A total of 120 deregistered vehicles - mostly saloon cars - were seized by the Land Transport Authority (LTA) during sting operations earlier this month.
The deregistered vehicles had either been kept beyond the permissible deadline for them to be disposed of or had been declared as exported, the LTA said in a statement yesterday.
The sting operations against car dealers and owners were conducted at several locations on June 7.
The owners of the raided premises are helping with the LTA's investigations, the authority said.
Within a month of deregistering a vehicle, owners are required to submit proof to the LTA that it has been properly disposed of at authorised scrapyards or export processing zones, or that it has been exported overseas.
Those who are found guilty of making a false declaration to the LTA on the disposal of a vehicle may be fined up to $5,000 or jailed for up to 12 months, or both.
Motor industry players said that errant dealers may be trying to avoid paying the monthly fee of around $200 to store the deregistered vehicles in the export processing zones.
Monthly fee to store the deregistered vehicles in the export processing zones.
At such yards, cars can be kept for up to a year, under lock and key, before they are sent overseas.
One industry veteran, who declined to be named, said these storage costs will eat into profit margins, which are already quite low.
"Some may also declare that the vehicles have been scrapped or exported, but are still waiting for the cars to be shipped out, or for an overseas buyer," he added.
The Straits Times understands that the bulk of the vehicles seized were owned by car dealers - which could include exporters or scrap dealers - rather than individuals.
As to individuals who were implicated, another motor industry player said: "The individual could have entrusted his dealer to scrap or export the car body, while still keeping the vehicle registered under his own name.
"The individual then proceeded to deregister the car and collect the scrap rebates using the documents provided by his dealer. However, for some reason, the cars are still in Singapore and were seized."
The LTA said yesterday that possessing, using or allowing a deregistered vehicle to be used beyond the permissible deadline is also an offence.
Those who are convicted may be fined up to $2,000 or jailed for up to three months, or both, for the first offence.