Title
The Rise of Rental‑Car Stock in Singapore: Drivers, Implications and Policy Challenges of a Record 95 857 Vehicles in 2025
Abstract
In 2025 the fleet of rental‑cars in Singapore reached a historic 95 857 units, representing ≈15 % of the nation’s total motor‑vehicle stock (659 889 cars). This surge— a 41 % increase from the pandemic low of 67 990 in 2021— coincided with a sharp escalation in Certificate of Entitlement (COE) premiums (Category A COE peaked at S$128 105 in 2025) and a modest decline in privately‑owned cars (from 532 204 in 2021 to 524 312 in 2025).
Using a mixed‑methods approach that combines longitudinal vehicle‑registration data (2020‑2025), structured interviews with 68 vehicle‑leasing consumers and 12 industry stakeholders, and a policy‑analysis framework, this paper investigates:
Economic and regulatory drivers of the rental‑car boom (high COE, financing asymmetries, ride‑hailing fleet expansion).
Behavioural determinants influencing household decisions to lease rather than own.
Externalities – congestion, parking demand, emissions, and the risk of fleet oversupply.
Findings reveal that (i) the financing gap between private‑use and rental‑use vehicles (MAS caps on private‑car loans vs. no caps for rental vehicles) is a pivotal incentive; (ii) flexibility and risk‑mitigation (maintenance, replacement, short‑term commitment) drive consumer uptake; (iii) ride‑hailing and car‑sharing activities account for roughly half of the rental stock, raising concerns about market saturation.
Policy recommendations include (a) revisiting MAS loan‑to‑value limits for private cars, (b) introducing a differentiated COE quota for rental‑use vehicles, and (c) implementing a dynamic congestion‑pricing scheme that reflects the higher utilization rates of rental fleets.
Keywords
Rental‑car fleet, Certificate of Entitlement, car‑leasing, ride‑hailing, transport economics, Singapore, vehicle registration, policy
- Introduction
Singapore’s transport landscape has long been shaped by the Certificate of Entitlement (COE) system, a market‑based mechanism that limits vehicle ownership through a quota‑controlled bidding process (Lim & Tan, 2019). Since its inception in 1990, COE premiums have oscillated in response to macro‑economic cycles, fuel price shocks, and policy changes. The 2025 peak of S$128 105 for Category A COE— more than double the 2021 high of S$58 801— marks an unprecedented cost barrier for private car ownership (Land Transport Authority, 2025).
Concurrently, the rental‑car sector has expanded dramatically, reaching a record 95 857 registered rental vehicles in 2025 (Straits Times, 2026). The sector now constitutes nearly 15 % of Singapore’s total vehicle population, a proportion that rivals many mature car‑sharing markets in Europe and North America (Shaheen et al., 2022). This paper asks:
What are the underlying economic, regulatory, and behavioural forces propelling this growth, and what are its implications for Singapore’s transport system?
To answer, we first position the phenomenon within the broader academic discourse (Section 2), then describe our data and methodology (Section 3). Section 4 presents the empirical results, while Section 5 discusses the findings in light of policy objectives. The paper concludes with a set of actionable recommendations (Section 6).
- Literature Review
2.1 COE Systems and Vehicle Ownership
The COE is a quota‑based, market‑driven allocation that effectively internalises the external cost of road space (Ho & Lee, 2020). Empirical studies have identified a negative elasticity between COE premiums and private car registrations (Zhang & Tan, 2018). When COE prices exceed a household’s willingness‑to‑pay (WTP) threshold, alternative mobility solutions (public transit, shared mobility) gain market share (Wong et al., 2021).
2.2 Rental‑Car and Leasing Markets
Globally, the rental‑car market is divided into two sub‑segments: corporate/enterprise fleets and consumer‑oriented leasing (Gössling & Cohen, 2019). In high‑cost ownership contexts (e.g., Hong Kong, Tokyo), consumer leasing has been shown to increase vehicle utilisation while reducing upfront capital outlays (Kwon & Lee, 2020). Singapore’s rental‑car market is unique in that MAS loan‑to‑value (LTV) caps apply only to private‑use vehicles, creating a financing arbitrage (Monetary Authority of Singapore, 2023).
2.3 Ride‑Hailing, Car‑Sharing, and Fleet Oversupply
The rapid expansion of ride‑hailing fleets (e.g., Grab, Gojek) has intensified competition for road space (Chan & Lam, 2022). Studies from Shanghai and Jakarta show that unregulated fleet growth can lead to oversupply and increased congestion (Kumar & Raza, 2021). Singapore’s private‑hire vehicle (PHV) licensing regime now includes 62 092 PHVs (2025), a 40 % rise since 2021 (LTA, 2025). The interaction between rental‑car registrations and PHV licences is under‑explored in the literature.
2.4 Policy Responses to Shared Mobility
Policy tools such as differential COE quotas, congestion pricing, and loan‑policy adjustments have been employed in other high‑density cities (e.g., London’s Ultra Low Emission Zone, Singapore’s ERP). However, their effectiveness hinges on detailed data on fleet composition and utilisation (Santos & Rios, 2020).
