SINGAPORE: The reduction of rebates for scrapping cars before 10 years could lead to higher sales of electric vehicles (EVs), given the relatively lower impact on their depreciation value compared with internal combustion engine (ICE) cars, analysts say.
It may also boost the secondhand market, they added.
Prime Minister Lawrence Wong announced in his Budget 2026 speech that the Preferential Additional Registration Fee (PARF), which is given when a car is deregistered before 10 years, would be reduced by 45 percentage points.
The cap would also be lowered from S$60,000 (US$47,400) to S$30,000. These new rates kick in from the next Certificate of Entitlement exercise, which begins on Feb 16.
Analysts told CNA that the move would accelerate the depreciation of all new cars, although ICE cars' values will fall at a faster rate than EVs.
This is because EVs receive up to S$30,000 rebates from the Vehicular Emissions Scheme (VES) and the Electric Vehicle Early Adoption Incentive (EEAI). This rebate is given upfront at the point of sale.
Drivers have to pay an Additional Registration Fee (ARF) when they buy a new car. This fee is based on the vehicle’s Open Market Value (OMV).
When a car is scrapped before the 10-year mark, owners get a PARF rebate, which is calculated as a percentage of the ARF.
EV owners' rebates of up to S$30,000 is subtracted from the ARF.
This means that an EV’s payable ARF is much smaller than that of an ICE car, which also means the PARF is much smaller for an EV.
But the total rebates for an EV outstrip those of an ICE car, because EVs get rebates upfront.
To illustrate this: For an EV and ICE car with the same ARF of S$36,000, the EV will have its payable ARF reduced to S$6,000 if it qualifies for the full S$30,000 in VES and EEAI rebates.
The ICE car’s payable ARF remains at S$36,000.
When an EV is scrapped before five years, the PARF rebate - calculated at the current rate of 75 per cent of the ARF - is S$4,500. Together with the upfront S$30,000 rebate, that is S$34,500.
For an ICE car that is scrapped before five years, the PARF rebate is S$27,000.
In this scenario, under the new PARF rate of 30 per cent, the same EV will receive S$1,800 when it is scrapped. But with the S$30,000 upfront rebate, that is S$31,800 in total.
The ICE car only gets S$10,800.
“EV owners won’t feel the same pinch, but the ICE owners will feel that pinch,” said Associate Professor Raymond Ong, a transport infrastructure researcher at the National University of Singapore (NUS),
The new PARF rates will also affect EVs of different makes, depending on how expensive they are.
Associate Professor Walter Theseira from the Singapore University of Social Sciences said the new move is likely to benefit Chinese EV brands more than American or continental marques, because Chinese EVs generally have lower Open Market Values.
According to data from OneMotoring, in January, BYD’s 11 models had a median OMV of S$28,359.
By comparison, the median OMV was S$49,433 for Tesla’s five models, S$48,539 for Volvo’s five EV models, and S$43,263 for Audi’s four EV models.
The lower OMV results in a lower ARF. After accounting for the upfront rebates from the VES and EEAI, many Chinese EVs end up with a much smaller ARF payable.
“Most (Chinese EVs) have an ARF that is very close to the rebate limit and so they have hardly any PARF to speak of,” said Assoc Prof Theseira, a transport economist.
For example, a BYD model with an OMV of S$28,359 would incur an ARF of S$31,703. After applying S$30,000 in rebates, the ARF payable is S$1,703.
In contrast, a median Tesla model with an OMV of S$49,433 would incur an ARF of S$65,923. After the same S$30,000 in rebates, the owner would still pay S$35,923 in ARF.
Because the PARF rebate is pegged to a percentage of the ARF, any reduction in the PARF rate has a much larger dollar impact on higher-OMV cars.
In the same scenario, the BYD that is scrapped before five years would get S$1,277.25 under the current PARF rate. Under the new rate, that is S$510.90 – a difference of S$766.35.
The Tesla that is scrapped before five years would get S$26,942.25 under the current rate. Under the new rate, that is S$10,776.90 – a difference of S$16,165.35.
In absolute terms, the loss in rebate value is therefore far greater for higher-OMV models.
