Should You Buy a COE or PARF Car in Singapore? What’s the Difference?

With the average price of a new car rivalling the cost of a 3-Room BTO flat in a non-mature estate in Singapore, it’s easy to see why used cars are a more viable option for aspiring car owners. And if you want to buy a used car, you’ll have to look at more than just the colour, make, and model – you’ll need to decide whether you want a PARF car or COE car.

Here’s a more in-depth look at the advantages and disadvantages of both PARF and COE cars:

What is the Preferential Additional Registration Fee (PARF) rebate?

PARF rebate, or Preferential Additional Registration Fee rebate, allows buyers to offset the various upfront vehicle taxes and fees when you register a car, namely:

1. The Additional Registration Fee (ARF)
2. The COE Quota Premium
3. The Registration Fee (RF)
4. The $10,000 used car surcharge (if applicable)

The PARF rebate is computed based on the age of the car at de-registration. The age of the car is computed from the date of its registration in Singapore or its original registration in a foreign country, whichever is earlier. For a full breakdown of PARF benefits for eligible cars, check out the full table at ONE.MOTORING.

The most common case for Singaporeans is that they buy a new car, drive it until the initial 10-year COE is up, scrap it, and then get back the PARF + COE rebate.

What is the difference between a PARF car and a COE car?

Used cars purchased just a few years ago are still laughably cheap compared to buying a new one – even with the low COE prices today. But with used cars, there’s cheap… and then there’s dirt cheap.

If you want to buy something dirt cheap that’ll last for a few years until you upgrade to something better, get a COE Car. If you want something less vintage that’ll let you collect your COE and PARF rebates after de-registration, get a PARF car. But this is only a surface-level difference.

The main difference between a PARF car and a COE car is that the amount you can get back when you de-register the car is different.

A PARF car hasn’t been de-registered before its 10-year depreciation period has ended. This makes it eligible for both the COE and PARF Rebate, which ranges from 50% – 75% of the Additional Registration Fee (ARF) paid on the vehicle.

A COE car is not eligible for the PARF Rebate because the owner chose to pay the Prevailing Quota Premium (PQP) for 5 or 10 more years more instead of de-registering the vehicle. This means that upon de-registration, you’ll only receive the COE Rebate.

There are many other differences between PARF and COE cars that contribute to both their upfront and long-term cost, such as:

1. Downpayment for a COE car is cheaper than a PARF car

The down payment makes up the biggest chunk of your upfront cost when buying a used car. And with the latest MAS car loan restrictions, the amount you can borrow is reduced – meaning you’ll have to pay a larger down payment.

So your down payment will depend on the following:

• If the Open Market Value (OMV) of your vehicle is $20,000 or less, your maximum Loan-to-Value is 60% – meaning you’ll have to make a 40% down payment.

• If the Open Market Value (OMV) of your vehicle is more than $20,000, your maximum Loan-to-Value is 50% – meaning you’ll have to make a 50% down payment.

Go with a COE car if you don’t want to pay a lot up front. That’s because the sale price of COE cars can be up to 40% – 50% cheaper than PARF cars, and your down payment will be 40%.

PARF cars on the other hand still retain much of their OMV, meaning you’ll probably need to pay 50% down (if the remaining OMV is above $20,000).

2. COE Rebate vs PARF Rebate 

Much of a used car’s sticker price comes from the rebates buyers receive from de-registering them. COE cars gain much of their value from the COE rebate attached to it. PARF cars on the other hand get much of their resale value from both the PARF rebate, which is based on 50% – 75% of the vehicle’s ARF, and the COE rebate.

Here are some examples:

COE Rebate for a COE car 

If you de-register your car before the remaining COE expires, you’re entitled to a rebate for the remainder of COE remaining. Since this rebate is passed onto the buyer, it’ll get factored into the resale value.

For example:

A used car registered in April 2008 has a PQP of $19,001 that is set to expire in April 2018.

If this car is sold in October 2013, you’d calculate the COE rebate by multiplying the PQP ($19,001) * the number of months remaining on the COE (54 months) and divide it by 10 years (120 months).

