Many drivers in Singapore are reconsidering their car-buying plans after the government announced significant adjustments to the Preferential Additional Registration Fee (PARF) rebate system. For years, the PARF rebate has been an important factor when calculating the long-term cost of owning a car. With the latest changes taking effect in 2026, buyers may need to rethink their strategies before committing to a new vehicle.

The update affects how much money car owners can recover when they deregister their vehicles before the end of the standard 10-year Certificate of Entitlement (COE) period. In simple terms, the value you could previously expect to receive at the end of your car’s lifespan is now significantly lower.

These new rules apply to vehicles registered using COEs obtained from the second COE bidding exercise in February 2026 onwards. As a result, anyone planning to purchase a car in 2026 should understand how these adjustments could affect the total cost of ownership.

One of the most noticeable impacts is the reduction in the potential “paper value” of a vehicle. The PARF rebate is calculated as a percentage of the Additional Registration Fee (ARF) paid when the car was first registered. When owners deregister their cars before the 10-year COE expires, they receive a portion of this ARF as a rebate.

Under the revised structure, the rebate percentages have been reduced substantially across all vehicle age categories. For example, a car deregistered within the first five years previously qualified for a rebate of 75% of the ARF. Under the new rules, that percentage drops significantly.

The change also introduces a new maximum rebate cap. Previously, car owners could receive up to $60,000 in PARF rebates depending on the ARF paid. With the new policy, the maximum rebate is now limited to $30,000.

To understand the financial difference, consider a vehicle with an ARF of $40,000. Under the previous system, deregistering the car after five years could return up to $30,000 in rebates. Under the revised framework, the same scenario would result in a much smaller refund, highlighting the impact these policy changes can have on long-term depreciation.

Because of this shift, a strategy that some drivers used in the past may no longer be as attractive. Many motorists previously purchased a new car, drove it for about five to seven years, then deregistered it early to recover a sizable portion of the ARF through the PARF rebate. This allowed them to switch cars regularly while managing depreciation costs.

With rebates now significantly reduced, the financial benefit of deregistering a car early becomes smaller. Buyers who previously relied on recovering a large amount midway through the ownership period may now find that extending ownership provides better overall value.

Another effect of the policy change is that renewing a car’s COE may become a more appealing option for some drivers. At the end of the initial 10-year COE period, vehicle owners can either scrap the car or renew the COE to continue driving it.

In the past, a meaningful PARF rebate sometimes encouraged owners to deregister their vehicles once they approached the 10-year mark. Now that the rebate amount has been reduced, scrapping the car may feel less rewarding financially. If the vehicle is still in good condition, some drivers may decide that extending the COE for another five years could be a practical alternative.

This change does not automatically mean that large numbers of drivers will renew their COEs. Factors such as maintenance costs, vehicle condition, and future COE prices will still influence that decision. However, the psychological motivation to replace a car before the 10-year mark may become weaker than before.

Another interesting consequence of the new rebate structure is its potential influence on the comparison between electric vehicles and traditional petrol-powered cars. Electric vehicles already benefit from several government initiatives designed to encourage adoption, including incentives that reduce the upfront ARF payable during registration.

Since the PARF rebate is calculated based on the ARF originally paid, vehicles with higher ARF amounts generally had the potential for larger rebates in the past. With the new lower rebate percentages and cap, cars with high ARF values may see a bigger reduction in potential returns. Electric vehicles, which may already enjoy upfront incentives, could therefore appear relatively more attractive over the long term when depreciation is considered.