Police said the incident took place in Umm Tuba, with perpetrators writing "Death to Arabs" on the car and "administrative revenge" next to the vehicle owner's home.
Sunday's incident shared similarities with previous attacks referred to as "price tag" attacks, a euphemism for hate crimes by Israeli settlers that generally target Palestinians, but have also hit Christian and Muslim places of worship, AFP reported.
Extrimist Israeli settlers on July 31 torched a Palestinian home in West Bank village Duma, killing an 18-month-old boy and fatally injuring his parents.
The arson attack on Sunday comes as month-long tensions in Israel and occupied territories have left more than 55 Palestinians killed by Israeli forces.
Israeli settlers have carried out at least 197 attacks on Palestinians and their property in occupied East Jerusalem and the West Bank since the start of 2015, according to the UN Office for the Coordination of Humanitarian Affairs.