Shopping for a new car? Four tips to get the most bang for your buck

SINGAPORE – Budget, cash flow and personal desires top the checklist when shopping for a new car.

However, an often-overlooked strategy is to navigate the statutory rules to maximise value so buyers will get the most out of their purchase.

Those buying new cars today must contend with two policy changes introduced since January 2026 that directly affect car ownership costs.

The first is the Vehicular Emissions Scheme (VES), which is broadly a system of pollution penalties and green rebates.

From Jan 1, the scheme’s criteria were tightened, resulting in petrol-hybrid cars losing their rebates, while surcharges were increased for cars with higher exhaust emissions.

These changes are meant to nudge buyers towards cleaner vehicles, especially electric vehicles (EVs).

The second policy change is the revision to the preferential additional registration fee (PARF) rebate, announced on Feb 12.

The PARF rebate is a payout that car owners receive when they deregister their vehicles at any time before the end of the 10-year certificate of entitlement (COE).

This rebate reduction means that a car will have less residual value when the owner gives it up, increasing the cost of ownership.

Tip 1: Work with the VES, but watch for exceptions

There is no escaping the impact of VES, but understanding the nuances can help you net a better car. The first tip is to be alert to “exceptions”.

Unless a buyer is firmly committed to a specific brand or model, it pays to keep an open mind. 

Generally, cars with smaller engines and lower output produce fewer emissions and, therefore, incur lower penalties. However, there are exceptions.

For instance, the Honda HR-V comes in two versions, but both have 1.5-litre engines. One produces 118hp, qualifying it under the Category A certificate of entitlement (COE) bracket.

The other, which is a petrol-hybrid, has 141hp. The hybrid version is more fuel-efficient, achieving 20.4km per litre compared with 16.4km per litre, and also comes better equipped, but falls under Category B COE, which typically commands a higher premium.

At first glance, going by the published prices, which are after applicable VES surcharges, the Category A variant appears to be the more economical option. This is after the $7,500 VES penalty that the car incurs because of its tailpipe emission level, while the Category B hybrid variant does not get the same surcharge.

As at April 10, the Category B COE costs $121,000, which is $3,000 higher than Category A’s $118,000. The more powerful variant is priced at $218,999, compared with $204,999 for the Category A version.

After accounting for the difference in COE premiums, the Category B car effectively costs about $11,000 more. In return, buyers receive a more powerful and fuel-efficient engine, along with additional equipment such as LED fog lights and larger 18-inch wheels. 

Viewed in this light, the Category B variant arguably offers better value for money, partly because the Category A version is penalised under the VES.

That said, not all cars that incur pollution penalties represent poor value. Some still offer strong propositions despite the surcharge. 

The Toyota Vios and Toyota Corolla Altis illustrate this point. 

The Vios, which is a 1.5-litre petrol-hybrid, is priced at $198,888 with COE. The Altis, which is a 1.6-litre non-hybrid car, is priced at $203,888 with COE, after factoring in a $7,500 pollution penalty.

Although the Altis is an older model, it offers significantly more interior space for a relatively small price difference. In this case, the Altis arguably delivers more value, particularly for buyers who prioritise practicality.

The key takeaway is that the VES should not be evaluated in isolation. Buyers should instead compare the final prices of competing models and assess their overall value propositions.

Tip 2: Reduced residual value matters less when PARF is already low or near-zero

The reduction in PARF rebates matters less if the rebate was low to begin with. If the purchase price represents the starting point of a car ownership journey, then the PARF rebate represents the endpoint, as it determines the residual value that owners recover after 10 years.

To understand this, it is necessary to briefly explain how PARF works. When a new car is registered, the owner pays an Additional Registration Fee (ARF), which is calculated based on the car’s Open Market Value (OMV), or its basic cost before taxes.

When the car is deregistered any time before the end of its first 10-year COE, the owner receives a PARF rebate that is tied to the ARF paid, after factoring in tax rebates.

The PARF rebate rates have been significantly reduced for cars registered with COEs obtained from February 2026 onwards. For example, a 1-litre Volkswagen T-Cross has an ARF of about $26,000.

