When I last went I was considering renting a car in Mexico for sightseeing. I went to my insurance agent and was given a brochure about the driving requirements.
Here are some of the major bullet points:
How to Drive Legally in Mexico:
Possess a valid, current drivers license. Confirm that it is valid well within the date range of the trip and that it has no issues pending against it. Call the local Department of Motor Vehicles or similar state agency that regulates drivers licenses in the U.S.
Take the valid U.S. drivers license on the trip to Mexico, even if entering by plane. The Mexican government recognizes a U.S. drivers license as legal in Mexico, as long as the license is valid in the U.S.
Purchase appropriate car insurance for both a car entering Mexico or a rental car. U.S. auto insurance is not valid in Mexico. At the border and in large towns, there are several agencies available solely for tourists to purchase insurance. For rental cars, consider purchasing the insurance offered by the rental company. Some major credit cards will cover insurance in Mexico, but check individual policies prior to the trip.
Tips and Warnings:
Watch for “topes,” large speed bumps present in some areas that could cause damage to a vehicle’s undercarriage.
Due to wandering animals (yes, even in the cities), unmarked speed bumps and other factors, tourists in Mexico should drive only in the daylight hours.
Military checkpoints are present throughout Mexico. Don’t worry, these are focused on catching criminals, not tourists. Proceed slowly and do as you’re told.
And if you hit someone, make sure they are dead and keep going