Cars for Cash: Exploring Changes to the PARF Rebate

In this Explainer, find out…

What recent policy changes have been introduced to the Preferential Additional Registration Fee (PARF)?
What concerns does the updated PARF seek to address?
What are the potential drawbacks of PARF?

Introduction

Introduced in 1975, the Preferential Additional Registration Fee (PARF) was implemented to reduce the average age of cars on the road and discourage the continued use of older, more polluting vehicles. It serves as a rebate on the Additional Registration Fee (ARF), which is the upfront tax paid when a car is first registered. The earlier the car is deregistered, the larger the rebate. PARF hence originally encouraged motorists to replace old cars rather than continue driving them for long periods. Maintaining a relatively young vehicle fleet was especially important because newer vehicles generally produced fewer emissions than older ones. However, electric vehicles, which are considered less polluting, are becoming more common in Singapore. As a result, there is less need to encourage early deregistration through PARF rebates.

In 2026, the Government revised the PARF policy by significantly reducing the amount of rebate. This Policy Explainer first considers Singapore’s philosophy towards its transport policies. Thereafter, it explores the origins of PARF, the rationale behind its revision and the implications of the changes.

Singapore's Changing Transport Philosophy

To begin with, let us consider the broader background against which PARF operates. Singapore’s transport philosophy, which is the Government’s core belief system and long-term strategy for its country’s transport, has broadened over time. In the 1990s, the Government operated via a tightly controlled, supply-driven system. In 2014, the Government articulated its new vision of a “car-lite” Singapore. The car-lite vision prioritises land efficiency and environmental sustainability over individual car ownership. This aims to reduce dependence on private cars through a “walk, cycle, ride” system.

At the same time, Singapore also sought to lower emissions from the vehicle population by encouraging the adoption of electric vehicles (EVs). As a result, the Government’s objective was no longer simply to keep the vehicle fleet young, but also to reduce reliance on private cars while building a cleaner transport network.

How PARF Works

Against this backdrop, the PARF rebate operates as a refund that eligible car owners receive when they deregister or scrap their vehicle before it reaches 10 years of age. The rebate is calculated as a percentage of the ARF paid when the car was first registered, with newer cars receiving a higher rebate.

To obtain the PARF rebate, the owner must first deregister the vehicle, clear any outstanding loans or fees, and dispose of the vehicle through an LTA-approved scrapyard or export process. Once the vehicle has been properly deregistered, the rebate can be encashed, used to offset the cost of registering another vehicle or renewing a COE, or transferred to another party within the prescribed validity period.

Changes to the PARF Rebate

In Budget 2026, PARF was significantly revised. The changes were as such:

PARF rebates were reduced by 45 per cent;

Maximum rebate was halved from S$60,000 to S$30,000; and

Moving forward, PARF rebates would only apply to cars and taxis, and not commercial vehicles or classic cars.

Taken together, Figure 1 illustrates the drastic drop in rebates relevant cars will receive.

Figure 1: Table comparing old and new PARF policies

To better understand the changes brought about by the revised PARF, let us consider the example of Singapore’s most popular mass market cars, the Toyota Corolla Artis. This model currently carries an Additional Registration Fee of S$23,537. Assuming that it gets scrapped at year 10, the old rebate before Budget 2026 is 50 per cent of the ARF, which amounts to S$11,768.50. After Budget 2026, the new rebate will only amount to 5 per cent of the ARF, which is S$1,176.85.

This effectively leads to a loss of S$10,591.65 at deregistration. Hence, even if the original cost of the car is unchanged, a cut in PARF means that owners now recover less value at deregistration. Almost all car owners deregister their cars by the end of the tenth year as the Certificate of Entitlement (COE) expires after 10 years, and renewing it is highly expensive. Furthermore, keeping the car after 10 years means forfeiting the PARF rebate entirely. This is because the rebate is only available for vehicles deregistered before the original COE expires. However, with the PARF rebate being significantly cut, more people might renew their COE instead, which would increase the age of the car population.

Importantly, the significant cut in PARF rebates hit conventional cars much harder than EVs. This is because Singapore already gives substantial green discounts at the point of purchase for EVs under the Electric Vehicle Early Adoption Scheme (EEAI) and the Vehicular Emissions Scheme (VES). Combined, these incentives reduce an EV’s ARF dramatically. Because the starting ARF for an EV is already lower, the absolute reduction in rebates from the cut in PARF rates is smaller as compared to a conventional car. As owners now get higher rebates from EVs than non-EVs, EVs are now relatively more cost-competitive and may appear more attractive to buyers.

Why the Change?

The Government shared that the revision reflected rising EV adoption, which reduced the need to incentivise the early disposal of cars. Furthermore, given how EVs are less pollutive, the need to heavily incentivise early car deregistration to combat pollution is greatly diminished.

Overall, this marks a shift in the Government’s approach towards an ageing vehicle population. In the past, policymakers were generally reluctant to encourage the retention of older vehicles due to concerns over their higher carbon emissions and environmental impact. However, with the growing adoption of electric vehicles and the resulting reduction in transport-sector emissions, the Government appears more willing to accommodate an ageing vehicle fleet. This is because the environmental costs associated with older vehicles are gradually diminishing.

Benefits of PARF Change

Given the policy’s key changes and underlying rationale, it is important to assess how effectively it may achieve its intended outcomes in Singapore.

