Driving in a Foreign Country: 9 Questions and Answers

I’ve been running this Cheapest Destinations Blog since 2003 so you’d think I would have covered international car rental plenty of times, but I haven’t really written much about driving in a foreign country. If my memory is correct though, I’ve rented a car in at least 10 foreign countries, from Argentina to Canada, Greece to Jordan.

Each country has its own rules of the road, its own rental car rules, and its own insurance requirements. There are overlaps for sure, but in my experience, it’s never as straightforward or as quick as renting a car in the USA, the land of efficiency and quick inventory turns.

Here are some aspects to be aware of if you’re going to drive in another country, whether that’s your car, someone else’s car, or a rental vehicle.

Do I need an international driver’s license?

This question comes up a lot in regards to driving in a foreign country and the answer is not always clear. Sometimes there’s nothing stated on the rental car sites that you need one, but then you show up and they ask for it. Other times it’s listed but then they don’t ask to see it. The other side of this is what happens if you get pulled over by police in a foreign country?

It’s better to be safe than sorry since this isn’t a major expense and if you obtain an international driver’s permit, you’ll be prepared just in case. Think of it like travel insurance: maybe you won’t need to take advantage of it, but it’s good to have if the need comes up.

If you’re American, you can obtain one at a AAA office but it’s only good for one year and it doesn’t exactly look official. If you follow that link above, you can get one that’s good for three years and there’s a version that goes on your phone as well so you always have it with you.

Will my auto insurance cover me in another country?

If you live in the USA, it’s unlikely that you’re driving in a foreign country with your own car anywhere besides Canada or Mexico. So let’s start with Canada, the easy one. I’ll quote directly from the Progressive Insurance site since they’re one of the most popular companies out there.

If you are traveling to Canada by car, whether in your vehicle or a rental car, your U.S. insurance will usually protect you with the same coverages and limits that you have at home. Car insurance in Canada for visitors from the U.S. is governed by reciprocal laws between the two countries.

For Mexico, unfortunately, it’s more complicated. If you’re staying within 15 kilometers of the border, no problem, so you could drive into Tijuana and back with your California-plated car, or El Paso to Ciudad Juarez if you’re feeling adventurous. Once you go further inland, however, you need to stop by an office and get registered, obtain a permit, and show or buy Mexican insurance. This is true if you come in with a motorcycle, car, truck, or recreational vehicle.

There are countless articles and message board discussions about this since the exact requirements can change by length of visit, size of vehicle, and residency status, so go to a trustworthy source to get the updated scoop. Here’s an article on it from one of the longest-established Mexico resource sites out there, Mexperience.

If you’re renting a car in another country, that’s a whole other can of worms. In most cases, either your regular auto insurance, your credit card, or both will cover the collision damage part of the rental car risk. Not all policies and all credit cards are the same, however, so take some time to read the fine print. There are also some countries that are excluded from this coverage, such as Israel and Jamaica. 

Some travel insurance will cover this too, though again you need to read carefully to be sure of what your policy covers and what it doesn’t. For my annual Allianz plan, for example, it says the following:

Covers costs if a car you’re renting is stolen or is damaged in an accident or while it’s left unattended (not available to residents of KS, TX, NY and WA). Benefit is for all insured, per trip, up to $45,000.

Note the exclusions there: if you’re from one of those four states you won’t be able to rely on your travel insurance, apparently. You should also be aware that travel insurance will not cover any damage to a vehicle you are shipping if the damage occurs while the car is being shipped, regardless of origin and destination.

I also have a “non-owners policy” from GEICO that covers liability for me in the USA. It does not automatically cover that abroad though, including in Mexico. When I’m renting in Mexico, I need to either buy the daily liability insurance or rent from a company that includes it in the rates.

Do I need proof of insurance to rent a car?

Even if the agent doesn’t ask for it, you should have a copy of your auto insurance policy and credit card coverage information with you in case. You might need it to counter the (usually false) claims by the rental agent that you’re not covered in their country. See the next section for more on that.

Although it’s rare, some agencies do ask for proof of insurance if you decline theirs and they’ll either make physical copies or make you e-mail it to them. I ran into this once in the USA even, with Ace Rental Car. 

Plus of course you’ll need your insurance info if you get into any kind of accident.

Do I need all that extra insurance the rental car salesperson is pushing on me?

In order to understand why rental car companies are so aggressive about pushing their own insurance on you, it’s important to understand how their business works. Just as airlines make most of their profits from gouging you with extra fees, rental car companies make exponentially more profit from pushing unnecessary insurance than they do from the rental fees. The clerk’s income is often structured in a way that they are incentivized by how many insurance policies he or she sells in a given week, especially in busy tourist area offices.

Ask anyone who has worked for a rental car company about how the business works and they’ll tell you that it’s all about resales of the vehicles and duping people into buying extra insurance. The actual rental fees just keep the lights on.

That’s why you sometimes see rental cars going for $5 or $6 per day. They’re just trying to get you in the door with the hopes of selling you a more profitable product: insurance.

