In the 2nd COE bidding exercise of February 2026, something unusual happened. Category A closed at $106,501, above Category B's $105,001. The last time Cat A exceeded Cat B was in October 1998, during the Asian Financial Crisis, when Cat A edged past by just $198. This time, the gap is $1,500, and the cause is traceable to a single policy announcement made eight days earlier.
Executive Summary
Budget 2026 introduced a sweeping revision to the PARF rebate scheme, slashing rebate rates and halving the maximum payout cap. The changes, effective from this very bidding exercise, altered the total cost of ownership for Cat B vehicles more sharply than for Cat A, triggering an immediate repricing at the auction. It is only the second time in over 35 years of COE bidding history that Cat A has closed above Cat B.
The Budget 2026 PARF Changes
On 12 February 2026, Prime Minister Lawrence Wong announced that the Preferential Additional Registration Fee (PARF) rebate, the amount refunded when a car is deregistered, would be significantly reduced for all new registrations.
| Age at Deregistration | Previous Rebate | New Rebate |
|---|---|---|
| Not more than 5 years | 75% of ARF | 30% of ARF |
| Above 5 to 6 years | 70% of ARF | 25% of ARF |
| Final year (Year 10) | 50% of ARF | 5% of ARF |
The maximum rebate cap was also halved, from $60,000 to $30,000.
The government's rationale: as electric vehicles become more common and less pollutive than conventional petrol cars, the policy incentive to encourage early deregistration through generous PARF rebates is less necessary.
Why Cat B Is Hit Harder
PARF is calculated as a percentage of the Additional Registration Fee (ARF), which in turn scales with a vehicle's Open Market Value (OMV). Cat B vehicles, being larger, more powerful, and typically more expensive, carry higher OMVs and therefore higher ARFs.
Under the old scheme, a Cat B buyer could realistically expect a PARF rebate at or near the $60,000 ceiling, making the car's residual value meaningfully higher at deregistration. With the cap now at $30,000 and rebate rates slashed across all age bands, the financial cushion has been substantially eroded.
Cat A buyers, by contrast, had lower OMVs and lower ARFs to begin with. Their absolute dollar loss from the PARF cut is smaller, meaning Cat A's total cost of ownership increased less relative to Cat B.
The Market Response
The repricing was immediate. With Cat B's effective ownership cost rising more sharply, bidders pulled back. Cat A, comparatively less exposed to the PARF changes, held firm. The result: a $1,500 inversion, the widest Cat A-over-Cat B gap ever recorded.
The only precedent is October 1998, when the Asian Financial Crisis briefly pushed Cat A ($25,300) above Cat B ($25,102) by a razor-thin $198. Both instances share a common thread: a major shock, whether economic or policy-driven, that disrupted the normal demand premium for larger vehicles.
What This Means for Buyers
Buying Cat B: The calculus has shifted. A lower PARF rebate at deregistration means higher net depreciation over the full 10-year COE term. Factor this into your total cost of ownership, not just the COE premium itself.
Buying Cat A: Prices held up precisely because demand remains strong. The PARF changes offer no meaningful relief for Cat A buyers. The relatively lower impact simply preserved existing demand levels.
Whether this inversion persists in subsequent bidding rounds will depend on how the market continues to digest the new PARF landscape. What is certain is that Budget 2026 has permanently changed the underlying economics of car ownership in Singapore.