Aligning with Singapore's Evolving Transport Strategy

The revised PARF rebate reflects Singapore's evolving transport strategy as the country transitions towards cleaner and more sustainable mobility. PARF was originally introduced to encourage the timely renewal of the vehicle fleet so that older, more polluting vehicles would be replaced more quickly. However, as electric vehicles become increasingly prevalent and are less polluting than conventional petrol cars, the Government has indicated that there is less need to incentivise early deregistration through generous PARF rebates. The reduction in PARF rebates therefore reflects a shift in policy priorities, with cleaner vehicle technologies reducing the reliance on fleet renewal as the primary mechanism for lowering transport emissions. At the same time, lower PARF rebates reduce the residual value received upon vehicle deregistration, increasing the overall lifetime cost of private vehicle ownership. Although the policy is not intended as a direct demand-management measure, it is consistent with Singapore's broader objective of managing private vehicle ownership while prioritising public transport, walking and cycling. This reinforces the country's long-term vision of a less car-dependent transport system.

Reduced Government Expenditure

The revised PARF structure also reduces government expenditure by lowering the amount returned to vehicle owners upon deregistration. Under the revised framework, rebate rates have been reduced across all vehicle age bands, while the maximum PARF rebate has also been halved. As a result, government payouts to eligible vehicle owners will be lower than under the previous scheme.

Although the Government has not quantified the expected fiscal savings, the lower rebate rates and rebate cap will reduce expenditure on PARF rebates over time, with the additional revenue supporting broader public spending priorities, including the provision of high-quality and affordable public transport.

Potential Drawbacks of PARF Change

Having examined the pros of the PARF rebate, we now turn to look at several potential shortfalls in its design and implementation.

Lack of Interim Measures

The revised PARF rebate was implemented immediately following Budget 2026, with no interim or transitional measures for buyers who already committed and paid deposits for their cars before the changes were announced. This created a situation where some consumers who paid deposits under the old PARF rebate framework were subsequently subject to increased depreciation on their vehicles.

The Ministry of Transport justified the immediate implementation on the basis that the revised PARF rebate was market-sensitive, preventing a rush-to-market. Furthermore, it is trite that vehicle taxation measures are applied at the point of registration rather than sale, and that immediate effect is necessary to avoid distorting the Certificate of Entitlement (COE) market. The Ministry has maintained that the purchase of a car is a private commercial arrangement between buyers and dealers, with some cases resolved through renegotiation.

However, estimates suggest that up to 2,000 car buyers with committed purchases were affected, primarily concerning buyers of high-end internal combustion engine cars.

Member of Parliament Diana Pang highlighted that buyers who entered contracts under the old PARF framework “face a dilemma of either proceeding at a loss or forfeiting their deposits if they cancel their car purchase”. This could erode trust, especially if ordinary families are hurt because they are not sophisticated buyers and reasonably expect the rules to be stable when making big purchases.

Disproportionate Impact on Luxury Cars

The PARF rebate is calculated based on the Additional Registration Fee (ARF) paid by a car owner, which is in turn pegged to a car’s Open Market Value. This means that the rebate for a more expensive car is higher. Correspondingly, the loss under the revised PARF rebate is larger for luxury cars. As a result, a luxury vehicle such as a BMW 520i is expected to experience a substantially higher increase in annual depreciation (around 11 per cent) compared to an entry-level hatchback such as a Suzuki Swift (around four per cent).

In principle, the reduction in the PARF rebate is intended to make high-end vehicle ownership less financially attractive. This aligns with the broader goals of discouraging excessive private car ownership and encouraging the use of public transport.

Price elasticity, also known as price elasticity of demand, measures how sensitive consumers are to price changes. Most luxury car buyers typically exhibit price-inelastic demand, meaning that the demand for luxury cars is unlikely to substantially change even when prices change. As a result, a larger reduction in PARF rebates for luxury cars may not necessarily significantly reduce demand at the top end of the market. In fact, the policy may unintentionally affect middle-income groups. This will be elaborated on below.

Unintended Burdens on Middle-Income Groups

Apart from the main objective of encouraging uptake of EVs in Singapore, the revised PARF rebate serves as a tool to address wealth inequality. While there is no doubt that luxury cars are disproportionately affected by the revisions in the PARF rebate, the changes are also felt across the spectrum.

Take, for instance, an entry-level Suzuki Swift. Priced at S$152,000, it is one of the cheapest cars in Singapore. Yet it saw its PARF rebate slashed from S$6,600 to S$660, resulting in an increase to its annual depreciation to about S$15,000. This demonstrates that PARF, which aims to target the affluent, can also impact the middle-income segment, while the truly wealthy remain largely unaffected.

Conclusion

At its core, the PARF scheme encourages timely replacement of older vehicles, while allowing owners to recover part of the taxes paid when registering a vehicle. Beyond being a simple rebate, however, it also functions as a subtle policy tool. While the COE system primarily regulates car ownership by controlling the number of vehicles on the road, the PARF scheme influences how long vehicles remain in use by shaping rebate incentives for deregistration. In this way, the two policies work in tandem as tools for the Government to maintain the delicate balance in Singapore’s automotive market.

This Policy Explainer was written by members of MAJU. MAJU is a ground-up, fully youth-led organisation dedicated to empowering Singaporean youths in policy discourse and co-creation.

By promoting constructive dialogue and serving as a bridge between youths and the Government, we hope to drive the keMAJUan (progress!) of Singapore.