PARF cuts may have spooked luxury car buyers, dragging down high-end COE premiums: Analysts

Singaporean car buyers reacted with limited immediate impact to recently announced changes to vehicle scrapping rebates, though some luxury vehicle orders were reportedly cancelled. The adjustments, revealed during Prime Minister Lawrence Wong’s Budget 2026 speech on February 12, reduce the rebates offered under the Preferential Additional Registration Fee (PARF) scheme.

PARF Rebate Changes and Initial Reactions

The PARF scheme changes reduce rebates for scrapping a car before its 10-year Certificate of Entitlement (COE) expires by 45 percentage points. The new maximum rebate is capped at S$30,000 (US$24,000), a decrease from the previous range of 50 to 75 percent of the Additional Registration Fee (ARF) paid, capped at S$60,000.

Limited Immediate Impact

Despite the significant changes, Certificate of Entitlement (COE) prices remained largely unmoved on February 20. This is largely because many buyers had already committed to orders and paid deposits before the Budget 2026 announcement. The standard practice in Singapore involves signing a sales contract with a deposit before dealers bid for COEs.

Did You Know? Prior to the changes, car owners could receive rebates of between 50 and 75 percent of the Additional Registration Fee (ARF) paid when deregistering vehicles before their 10-year COE expired.

Luxury Car Segment Shows Early Signs of Adjustment

However, the luxury car segment showed some immediate reaction. Mr. Ng Lee Kwang, director at Octagon Motors Group, reported hearing of order cancellations, specifically for models like the BMW 7 series and Toyota Vellfires. The timing of the announcement, coinciding with the Chinese New Year holiday when some dealerships were closed, also contributed to the delayed response.

Expert Insight: The fact that the most immediate impact appears in the luxury car segment suggests that buyers of these vehicles are more sensitive to changes in financial incentives, and potentially have more flexibility to adjust their purchasing decisions.

Looking Ahead

The full effects of the PARF changes are not yet clear. Associate Professor Walter Theseira of the Singapore University of Social Sciences’ business school indicated that the impact will likely be seen in the next few COE auctions as buyers and dealers have time to respond. Future auctions could see decreased demand, potentially leading to lower COE premiums. Dealers may also adjust their pricing strategies to account for the reduced rebates. Forfeiting a deposit, however, may not be financially sensible for many buyers, according to Mr. Jake Ler, chief marketing officer at Motorist Singapore.

Frequently Asked Questions

What is the PARF scheme?

The Preferential Additional Registration Fee (PARF) scheme provides rebates to car owners who scrap their vehicles before their 10-year Certificate of Entitlement (COE) expires.

How much have the PARF rebates been reduced by?

The rebates have been reduced by 45 percentage points and are now capped at S$30,000 (US$24,000).

Why weren’t COE prices immediately affected?

Many buyers had already committed to orders and paid deposits before the changes were announced, and the timing coincided with the Chinese New Year holiday.

How will these changes ultimately affect the Singaporean automotive market in the long term?