“The OMV (of continental and American EVs) tends to be significantly higher than the Chinese-branded EVs, so I think they would get hit,” said Assoc Prof Theseira.
The secondhand market could see a boost due to this new tax quantum, said Mr Benjamin Loo, chief operating officer at car dealership CarTimes Group.
He said that existing vehicles would have lower depreciation compared to vehicles registered in future, which will face a steeper drop in PARF rebates.
“Immediately after the news launched, we have received increased queries on our secondhand vehicles which are less than two years old,” said Mr Loo.
He added that CarTimes has received a 20 per cent increase in queries for such cars.
Assoc Prof Theseira said: “If you’re price conscious or depreciation conscious, a used car is a good bet … used cars always have lower depreciation generally, so this could provide a short boost (to the secondhand car market).”
He added that in four to five years, there could be an “interesting” observation in the secondhand market, where older cars bought before Feb 16 and cars bought after that are both on the market.
“In the same market, you're going to see coexisting cars which are the same model, separated just by one or two months’ age, which have very different paper values,” he said.
Will the move ultimately drive up the cost of car ownership, especially when rebates to encourage EV ownership taper off?
The early adoption initiative rebate - capped at S$7,500 - will cease from Jan 1, 2027.
If COE remains constant, then it would increase the cost of new car ownership, with owners scrapping their cars before 10 years getting back less in PARF rebates compared with before.
However, industry insiders say it is an open question whether COE prices will rise or moderate due to the changes to PARF.
Distinguished Professor at the National University of Singapore (NUS) Ivan Png said that COE prices could moderate.
“Buyers of ICE cars expect less rebate if they scrap their cars before 10 years … Their car purchase will become more expensive, which increases the total cost of car ownership,” he said.
“They would adjust by bidding less for COEs.”
Conversely, the changes to PARF could also have the effect of making future car owners less willing to scrap their cars early, said Mr Raymond Tang, managing director of Yong Lee Seng Motor.
“The impact might not be now, but 10 years later, when a lot of people decide not to scrap (because) everyone thinks that the scrap value is so low,” he said. “This means there could be fewer COEs.”
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It may also boost the secondhand market, they added.
Prime Minister Lawrence Wong announced in his Budget 2026 speech that the Preferential Additional Registration Fee (PARF), which is given when a car is deregistered before 10 years, would be reduced by 45 percentage points.
The cap would also be lowered from S$60,000 (US$47,400) to S$30,000. These new rates kick in from the next Certificate of Entitlement exercise, which begins on Feb 16.
Analysts told CNA that the move would accelerate the depreciation of all new cars, although ICE cars' values will fall at a faster rate than EVs.
This is because EVs receive up to S$30,000 rebates from the Vehicular Emissions Scheme (VES) and the Electric Vehicle Early Adoption Incentive (EEAI). This rebate is given upfront at the point of sale.
HOW DOES PARF WORK?
Drivers have to pay an Additional Registration Fee (ARF) when they buy a new car. This fee is based on the vehicle’s Open Market Value (OMV).
When a car is scrapped before the 10-year mark, owners get a PARF rebate, which is calculated as a percentage of the ARF.
EV owners' rebates of up to S$30,000 is subtracted from the ARF.
This means that an EV’s payable ARF is much smaller than that of an ICE car, which also means the PARF is much smaller for an EV.
But the total rebates for an EV outstrip those of an ICE car, because EVs get rebates upfront.
To illustrate this: For an EV and ICE car with the same ARF of S$36,000, the EV will have its payable ARF reduced to S$6,000 if it qualifies for the full S$30,000 in VES and EEAI rebates.
The ICE car’s payable ARF remains at S$36,000.
When an EV is scrapped before five years, the PARF rebate - calculated at the current rate of 75 per cent of the ARF - is S$4,500. Together with the upfront S$30,000 rebate, that is S$34,500.
For an ICE car that is scrapped before five years, the PARF rebate is S$27,000.
In this scenario, under the new PARF rate of 30 per cent, the same EV will receive S$1,800 when it is scrapped. But with the S$30,000 upfront rebate, that is S$31,800 in total.
The ICE car only gets S$10,800.
