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The best, and easiest, way to get around downtown Taos is on foot. If walking isn't fast enough for you, consider renting a bike. A number of bike shops in town offer bicycle rental for half- and full-day rentals. If you're into more than just tooling around town, you can also rent mountain bicycles for a more thrilling ride in the nearby hills. There is only one Taxi company in all of Taos county, and distances between some of the outlying areas can be expensive when paying for the Taxi.
Getting around town is also made easy by the presence of the Chile Line Town of Taos Transit. Two bus routes run southbound and northbound to destinations across the city, making a number of stops along the way. Bus service is available Monday to Saturday 7 a.m. to 7 p.m. and Sunday 8 a.m. to 5 p.m. during the summer. Buses run every half hour through the week and every hour on the hour on Sunday. Chili Line Service extends to Taos Ski Valley during ski season, so be sure to check that alternative if you're going up to the slopes.
Renting a car is the only way to go if you plan to travel beyond Taos' city limits (and given the scenery in the surrounding area, you should seriously consider getting your own wheels) -- do note, however, when driving within Taos' city limits, finding parking can sometimes be a problem, especially during the busy summer season. However, there is parking on the Taos Plaza, as well as in some nearby lots run by the town that are free and rarely full. To visit many of the attractions such as The Gorge Bridge, The Millicent Rogers Museum, Hacienda de los Martinez, Taos Ski Valley, Arroyo Seco, Wild Rivers Recreation Area, The Enchanted Circle, etc., a car is absolutely necessary. Also, many of the finest restaurants and accommodations in the Taos area are only accessible via car. To find out more about these areas look for them in Trip Advisor under the headings of Arroyo Hondo, El Prado, Arroyo Seco, Ranchos de Taos, and Taos Ski Valley.
Some rental car agencies in Albuquerque may try to upsell visitors to Taos on a 4-wheel drive vehicle. The only reason that anyone would absolutely require a 4-wheel drive in Taos is if they intend to leave the city limits to traverse steep, unpaved terrain. Otherwise, rental cars have no problems coming and going to town.
Taos and the immediate area can sometimes get heavy snow, but agressive snow removal programs by the State and the Town of Taos keep roads open during and immediately after all but the heaviest snows. State Highway 68 from Espanola into Taos, for example, is a major "lifeline" road that is kept open at great expense and effort at all times. The main State Highway 150 to Taos Ski Valley is likewise kept open for all but the briefest closures. The high pass between Taos and Angel Fire along U.S. 64 may be more problematic, so be sure to check road conditions with the State Transportation Authority. The pass between Tres Piedras and Tierra Amarilla along U.S. 64 west of Taos may be closed for extended periods during the winter, but there are easy work-arounds to avoid this road. Again, check with the previously mentioned website or you can call 511 from any phone in New Mexico or (800) 432-4269.
If you do need to rent a car in Taos, the Ford concession in town which rents out reasonably. Call Charley, 575-751-3200.