What Car Rental Customers Need To Know About Vehicle Emission Scheme (VES).

12 November 2020 – In efforts to improve air quality through the adoption of greener vehicles and discourage the use of more pollutive vehicles, the Land Transport Authority (LTA) and the National Environment Agency (NEA) have rolled out its newest set of continued efforts to reduce carbon emissions by vehicles via the Vehicle Emission Scheme (VES).


With the enhanced VES, coupled with the Electric Vehicle Early Adoption Incentive (EEVI), which commenced on 1 Jan 2021, buyers will be able to enjoy savings of up to S$45,000 when they purchase a fully electric car, and up to S$57,500 for a new fully electric taxi. This is in efforts to reduce the upfront cost gap between electric and petrol-fueled equivalent vehicles, and therefore help attract people to buy electric vehicles instead of their petroleum-fueled alternatives.


For those who are considering whether they would want to venture into becoming a customer of car rental services vs embarking on a the journey of car ownership, having a greater understanding of what the VES is and the repercussions of your decision, could help in providing you with a more informed decision at the end of the day, making the best choice for YOU.


What is the Vehicle Emission Scheme (VES)? 

The VES is a scheme that encourages car or taxi buyers to purchase cleaner vehicles through the use of rebates and imposing surcharges that are based on how clean (or polluted) the vehicle’s emissions are. The scheme covers the emissions of these 4 pollutants:

  • Carbon dioxide (CO2)
  • Hydrocarbons ( HC)
  • Carbon monoxides (CO)
  • Nitrogen oxides (NOx)
  • Particulate matter (PM)


Essentially, the VES grades the car based on the worst-performing pollutant in your vehicle, which then determines the vehicle’s band and its corresponding VES rebate or surcharge.



*Increased rebate with effect from 1 Jan 2021

^Increased surcharge with effect from 1 Jul 2021

(Table Cred: LTA)

Under the VES, if you are registering a car/taxi under Band A1 and A2, you will be able to get an emission rebate of S$25,000 and S$15,000 respectively, which will help to offset the car/taxi’s Additional Registration Fee (ARF).

Moreover, for the registration of a car/taxi under Band C1 and C2, you will incur an emission surcharge of S$15,000 and S$25,000 respectively, which increases the price of your purchased car.


As mentioned in our previous article on “COE Prices Surged; Highest in Years – How COE Relates to Car Rental Customers?”, we briefly mentioned one reason that caused a hike in the COE prices was the increase in VES surcharge for petrol vehicles.

*Increased rebate with effect from 1 Jan 2021

^Increased surcharge with effect from 1 Jul 2021

(Table Creds: NEA)

Under this new revised scheme, which was rolled out on 1 January 2021, the rebates for vehicles in Band A1 and A2 were increased by S$5,000 for cars and S$7,500 for taxis. Of which, the table above shows that vehicles from Band A1 will enjoy a rebate of S$25,000 while a vehicle in Band A2 will enjoy a S$15,000 rebate.


Conversely, the surcharge for Band C1 and C2 vehicles will increase from 1 July 2021, by S$5,000 for cars and S$7,500 for taxis. As such, from 1 July 2021 to 31 Dec 2022, Band C1 cars will incur a surcharge of S$15,000 while Band C2 cars will incur a surcharge of S$25,000.



The VES Rebates/surcharges affect the car’s Additional Registration Fee (ARF). ARF is a tax that is imposed on all cars during its registration and it is based on the car’s open market value (OMV).


For potential car owners intending to buy a car under Band A1 or A2, you are entitled to the relevant VES rebate, which would then lower your ARF, which would then in turn give you the Preferential Additional Registration Fee (PARF) rebate. The PARF rebate is the amount that LTA reimburses to you once you deregister your car within the COE duration of 10 years.


However, if you intend to buy a car under Band C1 or C2, you are given a VES surcharge, and the reverse does not hold true. In other words, the VES surcharges do not increase your ARF, increasing the price of your car.


Essentially, the more environmentally friendly your potential car is – the more rebates you have; the more pollutants emitted from your car – the more surcharges payable!



Essentially, as customers of car rental companies, be it going for long term car rental or short term car rental services – you need not fret about these nitty-gritty details that pertains to car ownership; such as the fluctuations of COE, VES as these costs are taken care of by the car rental company.


Perhaps further analyzing whether one needs to buy vs renting a car would be ideal, as the car rental companies take the burden off of understanding the complicated car ownership market for you. As such, it is important to do your research on whether you really need to purchase a car, or if a simple fuss-free, long-term car rental approach would suffice. Read our article on “Long Term Car Rental vs Car Ownership” to gain more understanding of the points of consideration before making such a big purchase.


While having an EV may seem attractive, with all the rebates and discounts to encourage the uptake of EVs, the layman buyer may still face difficulties in the use of EVs in today’s commuting landscape. The availability of charging infrastructure, both locally and internationally (if you want to travel overseas), may be a point of contention for new EV car buyers to consider. To read more about the challenges of switching to EVs, we have recently posted an article about “All Systems Go For Electric Vehicles – What Roadblocks Exist For Car Rental Companies?


To read more about the other costs involved in purchasing a car, you may peruse “COE- What is it and Why is it So Expensive?