Jim Douglas has pulled his famouse racing car off the track - where is he now? teaching a driving school- with major help from Herbie! Herbie and Jim Get involved in stopping a bank robbery and rescuing the beautiful teller Susan from her hostage situation - as gratitude she signs her daughter up for driving lessons. Jim falls head over heals for Susan only to find out she is temporarily engaged to a Mr. Randy Bigelow.

Susan leaves Bigelow at the alter only to land Jim into a hostile situation as Randy Bigelow decides Jim needs to be eliminated from the picture - his first idea is to get the bank to loan Jim money to save his driving school- his plan: force him out of buisness.

Jim and Susan plan to tie the knot- he assures her that his racing days are over - but after another race car driver taunts him into doing one more race- susan has second thoughts!

Jim and Susan decide they need a bigger family car.To test drive one they need collateral - Herbie is it, they leave him at the car lot while they take the new one for a spin. Herbie has a temper tantrum and destroys all the cars in the lot.Jim unable to pay for the damages, reluctantly has to leave Herbie inpounded until he can raise the cash. In the meantime thieves try to steal Herbie.