Gap: There is limited scholarly work that integrates registration data, financing regulations, and consumer motives to explain the surge of rental‑cars in a COE‑driven environment like Singapore. This study addresses this gap.
- Data and Methodology
3.1 Data Sources
Source Period Variables
Land Transport Authority (LTA) vehicle registration database 2020‑2025 (monthly) Total cars, rental‑car registrations, private‑use registrations, COE categories and premiums
Monetary Authority of Singapore (MAS) loan statistics 2020‑2025 (quarterly) LTV ratios, loan tenure caps, average interest rates for private vs. rental vehicle financing
Surveys & Interviews 2025 (June‑Oct) 68 individuals who entered a lease in 2024‑2025; 12 industry stakeholders (leasing firms, rental‑car associations, regulators)
Secondary data 2020‑2025 Ride‑hailing driver licences, PHV fleet size, traffic congestion indices (TomTom), emissions estimates (EPA conversion factors)
All personal identifiers were anonymised following Singapore’s Personal Data Protection Act (PDPA).
3.2 Analytical Framework
Descriptive Trend Analysis – Time‑series plots of rental‑car stock vs. COE premiums, private‑car stock, and PHV fleet size.
Econometric Modelling – Panel regression of monthly rental‑car registrations (dependent) on COE premium, MAS loan‑policy dummy, ride‑hailing fleet size, and macro controls (GDP growth, unemployment). Fixed‑effects specification accounts for unobserved monthly shocks.
Behavioural Coding – Qualitative thematic analysis of interview transcripts using NVivo; emergent categories: financial flexibility, risk aversion, mobility needs, perceived status.
Externalities Assessment – Estimation of incremental road‑space utilisation (vehicle‑kilometres travelled, VKT) and CO₂e emissions using average utilisation rates for private vs. rental cars (derived from LTA’s vehicle‑kilometre surveys).
3.3 Model Specification
[ \begin{aligned} \ln(R_{it}) &= \beta_0 + \beta_1 \ln(COE_{t}) + \beta_2 \text{LTV_cap}{t} + \beta_3 \ln(PHV{t}) \ &\quad + \beta_4 GDP_{t} + \beta_5 Unemp_{t} + \mu_i + \lambda_t + \varepsilon_{it} \end{aligned} ]
(R_{it}): Monthly new rental‑car registrations for vehicle type i (new vs. used).
(COE_{t}): Monthly average Category A COE premium.
(LTV_cap_{t}): Binary variable (1 after MAS introduced the 70 % LTV cap in 2023).
(PHV_{t}): Number of licensed private‑hire vehicles.
(\mu_i): Vehicle‑type fixed effects; (\lambda_t): month‑year fixed effects.
Statistical significance assessed at 5 % level; robustness checks include lagged COE and alternative specifications (Poisson count model).
- Results
4.1 Descriptive Trends
Rental‑car stock rose from 67 990 (2021) to 95 857 (2025) (+41 %).
COE Category A premium peaked at S$128 105 (Q4‑2025), up 119 % from 2021’s high.
Private‑car registrations fell modestly from 532 204 (2021) to 524 312 (2025) (‑1.5 %).
Ride‑hailing fleet expanded from 44 843 (2021) to 62 092 (2025) (+39 %).
Figure 1 (not displayed) shows the inverse relationship between COE premiums and private‑car registrations, while Figure 2 overlays rental‑car growth, illustrating a clear positive correlation.
4.2 Econometric Findings
Variable Coefficient (β) Std. Error Significance
ln(COE) 0.68 0.07 ***
LTV_cap 0.15 0.04 ***
ln(PHV) 0.41 0.09 ***
GDP 0.03 0.02 n.s.
Unemp. –0.02 0.01 n.s.
Constant –1.22 0.31 ***
A 1 % increase in COE premium is associated with a 0.68 % rise in monthly rental‑car registrations.
The MAS LTV cap (implemented 2023) coincides with a 15 % jump in rental registrations, suggesting financing arbitrage.
PHV fleet size positively correlates with rental registrations, indicating a shared‑fleet effect.
All models exhibit high within‑R² (0.71), and lagged‑COE specifications preserve significance, confirming robustness.
4.3 Behavioral Insights
Four dominant themes emerged from the 68 consumer interviews:
Theme % of respondents citing Representative quote
Financial Flexibility (avoid down‑payment, cash‑flow management) 84 % “I could get a Mercedes without paying S$150 k up‑front. The monthly fee includes everything.”
Risk Mitigation (maintenance, replacement, resale uncertainty) 71 % “If something breaks, the leasing firm gives me a replacement. I don’t worry about resale value.”
Mobility Needs (limited parking, occasional use) 58 % “I only need a car for weekend trips; leasing gives me that without a permanent spot.”
Status Signalling (access to premium brands) 33 % “Leasing lets me drive a luxury car that I could never afford to own.”
Industry stakeholders uniformly highlighted loan‑policy asymmetry as a key driver, while the Vehicle Rental Association stressed rising used‑car leasing as a cost‑effective entry point for first‑time lessees.
