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Frequently Asked Questions (FAQs) This section covers some of the most frequently asked questions about the usage of paper value in the context of the Singapore automotive market. What is paper value? The value of a vehicle is comprised of the following components: 1) PARF rebate 2) COE rebate 3) “Body” value which is the value of the vehicle itself when stripped of all taxes. Items no. 1) and 2) make up the total paper value and determined by LTA’s rebate policy. To determine your vehicle’s paper value, visit OneMotoring’s website. Current regulations allow car owners to offset the ARF, COE and registration fee values of a new car by using the rebates granted to them when they deregister their old cars. If the owner of the deregistered car does not utilise the rebate (in part or in whole), he/she may transfer the rebate benefit to another interested party. Why is this phenomenon happening? The surplus of paper in the market has been caused by the following: 1) The unusually high number of cars being deregistered since the year 2002. 2) Reductions in ARF (once in 2002, and again in 2004) 3) Lower COE premiums Presently, car dealers and paper brokers make up the bulk of the buyers of the unutilized paper. They buy paper at a “discount” from its par value. This discount is currently between 7% and 8%. They then sell this paper at a lower rate (for example, 6%) to an interested party, usually new car dealers who will then utilize the paper to offset the ARF and COE amounts for new cars that are registered through their dealerships. The difference in the rates applied to the paper bought and sold constitutes the dealers’ profit. If you are buying a new car, you can lower the cost of the car by buying paper from the market at a discount from its par value (see example on benefit for car buyers below). If you are a car seller, you may be able to yield a higher return on your paper by selling your unutilised paper to car buyers directly at a lower discount (see example on benefit for car sellers). Yes. LTA allows the PARF and COE rebates to be transferred to another interested party. For more information, please refer to OneMotoring’s website. Transfer fees will apply. I am a car buyer. How much can I save? In theory, the total amount of paper you can use to offset the ARF and COE values of your new car is: 110% of OMV + 100% of COE Note: Some (not all) car companies apply the following formula instead: 110% of OMV + 100% of COE - $10,000 The $10,000 represents the amount of cash the car company pays upfront to LTA to bid for your COE. The amount you can save on your new car depends on the discount you can obtain when purchasing paper from the open market. Example: OMV : $20,000 COE : $18,000 Total Paper allowable: 110% of $20,000 + $18,000 = $40,000 If you can buy paper at a discount of 3.5%, you will save 3.5% of $40,000 = $1,400 (before transfer and facilitation fees). In this example, the transfer fee will be $10, payable to LTA and facilitation fee of $250 payable to FussFree Auto. I am a car seller (car to be deregistered). How much can I benefit? If your current car can is going to be deregistered, you can use your PARF and COE rebates to offset a certain amount against your new car. If you do not intend to register a new car or cannot utilize all your existing paper, then you will need to transfer the benefit to another interested party at a discount. Example: Total paper value :$50,000 Market discount : 7% or $3,500 (if sold to a broker) Discount given to private buyer : 3.5% or $1,750 Net Benefit : $3,500 - $1,750 = $1,750 (before costs to LTA and facilitation fee) In this example, the facilitation fee would be $250 payable to FussFree Auto and if your current paper is in excess of $50,000, a "splitting" fee of $21 would be payable to LTA. Sellers: To facilitate the sale of your paper, FussFree Auto charges a fixed fee of 0.5% or $250, whichever is higher. In addition, if your paper cannot be sold in its entirety, LTA charges a "splitting" fee to divide your paper to the desired amount. Each split costs $10.50 (subject to a minimum of $21) and is payable to LTA. Buyers: To facilitate the purchase of paper for your new car, FussFree charges a fixed fee of 0.5% or $250, whichever is higher. In addition, you will need to pay $10 for each piece of paper transferred to you name. This fee is payable to the LTA. Does paper have an expiry date? Yes. From the time of deregistration, owners have 6 months to utilise the PARF and COE benefit. After 6 months, any PARF / COE benefit will be forfeited and the paper ceases to have any value. I do not have enough cash to buy paper. What can I do? If you are buying a new car and do not have enough cash to purchase paper on the open market, you may want to consider some form of short-term financing to purchase the paper. If you are taking a large loan for the purchase of your new car, the amount used to purchase the paper will be refunded to you upon registration of your new car by the company selling you the new car. Example:
'You will need to pay a total of $48,510 to purchase the paper in the example above. Once your vehicle is registered, and considering that a loan of $100,000 was approved and you supplied paper worth $50,000, you would have "overpaid" for your car to the tune of $50,000. The company selling you the car would then refund you the $50,000 in full. In simple terms, you paid $48,510 for the paper and will be refunded $50,000, thus saving $1,490 on your new car. If you are taking a short-term loan to fund the purchase of the paper, you will need to factor in the cost of financing to work out your total net benefit after financing costs. Example (with financing):
The dealer selling me a new car has expressed reluctance towards me providing my own paper. What can I do? We suggest good old fashion negotiation with the dealership in question. As far as we understand, as long as the rebates are legally in your name, there should be no restriction on the paper's usage. However, we strongly suggest that you check with your dealer on the terms and conditions that they apply to their sales agreement before signing on the bottom line. If you would like to find out more and are interested in using this pioneering service, please contact us at paperexchange@fussfreeauto.com or at +65 9664 0089.
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