Previously, it would have qualified for a PARF rebate of about $13,000 at the end of its 10-year lifespan. Under the new rules, this rebate is reduced to about $1,300, resulting in an additional depreciation of $11,700 when the car is scrapped at the end of its 10-year COE.

By contrast, the Volvo EX30 Plus, a relatively compact EV and priced around the level of the Volkswagen, has an ARF of about $30,000. However, this is offset by rebates totalling $30,000, comprising $22,500 under the VES and the $7,500 incentive for early EV adoption. This effectively reduces its PARF to zero. As a result, the reduction in PARF rebates does not affect the EX30, since it has no rebate to begin with.

Prior to the policy change, the Volkswagen T-Cross had a clear total ownership cost advantage over the Volvo EX30, even though both are similarly priced, as the Volkswagen’s higher PARF rebate reduces long-term ownership costs. This advantage has now largely disappeared, as its remaining rebate is negligible.

Consequently, EVs have become relatively more attractive, as internal combustion engine cars lose a key financial benefit. Even a budget model like the Suzuki Swift has seen its PARF rebate fall sharply, from about $6,500 to around $650.

There is also a longer-term implication. With smaller PARF rebates, future buyers will have less capital to roll over into their next car purchase, making it more difficult to fund.

Tip 3: Consider a Category B upgrade while COE gaps are narrow

Buyers often zero in on Category A COE models on the assumption that such cars are always the better value buy.

But do not rule out a Category B upgrade when the price gap between two car COE categories is narrow. Currently, the difference between them stands at just $3,000, with Category B at $121,000 and Category A at $118,000.

In February, Category A COE prices even briefly exceeded those of Category B, which is a rare occurrence.

Such a narrow gap creates an opportunity for buyers to upgrade to more powerful vehicles, without paying a substantial premium. 

For this to be viable, two conditions must be met. First, the gap between COE categories must remain small, although it is uncertain how long the current trend will persist. Second, manufacturers must offer comparable Category A and Category B variants that are priced relatively close to each other.

While some brands offer such variants – BYD has them for its popular Seal and Sealion 7 models – comparing them can be complex due to differences in specifications, battery sizes and promotional packages. 

A clearer example is the Zeekr X. The Category A version produces 110kW and accelerates from 0 to 100kmh in 8.7 seconds, and is priced at $198,999 with COE. The Category B version produces 150kW, achieves the same sprint in a quicker 5.6 seconds, and is priced at $208,999. For an additional $10,000, the performance gain is substantial.

When both COE premiums and vehicle price differences remain narrow, such upgrades can offer significant value.

Tip 4: For plug-in hybrids, the second propulsion system is ‘free’

Take advantage of plug-in hybrids. Such cars have petrol engines as well as powerful electric motors with batteries that can be charged by plugging into an EV charger. Such hybrids effectively provide a second propulsion system “for free” under the road tax structure.

Electric car owners have long lamented that road tax calculated based on total power output, along with an annual flat fee of $700, can result in high annual costs for powerful EVs.

For example, the Tesla Model Y with 110kW output incurs an annual road tax of $1,561, while the higher-performance Long Range all-wheel-drive version, with 378kW (507hp) and a 0-100kmh sprint time of 4.8 seconds, incurs a road tax of about $5,400. 

By comparison, the Volvo XC60 T8 plug-in hybrid delivers comparable performance completing the sprint in 4.9 seconds, yet incurs an annual road tax of only $1,176.

This difference arises because the Tesla is taxed based on its full electric output, whereas the Volvo has two propulsion systems: a 2-litre turbocharged engine producing 310hp/400Nm and an electric motor producing 145hp/309Nm.

The road tax is calculated based on the higher of the two outputs, rather than their combined figure. As a result, the road tax is based on the combustion engine, and the electric motor effectively escapes taxation.

This creates a structural advantage, as buyers can enjoy performance comparable with high-powered EVs while paying significantly lower road tax.

Other plug-in hybrids, such as the BYD Sealion 6 DM-i, Jaecoo J7 and Mazda CX-80, also benefit from this system, although their performance is less extreme than that of the XC60.

Conclusion: Buy smart within the system

When the full spectrum of car ownership costs is considered – including VES, PARF, COE premiums and road tax – a different car-buying strategy emerges. Instead of focusing solely on upfront price, buyers can evaluate how to work within the system to maximise value.