For most of us, starting a new job does not require borrowing a six-figure sum first. We may need new work shoes or a laptop bag, but we would hardly expect to take on years of debt before earning our first dollar.
For someone buying a car to become a private-hire vehicle (PHV) driver, however, this can be the starting point. Before earning an income, they take on a financial commitment that must be serviced regardless of how much they eventually earn, or how long they intend to be a PHV driver.
This is why, in my opinion, extending car loan limits to individual PHV buyers was long overdue.
On 29 October 2026, the government announced that car loan limits would be extended to individual PHV buyers from 30 October. These buyers can borrow up to 70% of the purchase price for cars with an Open Market Value (OMV) of $20,000 or below, and 60% for those above $20,000, with loan tenure capped at seven years.
What this means is that aspiring PHV drivers who want to buy a car for private-hire work can only get a car loan of up to 70% of the purchase price for cars with an Open Market Value (OMV) of $20,000 or below, and 60% for those above $20,000.
Car Loan Limits Were Introduced To Prevent Buyers From Overstretching
Singapore’s current motor loan framework dates back to February 2013, when the Monetary Authority of Singapore (MAS) reintroduced motor vehicle financing restrictions. Then, MAS explicitly highlighted the risk of buyers overextending themselves amid very low interest rates.
At the time, loans were capped at 50% or 60% of the purchase price, depending on the car’s OMV, with a maximum tenure of five years. These were subsequently eased to the current 60% or 70% limits and seven-year tenure from May 2016.
There Was A Reason To Treat Income-Generating Vehicles Differently
The exemption for commercial vehicles had a reasonable purpose. In a November 2022 parliamentary reply, the Ministry of Transport explained that it avoided restricting credit to companies and individuals who depended on these vehicles for their business and livelihood.
Think of a construction company buying a crane, or a moving company purchasing a lorry. These assets allow the business to take on jobs and generate revenue. Requiring a large upfront payment could limit its ability to operate or expand.
A car can similarly be an income-generating asset for a PHV driver. But does that justify allowing an individual to borrow its entire purchase price, particularly when they depend on future driving income to repay the loan?
Monetising A Car We Own Is Different From Buying One To Earn An Income
For someone who already owns a car, private-hire driving offers a way to earn additional income from an existing asset. The idea is similar to homeowners overseas using Airbnb to monetise a property they already own.
Buying a car specifically to become a PHV driver is a different financial decision. Instead of using an existing car to supplement our income, we take on debt and rely on future driving income to afford it.
For someone simply looking to earn a living, this means taking on both a job and the financial risks of owning a business asset. The car may generate income, but the repayments remain due even when that income falls short.
Drivers Who Buy Their Cars Carry The Ownership Risk
Under the traditional taxi rental model, an operator such as ComfortDelGro supplies the vehicle, and the driver pays rent. While rental comes with financial commitments, the driver does not take on a loan to purchase the taxi.
Drivers who buy their own cars must service the loan, bear depreciation and pay for maintenance, insurance and road tax. These commitments remain even if they fall ill, earn less than expected or want to switch jobs.
Selling the car may not fully cover the outstanding loan and settlement costs. This can leave drivers needing to continue driving to repay the debt they took on to start work.
The Downpayment Is Part Of The Safeguard
Ultimately, the new restrictions make buying a PHV harder for those with limited savings. But if we cannot afford the downpayment, we should consider whether we can comfortably afford the car and its ongoing costs.
Allowing 100% financing lets those with insufficient upfront savings take on even more debt, ironically weakening the safeguard for the very people it was meant to protect. The income we expect to earn from a car should be part of our affordability assessment. It should not replace one.
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Photo Credit: iStock/Konstantin Aksenov
