Driving is a great way to see Panama. The Panamerican Highway takes you to or near most towns in the country, and with a car you can also visit small villages and explore remote areas more easily. Most secondary roads are well signposted and in reasonable condition.
Panamanian drivers can be a little aggressive, but they're not much worse than New Yorkers or Angelenos. We recommend saving the car for outside Panama City: traffic jams, a dearth of road signs beyond major avenues, and lack of safe parking can make downtown driving stressful.
Gas stations are plentiful in and near towns in Panama, and along the Panamerican Highway. Some are open 24 hours. On long trips fill your tank whenever you can, as the next station could be a long way away. An attendant always pumps the gas and doesn't expect a tip, though a small one is always appreciated. Both cash and credit cards are usually accepted.
Most rental cars run on premium unleaded gas, which is generally a bit more expensive than in the United States. Gas is sold by the liter.
On-street parking generally isn't a good idea in Panama City. Instead, park in a guarded parking lot—most hotels have them. Many rental agencies insist you follow this rule. Restaurants often have free parking.
Compact cars like a Kia Pinto, Ford Fiesta, VW Fox, or Toyota Yaris start at around $35 a day; for $40–$50 you can rent a Mitsubishi Lancer, a VW Golf, or a Polo. Four-wheel-drive pickups start at $70 a day. International agencies sometimes have cheaper per-day rates, but locals undercut them on longer rentals. Stick shift is the norm in Panama, so check with the rental agency if you only drive an automatic.
Rental-car companies routinely accept driver's licenses from the United States, Canada, and most European countries. Most agencies require a major credit card for a deposit, and most require that you be over 25. Panamanian rental vehicles may not leave the country.
Avis. 800/633--3469; 507/278--9444; www.avis.com.pa.
Budget. 800/472–3325; 507/263–8777; www.budgetpanama.com.
Dollar. 866/700–9904; 507/270–0355; www.dollarpanama.com.
Hertz. 800/654–3001; 507/260–2111; www.hertz.com.
National. 800/654--3001; 507/275--7222; www.nationalpanama.com.
Thrifty. 800/334–1705; 507/204--9500; www.panamathrifty.com.
If you own a car, your personal auto insurance may cover a rental to some degree, though not all policies protect you abroad; always read your policy's fine print. If you don't have auto insurance, then seriously consider buying the collision- or loss-damage waiver (CDW or LDW) from the car-rental company, which eliminates your liability for damage to the car. Some credit cards offer CDW coverage, but it's usually supplemental to your own insurance and rarely covers SUVs, minivans, luxury models, and the like. If your coverage is secondary, you may still be liable for loss-of-use costs from the car-rental company. But no credit-card insurance is valid unless you use that card for all transactions, from reserving to paying the final bill. All companies exclude car rental in some countries, so be sure to find out about the destination to which you are traveling. It's sometimes cheaper to buy insurance as part of your general travel insurance policy.
Car-rental agencies in Panama require basic third-party liability insurance, and the fee is included in their cheapest quoted rental price. Optional insurance to cover occupants and the deductible if you are in an accident deemed your fault is about $20 extra per day for a compact car.
Panama has no private roadside assistance clubs—ask rental agencies carefully about what you should do if you break down. If you have an accident, you are legally obliged to stay by your vehicle until the police arrive, which could take awhile, depending on your location. You can also call the transport police or, if you're near Panama City, the tourist police.
National police. 911.
Tourist police. 507/511–9262; 911.
Transport police. 911.
The Panamerican Highway is paved along its entire length in Panama, and most secondary roads are paved, too. However, maintenance isn't always a regular process, so you may encounter worn, pockmarked surfaces if you stray from the main routes. Turnoffs are often sharp, and mountain roads can have hairpin bends.
In and around Panama City, traffic is heavy. An efficient toll highway ($5 one-way) connects the capital and the Caribbean port of Colón in an hour.
Turnoffs and distances are usually clearly signposted. Be especially watchful at traffic lights, as crossing on yellow (or even red) lights is common practice.
Rules of the Road
You cannot turn right on a red light. Seat belts are required. Cell phone use and texting while driving is prohibited. As you approach small towns, watch out for topes, the local name for speed bumps.