During Budget 2026, one of the biggest announcements made by Prime Minister Lawrence Wong was the sharp cut to the Preferential Additional Registration Fee (PARF) rebate. Starting with the first bidding exercise on 20 February 2026, rebates for scrapping a car before its 10-year Certificate of Entitlement (COE) expiry were slashed by 45 percentage points, with the cap halved from S$60,000 to S$30,000.
This move raises the long-term cost of owning internal combustion engine (ICE) cars in Singapore. Electric vehicles (EVs), on the other hand, are now comparatively more attractive because their value depreciates less. This is due to the upfront incentives such as the Vehicular Emissions Scheme (VES) rebates and the Electric Vehicle Early Adoption Incentive (EEAI) grant.
The ripple effects were felt almost immediately in the market. COE premiums for larger cars dipped below those of smaller cars for the first time in years, underscoring how the rebate cuts disproportionately affect models with a high Open Market Value (OMV). In contrast, EVs with lower Additional Registration Fees (ARFs) stand to gain, as their upfront rebates nearly eliminate payable ARF, leaving little exposure to the reduced PARF.
What Depreciation Looks Like Between Car Models
To illustrate the impact, let’s compare three popular models of a similar price. The Toyota Corolla Altis 1.6, the Toyota Camry Hybrid, and the Tesla Model 3 RWD 110 all have similar listed prices or average OMVs.
However, what sets them apart is the expected PARF rebate. The Altis and Model 3 are both affordable upfront, but the ARF paid is higher for the former than the latter, due to the VES rebate and EEAI grant, totalling $30,000 that owners of electric vehicles enjoy.
Read Also: Guide To Understanding The Additional Registration Fee (ARF) For Vehicle Registration In Singapore
The Camry, which has a higher upfront cost and ARF payable, could previously take comfort that the PARF rebate would be significant. Before Budget 2026, the PARF rebate for the Camry was more than double that of the Tesla Model 3 and almost double that of the Altis.
| Toyota Corolla Altis | Toyota Camry Hybrid | Tesla Model 3 RWD 110 Electric | |
| Listed Price (inc. COE) | $188,888 | $261,888 | $185,888 |
| Average OMV | $18,755 | $42,044 | $41,110 |
| ARF | $18,755 | $51,844 | $50,109 |
| VES Rebate/Surcharge | $7,500 | $0 | -$22,500 |
| Actual EEAI Grant | $0 | $0 | -$7,500 |
| ARF paid | $26,255 | $51,844 | $20,109 |
| PARF Rebate After 10 Years (pre-Budget 2026) | $13,128 (50% of ARF paid) | $25,922 (50% of ARF paid) | $10,055 (50% of ARF paid) |
| Approximate Depreciation (pre-Budget 2026) | ~$17,576 per year | ~$23,597 per year | $17,583 per year |
| PARF Rebate After 10 Years (post-Budget 2026) | $1,313 (5% of ARF paid) | $2,592 (5% of ARF paid) | $1,006 (5% of ARF paid) |
| Approximate Depreciation (post-Budget 2026) | ~$18,758 per year | ~$25,930 per year | ~$18,488 per year |
Data Source: OneMotoring
Before the changes in Budget 2026, the Altis would have enjoyed a much higher PARF rebate and therefore a lower depreciation rate than the Tesla Model 3. However, due to the significant reduction in PARF rebate after Budget 2026, the difference in PARF rebate is reduced. This, therefore, results in the Tesla Model 3’s depreciation rate being lower than that of the Altis.
The depreciation rate of the Camry has always been higher than the Altis and the Model 3, but the reduced PARF rebate following Budget 2026 makes the difference more stark.
What This Means For Car Buyers
For mid-range sedans like the Altis and the Camry, the reduced PARF rebate means owners face higher depreciation and weaker resale values. On the other hand, EVs like the Tesla Model 3, are less exposed because their ARFs are already offset by incentives. Over a 10-year cycle, the cost gap between internal combustion engine (ICE) and EV ownership narrows significantly, tilting the balance toward EVs as the smarter buy. Even hybrid cars, once seen as a middle ground, now suffer from high ARFs without the full cushion of EV incentives.
Read Also: Cheapest Cars That You Can Buy In Singapore
For consumers, the message is straightforward. ICE cars will become increasingly expensive to own, while EVs are positioned as the smarter bet for both wallets and the environment.
The rebate cut dovetails with Singapore’s broader climate commitments, including the target to phase out ICE vehicles by 2040 and expanding EV charging infrastructure nationwide. PM Wong said as much in his Budget 2026 speech.
“Electric vehicles are less pollutive than conventional petrol cars. As EVs become more common, the need to encourage early deregistration through the PARF rebate is reduced.”
Read Also: Singapore Budget 2026: 5 Announcements That Will Benefit Everyday Singaporeans Financially
