I did a trip to Portugal, Gibraltar and Spain last year. We spent the first few days in Lisbon, so I didn't bother with a car. The transportation system was easy. You can get passes that work for trains, buses, trolleys, even the funiculars and elevators.
On the third day, I got a car and headed south.
Renting.a car is really cheap if you aren't looking for something fancy. I had a Corsa, which is about the size of a Toyota Yaris. I bought a "via verde" pass, which is the Portugese version of EZ pass. Once I got to Spain, I had to pay some tolls, others were charged when I turned the car in. The highways are not crowded at all, as the tolls are sort of high, so locals avoid them. The most important thing to remember is that you do't doodle in the left lane like people do in the states. People drive Autobahn-style, so expect to get passed by BMWs, Audis, etc doing much more than the speed limit.
Driving in Seville is a nightmare. It wasn't made for cars, so the streets are really rough, and narrow. Parking for hotels is generally underground, and finding the entrances can be a pain. Once I parked, I stayed parked.
I'm going to Barcelona next year. I plan on doing something similar to what I did in Portugal; spending a few days in Barcelona without a car, then getting one on the third day and heading 6 hours south. Then I plan on driving up the coast, spending a couple nights ni Valencia, Cartegena, Alicante, and Tortosa, ending back in Barcelona. I'll have the car for 10 days are a cost of about $130. Again, getting a tiny car, but when you're paying 10$ a gallon, a car that gets 50+ MPG is a good idea.
If you do plan on driving, spend some time researching the rules of the road. For instance, if there is a white line down the middle, you can't turn left. If you need to turn left, you driving until you can turn around, and then go back. If you stop along side of the road and get out, you have to wear a bright yellow vest, which is provided. It's also not a bad idea to spend $20 and get an international driving permit form AAA.
Also, research scams. I've read that some sleazy care rental places are in cahoots with robbers. They will rent you a can with a slow leak, and you will be followed by people who will "help" you when the tire runs flat. Then they want a bunch of money. You also need to be careful what you leave in the car, as break-ins are common.
But a car is definitely the way to go. Much quicker than buses, and who wants to spend their vacation in a bus?