Budget 2026: PARF rebate for deregistering cars reduced, maximum amount halved to $30,000

SINGAPORE – The rebate that car owners get for deregistering their vehicles before their certificates of entitlement (COEs) expire will be lowered, with the maximum amount halved from $60,000 to $30,000.

Prime Minister and Finance Minister Lawrence Wong on Feb 12 announced that the preferential additional registration fee (PARF) rebate will be lowered by 45 percentage points.

The changes will take effect from the next COE bidding exercise, which will close on Feb 20.

The PARF rebate is meant to encourage the timely renewal of Singapore’s vehicle population, with vehicle owners getting a higher amount for deregistering their vehicle sooner within its 10-year COE span.

PM Wong noted that as electric vehicles (EVs) become more common here, there is less need to encourage early deregistration of cars. EVs, which are less pollutive than conventional petrol cars, accounted for 45 per cent of new cars sold in 2025.

PARF is calculated as a percentage of the additional registration fee (ARF) a car owner has paid. ARF is a tax paid based on a car’s open market value – the approximate cost of a car before taxes. 

Observers said the reduction will increase the level of depreciation for cars that incur higher ARF, and is likely to dampen demand for such models.

The revised PARF rebate amount will be 30 per cent of ARF for cars that are not more than five years old at the time of deregistration, said the Land Transport Authority (LTA) on Feb 12. This is down from 75 per cent of ARF now.

For cars that are between five and six years old, the rebate falls from 70 per cent of ARF to 25 per cent of ARF. 

The PARF rebate for cars that are in the final year of their 10-year COE will be reduced to 5 per cent of the original ARF paid – down from 50 per cent now. 

PARF was last adjusted at the 2023 Budget, when the rebate was capped at $60,000. The Government also increased ARF taxes on higher-end cars then.

For cars that do not need a COE for registration, including taxis, the lower PARF rebate will apply to those registered from Feb 13, LTA said. The PARF changes do not apply to vehicles such as vans and classic cars.

Mr Neo Nam Heng, chairman of diversified motor group Prime, said the reduction in rebate will increase the cost of owning a car. 

Demand for cars that incur an ARF of $120,000 or more will be hit hardest, he said, citing models such as the Mercedes-Benz S-Class and BMW 7 series.

These models are currently eligible for a rebate of 50 per cent of ARF if deregistered in their final year, which works out to $60,000.

Going forward, the rebate will be 5 per cent of ARF, or $6,000. 

Mr Neo said the PARF reduction will also increase costs for firms with fleets of rental vehicles, including taxi operators. His group offers services such as car rentals, limousines and taxis.

Firms may pass on the higher costs to consumers by increasing car rental rates, he said.

He added that he is cautiously hopeful that COE premiums will fall at the next bidding exercise if buyers adopt a wait-and-see approach. At the most recent exercise,

COE premiums fell across all categories

, with that for larger cars going down by 8.8 per cent to $110,890.

Singapore University of Social Sciences transport economist Walter Theseira said the changes mean all cars will have close to zero value at the end of their lifespan.

The PARF rebate cut has increased the level of depreciation for cars with high ARFs, he noted.

This is likely to shift the market in favour of Chinese-made EVs, which have low PARF numbers that hurt their paper value in the past, he said.

Motor dealers will likely respond by trying to cut prices where they can, and changing their stock, Associate Professor Theseira added.

“I would expect a lot of the dealers will be trying to move in lower-cost cars where possible in order to try to get around this problem, because they know that the depreciation has gone up and customers will no longer be interested in buying,” he said.

For car buyers who had a certain level of depreciation in mind, the tax move will necessitate a recalculation, he added. “I think you will be a lot more hesitant about buying, and this just might actually dampen demand for a bit, or at least cause people to think about it a bit more.”

But the full effect of this policy will likely only be seen in four to five years when affected cars become eligible for PARF rebate, he said.

The move is also in some ways a tax on wealth, Prof Theseira said. By reducing the rebate on the ARF, it effectively raises taxes on a consumption item that the wealthy spend a lot of money on, he noted.

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