Discover why more rental cars are being towed while on the road and how to protect yourself from getting stranded by choosing a reliable car rental in Singapore.

Introduction

Imagine driving along the PIE on the way to a meeting or a ride-hailing shift, when your rental car is suddenly flagged down or repossessed in a car park. For a growing number of drivers in Singapore, this nightmare has become real.

Recent coverage by outlets such as CNA and The Straits Times has highlighted a worrying trend: car rental companies shutting down and leaving customers stranded when their vehicles are towed mid-contract. Industry data from the Accounting and Corporate Regulatory Authority (ACRA) points to a sharp rise in car-leasing entities ceasing operations over the past year. Why is this happening, and how do you avoid becoming the next victim?

Why rental cars get towed: financial instability

The main reason for mid-journey towings is financial distress at the company level. Many car rental operators run on highly leveraged models — large loans to build fleets. When they cannot service those loans, creditors have the legal right to repossess the assets, which are the cars you are driving. In recent high-profile cases, hundreds of PHV rental drivers found themselves suddenly without a vehicle after their rental firm's creditor-protection application was dismissed.

If the company cannot pay the bank, the bank takes the car back — regardless of whether you have paid your daily or monthly rental fee.

Lapsed road tax and insurance: a legal risk

Beyond bank repossessions, another common cause is the rental company failing to keep the car legal. To drive in Singapore, a vehicle needs valid motor insurance and road tax.

Struggling firms may cut corners by not renewing these. According to the Land Transport Authority (LTA), driving without valid insurance is a serious offence. If you are stopped at a routine check and the rental car's road tax has lapsed, the vehicle can be seized and towed on the spot — leaving you stranded and potentially exposing you to a 12-month driving disqualification and heavy fines for driving uninsured.

The pressure of record-high COE prices

The upheaval is closely tied to the volatile Certificate of Entitlement (COE) market. When COE premiums for Category A and B hit historic highs, the cost of maintaining a fleet jumped. Operators that promised low-cost car rental in Singapore without the financial backing to absorb those price hikes eventually collapsed. Smaller or newer firms that mismanaged cash flow could not replace ageing cars or service their debt, leading to the closures seen today.

Beware of illegal private car rentals

Another factor is the rise of illegal rental schemes — operators renting out private cars not registered for hire. A legal rental vehicle must be properly registered with the LTA for rental use (a "MOTORCAR" hire registration).

If your P-Plate car rental or budget hire is secretly a private passenger car, you are not covered by commercial insurance. If the LTA detects this, the car is towed on the spot. Always check that the vehicle has the correct decals and is legally registered for rental use.

How to protect yourself when renting

Given the current instability, choosing a reliable, established partner for your monthly car rental or daily hire matters more than ever.

Check the company's track record. AKA Car Rental has operated since 2015 and served over 700 customers, with a physical presence and staff you can speak to — Ryan, Brandon, Yong and Rachel.
Verify road tax status. You can check a vehicle's road tax on the LTA OneMotoring website before you drive off.
Ask about the fleet. A healthy operator owns or stably finances a diverse fleet — SUVs, MPVs, sedans and hybrids — and keeps them maintained. See our fleet.
Avoid "too good to be true" deals. Extremely low rates from unknown firms often hide poor maintenance or looming financial trouble.
Confirm proper registration. Make sure the car is legally registered for rental use, not a private car on the side.

What happens if you rent from AKA

Our vehicles are properly registered, insured and road-taxed, and we have 24/7 roadside assistance available where applicable. If something goes wrong on the road, you call us — not a bank. That stability is the single biggest difference between an established operator and a shaky one.

Frequently asked questions

Can a bank repossess a rental car while I'm driving it? Yes — if the rental company defaults on its loans, the bank can repossess its assets regardless of your rental agreement. This is why the operator's financial health matters to you.

How do I check if a rental company is legit? Look for trading history, a physical office, proper vehicle registration (hire decals) and current road tax. You can verify road tax on LTA's OneMotoring site.

What if my rental car is towed for lapsed road tax? You could be stranded and may face fines for driving an uninsured or unroadworthy vehicle. A reputable operator keeps road tax and insurance current — at AKA this is part of standard fleet management.

Are very cheap car rentals safe? Not always. Prices well below the market often signal cut corners — lapsed insurance, ageing unmaintained cars, or financial distress. Compare total value, not just the headline rate.