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VES Is More!

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What is the Vehicular Emission Scheme (VES) and how will it affect your car buying decisions? Read on to find out.

Buying a car in Singapore will always be a costly affair. On top of the price of the car itself, one must also factor in the cost of a Certificate of Entitlement (COE), the Additional Registration Fee (ARF), and the Goods and Services Tax (GST). To promote the adoption of cleaner and greener cars, the Vehicular Emission Scheme (VES) was introduced back in 2018.

The VES is based on the amount of carbon dioxide (CO2) and four other pollutant emissions on new cars, taxis and imported used cars. These pollutants are divided into bands — A1, A2, B (neutral), C1 and C2 — in increasingly worse emission types. Buyers of cars in the cleaner-performing bands A1 and A2 enjoy attractive rebates of S$20,000 and S$10,000 respectively on their ARF, while those intent on buying cars that have poor emission ratings in the C1 and C2 bands will be subjected to surcharges of S$10,000 and S$20,000 respectively. The effectiveness of the scheme was reflected in the increase in sales of VES vehicles in the A1 and A2 bands by about 60%, and a drop of around 20% for vehicles in the C1 and C2 bands, during the first deployment of the VES.

In January 2021 the VES was enhanced so that buyers of A1- and A2-band cars can enjoy rebates of S$25,000 and S$15,000 respectively, an increase of S$5,000 for both bands from the previous scheme. From July 2021, those looking to buy C1- and C2-band cars will have to fork out S$15,000 and S$25,000 respectively, an additional S$5,000 from the previous requirements. The neutral B band is not affected.

Buyers should be aware that a VES rebate doesn’t guarantee lower prices across the board. Cars under the neutral band B will not enjoy the rebates nor be penalised by surcharges. The rebates are also subject to the minimum S$5,000 ARF payable. This means inexpensive cars, such as the A2-banded Mitsubishi Attrage, will not be any cheaper because its ARF is already at the minimum amount. Big winners will be electric vehicles (EV) because, on top of the VES rebates, they are also entitled to the EV Early Adoption Incentive (EEAI) rebate of 45% of ARF (capped at S$20,000), maximising possible incentives to an attractive S$45,000!

If you’re thinking of buying a car with a VES rebate, you have to understand that this will also lower your ARF, which subsequently reduces the Preferential Additional Registration Fee (PARF) rebate as well. This is the amount LTA returns to you when you decide to deregister your car within 10 years. For example, if your car has an original ARF of S$22,000 and qualifies for a S$15,000 VES rebate, your car’s new ARF value will be S$7,000. After deregistration, the PARF rebate will be S$3,500 (50% of the new ARF) instead of S$11,000 (50% of the original ARF). On the flip side, those buying cars penalised with a VES surcharge will not have their ARF values increased. The ARF and subsequent PARF rebate will remain the same regardless of the VES surcharges.

The new enhanced VES will be in effect until December 2022, and we can expect more changes in the future as the scheme evolves to help meet Singapore’s target of phasing out internal combustion engine vehicles by 2040.