Now in some cases, you really do need part of it. Liability insurance is required in many countries and it’s an add-on, not included in the rates. So even if you’re insured to the hilt in your own country and through your credit cards, you still need to purchase this. Do some research ahead of time for where you’re headed and see if you can’t get a deal where it’s automatically included in the rates.

Also, some credit cards offer primary rental car insurance, which means you go straight to them, while others offer secondary insurance, meaning you need to contact your auto policy company first. If they don’t cover it, then the credit card company comes next. Sometimes this secondary insurance will cover whatever deductible was charged by the primary one. 

At other times, the full package of insurance from the car hire company is less than $20 a day, so it can be worth it to just have the peace of mind that any and every scenario where something could go wrong is covered, from lost hubcaps to someone breaking a window and stealing something.

How high of a credit limit do I need on the credit card I’ll be using?

Rental car companies may put a hold on your credit card for a portion of the value of the car and it’s hard to know in advance what that number is going to be. If you buy their insurance, it will be low. If you refuse their insurance, they may put a hold of $4K or $5K on your credit card with the argument that they are taking more risk—whether this is actually true or not. (Remember, you’re probably covered several times over for any damages.)

For obvious reasons, you don’t want to reserve a rental car with a credit card that only has $400 of credit left on it. Ideally, you will use a high-limit credit card with plenty of capacity remaining.

What happens if the car gets damaged?

You’re screwed!

No, just kidding. But you will be on the hook somehow if the car has damage. In Mexico, a tiny little ding that a U.S. agency wouldn’t even glance at will be treated like the end of the world. This is why you need to pay close attention to the damages they mark down when you pick up the vehicle and you need to take your own photo and/or videos.

If there is real damage, you’ll need to go through the appropriate insurance agency. If it’s a credit card company, you may have to pay for the damages on the card and then they’ll reimburse you. I was able to do this online with my Hilton Amex Surpass card when a busted taillight got charged €430 in Greece and I got reimbursed within a month. You may have to spend some time on the phone though.

If you bought insurance through the agency, this is when you’ll be glad about that. In most cases, they’ll take care of it and you can walk away.

Is renting a car overseas expensive?

The price of a rental car in any given location depends on a variety of factors such as normal supply and demand, how expensive cars are to buy in that country, and the regulatory environment. We actually have it pretty good in the USA when there’s not some kind of supply chain issue, so you’ll likely pay as much or more to rent a car abroad.

There are plenty of exceptions though and I’ve gotten some great bargains in Mexico, Greece, and elsewhere by shopping around. Just remember that most countries pay far more for fuel than we do so they tend to favor smaller cars and manual transmissions. If you can’t drive a stick shift, you’re probably going to pay more—if you can even find an automatic available.

Start with Kayak, AirportRentalCars, or whichever site you usually use and then do some more shopping around as well. Sometimes the independent agencies not listed on those aggregator sites have better deals available. It wouldn’t be hard to do better than these one-day prices in Quebec City from Hertz:

Or you can just look around after you arrive if you have time before you’re going to rent. Agencies not located at the airport can be cheaper since they don’t have to pay the extra fees to be on site there.

Can I drive to a different country in a rental car from a neighboring one?

Most rental car companies don’t want you driving to a different country than the one you picked a car up in, though in regions of Europe with open borders, the rules are more fluid. Always ask before you rent if this is going to be a possibility. This is not a case where it’s better to ask for forgiveness instead of asking for permission!

The only time I’ve done this myself was when I drove from Chetumal in Mexico into Belize for about 10 days. It was a major production and naturally there was an insurance scam in the mix. Europcar in Chetumal, which I think has a monopoly on cross-border rentals there, makes you buy “special insurance” from them for Belize or they won’t rent you the car. It’s a total scam though because when you get to Belize, you then need to buy Belize car insurance and they share the fact that Mexican insurance isn’t recognized in their country. Sigh…

What happens if I get a traffic ticket while driving in a foreign country?

This is another case where the rules are going to vary a lot depending on where you are. The more rampant corruption is in that country, the more chance that you’ll be able to pay some money on the spot and the problem will magically go away.

If you didn’t do anything wrong and the cop is just looking for a way to extort money, as happened to me in Nayarit, Mexico, fighting over the principle of the ticket can end up costing more in time and money. I have driven in 12 states in Mexico with no problem, but in Nayarit the cops must be better paid than the judges: last time the bribe ended up running up to 500 pesos. In Mexico they take your driver’s license and don’t give it back until you show up in person and pay the fine, so it’s worth coughing up some cash.

In other countries you may get a notice about a court appearance long after you’ll be gone, so you have to figure out how to settle up before that.

In general, life will be more pleasant if you stay under the speed limit, don’t run any red lights, and drive conservatively instead of aggressively while visiting another country.

In some countries, the amount of the fine depends on how badly you’ve broken the law and how rich you are. A foreign driver in Switzerland once got fined the equivalent of $290,000 for going 180 mph in his Mercedes.

One last note: in Europe and former British Empire countries, you’ll often see “car hire” instead of “car rental.” We only hire people in American English, but in British English you can hire an inanimate object.

Have you rented a car in a foreign country and gotten a surprise of some kind? or had a strange experience driving in a foreign country? Tell us a story in the comments!