Renting a car in Panama

The insurance surprise

Third-party liability insurance is mandatory in Panama and is usually sold at the rental counter. Many online quotes don't include it, so the price you pay at pickup can be several times the daily rate you booked. When you compare companies, compare the total with liability insurance included.

• Liability insurance covers damage or injury you cause to others. It's required by law, and most companies won't let you replace it with credit card coverage.
• Collision damage cover for the rental car itself is where your credit card may help. Ask your card issuer for a letter confirming the cover applies in Panama and bring it with you. Expect a larger hold on your card if you decline the company's own cover.
• Read what's excluded. Tires, glass and the underside of the car are often excluded unless you buy extra cover.

What you need to rent

• A valid driver's licence from home. Visitors can drive on it for up to 90 days; residents need a Panamanian licence.
• Your passport, with the entry stamp you received on arrival.
• A credit card in the driver's name. Most companies won't accept debit or prepaid cards for the security deposit, and holds can run from a few hundred dollars to several thousand.
• Age. The minimum is usually 21, with a young-driver surcharge under 25 and some car classes limited to drivers over 25.

You can't take a Panamanian rental car across the border into Costa Rica.

Where to pick up

Panama City traffic is heavy and the road layout is confusing for newcomers, so if you're spending your first days in the city, use taxis or ride-hailing there and collect the car when you leave. If you're heading straight west to the beaches or the highlands, picking up at Tocumen airport avoids crossing the city twice. One-way rentals, such as collecting in Panama City and returning in David, are often possible but may carry a fee.

At pickup, photograph or film every side of the car, the interior, the fuel gauge and the odometer, and make sure existing damage is marked on the form.

Tolls and the Panapass

The main toll expressways in and around Panama City, the Corredor Sur and Corredor Norte, take payment only by Panapass, an electronic windshield sticker. Most rental cars already have one, and the company will offer a daily toll package or charge you per use. Outside the city, the main highways to the Pacific beaches, Chiriquí and the Azuero Peninsula are toll-free.

On the road

• Police checkpoints are common, especially on the Pan-American Highway. Slow down, be polite and have your passport, licence and the rental papers ready.
• Drive in daylight. It gets dark around 6:30 pm all year, and rural roads are often unlit, with potholes, pedestrians, animals and slow trucks.
• Speed limits change often, sometimes with little warning, and speed checks are common. Fines are paid at a transit authority office, not to the officer.
• Use Waze or Google Maps. Waze is widely used in Panama and flags police and hazards reported by other drivers.
• Don't drink and drive at all, keep your phone out of your hand, and wear your seat belt.
• Fuel up before long stretches in the interior, where stations can be far apart.
• Leave nothing visible in a parked car.

Do you need a 4x4?

Not for the main towns. The roads to Coronado, El Valle, Boquete and Pedasí are paved. A car with higher clearance helps if you plan to look at land, beaches or farms down dirt roads, especially in the rainy season. For Bocas del Toro you don't need a car on the islands at all: you can leave it on the mainland or, more simply, fly.

If something goes wrong

In an accident, don't move the car unless it's dangerous to leave it. Call the police and the rental company's emergency number, wait for the police report (it can take a while), and take your own photos. The insurance claim usually depends on that report.

Common questions

Can I drive in Panama with a Canadian or US licence?

Yes. Visitors can drive on a valid foreign licence for up to 90 days. Carry your passport with your entry stamp as well, because police checkpoints are common. Residents need a Panamanian licence.

Why is renting a car in Panama more expensive than the online quote?

Third-party liability insurance is mandatory in Panama and is often sold at the rental counter rather than included in online quotes. Compare total prices with liability insurance included.

Does my credit card's rental insurance work in Panama?

It may cover damage to the rental car, but it usually can't replace Panama's mandatory liability insurance. Get a letter from your card issuer confirming cover in Panama and expect a larger security hold if you decline the rental company's damage cover.