campsite.
2)Within the cities, you can find some cheap hostels that will fit your budget. Some of them are listed in our
Hostels section,
Click here to check them out.
Happy trails.