You don’t need one, but it changes what the holiday feels like. If you’re staying in a resort and your main goals are pool, beach, and maybe one organised trip to Teide or a boat tour, public buses and excursions are enough. You’ll barely notice not having a car.
If you’re curious about little villages, viewpoints, or you’ve spotted some hike that starts “just beyond this small town,” a car suddenly makes life much easier. Road quality is decent, but the mountain routes demand confident driving and a bit of patience with hairpin bends.
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If the idea of that makes you tense, stick with buses and tours and you’ll still have a good trip.