“EV owners won’t feel the same pinch, but the ICE owners will feel that pinch,” said Associate Professor Raymond Ong, a transport infrastructure researcher at the National University of Singapore (NUS),
CHINESE EVS STAND TO GAIN
The new PARF rates will also affect EVs of different makes, depending on how expensive they are.
Associate Professor Walter Theseira from the Singapore University of Social Sciences said the new move is likely to benefit Chinese EV brands more than American or continental marques, because Chinese EVs generally have lower Open Market Values.
According to data from OneMotoring, in January, BYD’s 11 models had a median OMV of S$28,359.
By comparison, the median OMV was S$49,433 for Tesla’s five models, S$48,539 for Volvo’s five EV models, and S$43,263 for Audi’s four EV models.
The lower OMV results in a lower ARF. After accounting for the upfront rebates from the VES and EEAI, many Chinese EVs end up with a much smaller ARF payable.
“Most (Chinese EVs) have an ARF that is very close to the rebate limit and so they have hardly any PARF to speak of,” said Assoc Prof Theseira, a transport economist.
For example, a BYD model with an OMV of S$28,359 would incur an ARF of S$31,703. After applying S$30,000 in rebates, the ARF payable is S$1,703.
In contrast, a median Tesla model with an OMV of S$49,433 would incur an ARF of S$65,923. After the same S$30,000 in rebates, the owner would still pay S$35,923 in ARF.
Because the PARF rebate is pegged to a percentage of the ARF, any reduction in the PARF rate has a much larger dollar impact on higher-OMV cars.
In the same scenario, the BYD that is scrapped before five years would get S$1,277.25 under the current PARF rate. Under the new rate, that is S$510.90 – a difference of S$766.35.
The Tesla that is scrapped before five years would get S$26,942.25 under the current rate. Under the new rate, that is S$10,776.90 – a difference of S$16,165.35.
In absolute terms, the loss in rebate value is therefore far greater for higher-OMV models.
“The OMV (of continental and American EVs) tends to be significantly higher than the Chinese-branded EVs, so I think they would get hit,” said Assoc Prof Theseira.
Related:
IMPACT ON SECONDHAND CAR MARKET
The secondhand market could see a boost due to this new tax quantum, said Mr Benjamin Loo, chief operating officer at car dealership CarTimes Group.
He said that existing vehicles would have lower depreciation compared to vehicles registered in future, which will face a steeper drop in PARF rebates.
“Immediately after the news launched, we have received increased queries on our secondhand vehicles which are less than two years old,” said Mr Loo.
He added that CarTimes has received a 20 per cent increase in queries for such cars.
Assoc Prof Theseira said: “If you’re price conscious or depreciation conscious, a used car is a good bet … used cars always have lower depreciation generally, so this could provide a short boost (to the secondhand car market).”
He added that in four to five years, there could be an “interesting” observation in the secondhand market, where older cars bought before Feb 16 and cars bought after that are both on the market.
“In the same market, you're going to see coexisting cars which are the same model, separated just by one or two months’ age, which have very different paper values,” he said.
COST OF OWNING A CAR
Will the move ultimately drive up the cost of car ownership, especially when rebates to encourage EV ownership taper off?
The early adoption initiative rebate - capped at S$7,500 - will cease from Jan 1, 2027.
If COE remains constant, then it would increase the cost of new car ownership, with owners scrapping their cars before 10 years getting back less in PARF rebates compared with before.
However, industry insiders say it is an open question whether COE prices will rise or moderate due to the changes to PARF.
Distinguished Professor at the National University of Singapore (NUS) Ivan Png said that COE prices could moderate.
“Buyers of ICE cars expect less rebate if they scrap their cars before 10 years … Their car purchase will become more expensive, which increases the total cost of car ownership,” he said.
“They would adjust by bidding less for COEs.”
Conversely, the changes to PARF could also have the effect of making future car owners less willing to scrap their cars early, said Mr Raymond Tang, managing director of Yong Lee Seng Motor.
“The impact might not be now, but 10 years later, when a lot of people decide not to scrap (because) everyone thinks that the scrap value is so low,” he said. “This means there could be fewer COEs.”
Continue reading...