So the COE rebate would be ($19,001 * 54) / 120 = $8,550.45

PARF Rebate for a PARF car 

If you de-register your car before the 10-year depreciation period has ended, you’re entitled to rebate based on a percentage of the vehicle’s ARF, which is also factored into the resale value.

The percentage you’ll receive is based on the following:

Number of Years Registered	PARF Rebate
5 Years or Less	75% of ARF
5 Years to 6 Years	70% of ARF
6 Years to 7 Years	65% of ARF
7 Years to 8 Years	60% of ARF
8 Years to 9 Years	55% of ARF
9 Years to 10 Years	50% of ARF
10 Years or More	Nothing

3. Condition of COE cars makes it easier to negotiate for a lower price 

The used car’s condition still plays a huge role its resale value, which is reflected in the vehicle’s OMV, depreciating 10% each year for the first 10 years after registration – for PARF cars only.

The value of COE cars on the other hand is more arbitrary because there’s no ARF rebate or “official” OMV remaining. This means you’ve got more leeway to negotiate price with the owner.

Whether you’re looking at a PARF or COE car, here are three factors to examine:

• Mileage: Typically, if a car has a lot of mileage, that can contribute to a reduction in the resale value. That’s because the car’s performance decreases as mileage increases due to wear and tear, meaning certain parts will need to be replaced faster. 
• Periodic maintenance: A car that hasn’t been properly maintained is a liability (and a waste of money!). Cars need periodic maintenance, such as changing the motor oil, transmission fluid, air filter, etc. Ask to see the car’s maintenance log, and if there isn’t one, it’s a red flag that its maintenance may have been neglected. And of course, always have a mechanic check the car before you buy it!
• External condition: Check the car’s exterior for any dents, scratches, lights, power windows, and tires. If there are blemishes, you can at least negotiate some small discount, but if the car has worn-out lights or tires, ask for replacement.

On a final note, COE cars may be much cheaper, but be prepared to pay higher (and more frequent) maintenance costs than newer PARF cars. If you want to save money on future maintenance costs, read up on How to Lower Your Car Maintenance Costs.

 

4. Road tax differs for a PARF and COE car

The road tax is another factor to consider when choosing between a PARF or COE car. That’s because depending on your choice, you may need to pay an additional surcharge on top of the road tax. Check out LTA’s website to see the formula for calculating the road tax.

The road tax is determined by the engine size of your car, so the larger the engine, the higher the tax – that goes for both PARF and COE car owners. But COE car owners need to pay an additional surcharge of up to 50% because their cars are 10 years or older.

Here’s the breakdown of the surcharge you’ll need to pay if you buy a COE car:

Age of Car	Additional Road Tax Surcharge
10 Years Old	Additional 10%
11 Years Old	Additional 20%
12 Years Old	Additional 30%
13 Years Old	Additional 40%
14+ Years Old	Additional 50%

How do PARF and COE cars compare to each other? 

So based on these factors, it’s plain to see that the upfront cost of a COE car is cheaper than a PARF car.

But that cost of a COE car can easily jump if you happen to buy a car with mechanical defects – plus you still need to pay higher road tax as well. PARF cars on the other hand are newer, usually in better mechanical shape, and still retain much of their resale value.

Choosing one is not only a matter of budget, but of knowing the risks that come with buying cheap. If you’re still unsure of whether to choose a PARF or COE car, here’s a simple summary of differences:

PARF car	COE car
More expensive than COE cars	Cheaper than PARF cars
Can collect PARF and COE rebates upon de-registering within 10 years	Can collect COE rebate
Higher monthly repayments	Lower monthly repayments
Higher down payments	Lower down payments
Possibly high car insurance premiums depending on make and model	Higher car insurance premiums due to age of car
Lower car loan interest rates	Higher car loan interest rates
Lower chance of maintenance issues	Higher chance of incurring maintenance costs
Lower road tax	Higher road tax
Higher resale value after 2-3 years	Low resale value
Lower mileage	Higher mileage
Warranty may still be active	Expired warranty
Must pay transfer fee

Ready to shop for used cars? Check out online car marts such as Motorist.sg, Carro, DBS Car Marketplace, Oneshift and sgCarMart.

Not forgetting, car insurance prices will affect your overall costs! Get cheap car insurance quotes via our MoneySmart wizard here.