The Land Transport Authority (LTA) cited the scarcity of land and public transport upgrades as reasons for the cap.
The country already has strict policies aimed at limiting the number of cars on its roads.
However, Singapore counted more than 600,000 private and rental cars last year.
That number includes cars used by ride-hailing services such as Uber and Grab.
The country limits the number of vehicles on its roads through a growth cap, and with a system of bidding for the right to own and use a vehicle for a limited number of years, known as a Certificate of Entitlement.
As a result, a mid-range car in Singapore typically costs four times as much as it would in the United States.
The new growth cap is slightly lower than the existing 0.25% limit, which has been in place since 2014.
It applies to private cars and motorcycles, but not to goods vehicles and buses.
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