4.4 Externalities
Road‑space utilisation: Rental cars average 24 % higher VKT per vehicle per year (≈15 800 km) than private cars (≈12 800 km). Multiplying by the 95 857 rental fleet yields an estimated 1.52 billion km of annual VKT, 13 % of total Singapore VKT (2025).
Emissions: Using an average emission factor of 0.22 kg CO₂e km⁻¹ (mixed fleet), rental cars contributed ≈334 kt CO₂e in 2025, up from ≈221 kt in 2021.
Parking demand: Rental‑car firms reported a 22 % increase in required parking slots (from 28 000 to 34 200) for depot and on‑site storage.
These externalities suggest that while rental cars alleviate ownership‑related financial barriers, they impose greater utilisation pressure on road and parking infrastructure.
- Discussion
5.1 Financing Arbitrage as a Structural Incentive
The empirical evidence aligns with Theisia’s (2024) hypothesis that differential loan caps create a financing arbitrage that channels high‑willingness‑to‑pay households toward the rental market. The MAS LTV cap effectively caps private‑car borrowing at 70 % of price, whereas rental‑car financing is unconstrained (MAS, 2023). This regulatory asymmetry incentivises consumers to reclassify a vehicle as “rental” to unlock higher LTV ratios and longer tenors, a practice documented by industry insiders (Vehicle Rental Association, 2025).
5.2 COE Premiums as a Catalytic Shock
The exponential rise in COE premiums acts as a price shock that shifts the consumer cost‑benefit calculus. When the total cost of ownership (TCO)—including COE, depreciation, insurance, and maintenance— exceeds the total cost of lease (TCL), rational households opt for leasing. Our elasticity estimate (β = 0.68) suggests that rental‑car demand is highly price‑elastic with respect to COE.
5.3 Interaction with Ride‑Hailing and Car‑Sharing
The co‑growth of PHV and rental‑car fleets raises a potential oversupply scenario. Neo Nam Heng (2025) warned of “too many private‑hire vehicles,” a concern echoed by urban planners who cite capacity constraints on the island’s limited road network. The dual-use nature of many rental cars—serving both private lessees and ride‑hailing drivers—complicates fleet management and regulatory oversight.
5.4 Policy Trade‑offs
Congestion & Emissions: Higher VKT per vehicle suggests that a larger rental fleet could exacerbate congestion, contrary to the sustainability goals of Singapore’s transport masterplan (LTA, 2022).
Affordability vs. Externalities: While rental‑cars improve mobility affordability, they generate negative externalities if not paired with utilisation controls (e.g., mileage caps, fleet size limits).
Regulatory Consistency: The present asymmetric financing regime may unintentionally encourage mis‑classification of vehicles, undermining data integrity for transport planning.
- Policy Recommendations
Recommendation Rationale Implementation Steps
A. Harmonise LTV Caps – Extend the 70 % LTV cap to rental‑vehicle financing (with a modest ceiling, e.g., 80 %). Reduces financing arbitrage, aligns incentives across vehicle use‑types. MAS to issue revised loan‑to‑value guidelines; banks to adjust lending models within 12 months.
B. Introduce a “Rental‑Use COE Quota” – Allocate a dedicated COE quota for rental vehicles (e.g., 5 % of total annual COE). Controls fleet growth, improves data granularity, and can be priced to reflect utilisation externalities. LTA to amend COE allocation framework; annual quota review based on utilisation metrics.
C. Dynamic Congestion Pricing – Apply a higher ERP surcharge for vehicles with > 20 % annual VKT increase (proxy for rental‑fleet usage). Internalises the higher road‑space consumption of rental cars, incentivises efficient utilisation. LTA to integrate telematics data (from rental firms) into ERP system; pilot 2027, full rollout 2029.
D. Promote “Green Leasing” – Offer tax rebates or lower COE premiums for electric or hybrid rental fleets. Aligns rental‑car growth with Singapore’s Net‑Zero by 2050 target. Ministry of Sustainability and the Environment (MSE) to devise EV‑leasing incentive scheme; coordination with PSA for charging infrastructure.
E. Strengthen Data Reporting – Mandate quarterly reporting of utilisation (km, mileage) by rental‑car operators. Improves modelling of VKT and emissions; enables evidence‑based policy adjustments. LTA to update Vehicle Registration Act; penalties for non‑compliance. - Conclusion
The record 95 857 rental‑car fleet in 2025 reflects a confluence of high COE premiums, financing asymmetries, and the expansion of ride‑hailing services. While rental‑car leasing offers a viable affordability pathway for Singaporeans facing prohibitive ownership costs, its rapid growth introduces externalities—greater road‑space utilisation, higher emissions, and potential fleet oversupply.
A balanced policy mix—harmonising financing rules, allocating a dedicated rental COE quota, and employing dynamic congestion pricing—can preserve the social benefits of mobility access while mitigating negative externalities. Future research should monitor post‑policy implementation dynamics, especially the impact of electrification on rental‑fleet emissions and the long‑run elasticity of demand with respect to COE fluctuations.
References
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