In Singapore, the cost of a car is dependent on a few variables. These include the cost of a Certificate of Entitlement (COE), the Additional Registration Fee (ARF) and the GST that is payable.
One other factor that could either increase or reduce the cost of buying a car in Singapore is the Vehicular Emission Scheme (VES). Introduced on 1 January 2018, the VES encourages owners to buy a car that emits less pollutants. Depending on your vehicle’s emission, you may either have to pay a surcharge or enjoy an ARF rebate.
Prior to 1 January 2018, it’s the Carbon Emission-Based Vehicle Scheme (CEVS) and the Revised Carbon Emission-Based Vehicle Scheme that applied to cars being registered. Both these schemes only took into consideration carbon emission.
How The Vehicular Emission Scheme (VES) Works?
The Vehicular Emission Scheme (VES) is based on how much carbon dioxide (CO2) a car emits along with 4 other pollutants. These 4 pollutants are Hydrocarbons (HC); Carbon Monoxide (CO); Nitrogen Oxides (NOX); Particulate Matter (PM). Grading is based on the worst-performing pollutant in your car and that determines your vehicle’s band and its corresponding VES rebate or surcharge.
How Much VES Rebate Or Surcharge Do We Get?
As of 1 January 2021, the VES rebate for the top two bands (A1, A2) will increase by $5,000. This means that for cars that qualify for the highest band A1, a rebate of $25,000 is given. For band A2, the rebate will be $15,000.
From 1 July 2021 onwards, the VES surcharge for the lowest two bands (C1, C2) will increase by $5,000. For a car with a band of C1, the vehicle surcharge will increase from $10,000 (currently) to $15,000. For a car with a band of C2, the vehicle surcharge will increase from $20,000 (currently) to $25,000.
To reiterate, it doesn’t matter if your car achieves A1 in four categories but a C1 in one category. If that happens, your car will fall under band C1 and incur a surcharge of $15,000 (from 1 July 2021 onwards).
How VES Affects The Cost Of Buying A Car?
VES rebate reduces the car’s Additional Registration Fee (ARF). The ARF is a form of tax imposed on all cars during registration based on their open market value (OMV).
For example, a car such as the Mazda 3 Sedan Mild Hybrid has an open market value (OMV) of $21,204.
ARF is calculated based on the following formula.
|Vehicle OMV||ARF Payable (%)|
|First $20,000||100% of OMV|
|Next $30,000 (between $20,001 to $50,000)||140% of OMV|
|Above $50,000||180% of OMV|
Based on its OMW, the Mazda 3 Sedan Mild Hybrid will have an ARF of $21,686, before VES.
Since the Mazda 3 Sedan Mild Hybrid falls under band A2, it enjoys a VES rebate of $15,000. This reduces its ARF to $6,686. Do note that the VES rebate is subject to a minimum payment of $5,000 for ARF.
If you buy a car with a VES band of C1 or C2, you will need to pay an additional $10,000 (C1) or $20,000 (C2) on top of the car’s cost. This will increase to $15,000 and $25,000 respectively from 1 July 2021 onwards.
VES Rebate Lowers Your ARF While VES Surcharge Does Not Increase Your ARF
If you intend to buy a car with a VES rebate, do note that the VES rebate will lower your ARF and thus, the Preferential Additional Registration Fee (PARF) rebate. PARF rebate is the amount that LTA returns to you if you deregister your car within 10 years.
For example, in the case of the Mazda 3 Sedan Mild Hybrid, while the original ARF was $21,686, this becomes much lower at $6,686 after the $15,000 VES rebate. If you deregister the car when the 10-year COE expires, you will get back $3,343 (50% of $6,686). This makes sense since the VES rebate already reduces the initial ARF when the car was bought.
However, in the event of a VES surcharge, the opposite does not apply. For example, if a car has an ARF of $30,000 and incurs a VES surcharge of $10,000, the car’s ARF does not increase. This means that the PARF rebate after 10 years will still be $15,000 (50% of $30,000), despite the VES surcharge.
In other words, while the VES rebate will lower your ARF, leading to a lower PARF rebate when the car is deregistered within 10 years, the VES surcharge only increases the price of your car, without increasing your ARF.
Earn Credit Card Rewards On Your Income Tax And More
Your big expenses such as rent, insurance and taxes can also earn you rewards. Make your payments through CardUp and earn miles, points or cashback on your credit card even on payments not typically accepted by credit cards. Sign up here!
Enjoy a lower fee of 1.75% (instead of the usual 2.6%) for income tax payment by using our DollarsAndSense promo code: DSTAX2021. Terms and conditions apply.