Loosely picking up where Herbie Goes to Monte Carlo (1977) left off, protagonist Pete Stancheck (Stephan W. Burns) has inherited Herbie from his uncle Jim Douglas and travels to Puerto Vallarta, Mexico with his friend Davy “D.J.” Johns (Charles Martin Smith) to retrieve the car. There, they befriend Paco (Joaquin Garay III), a comically mischievous, orphaned pickpocket.
Pete and D.J. board the Sun Princess, a cruise ship, to Rio de Janeiro to enter Herbie in the Brazil Grand Prêmio, while Paco follows hidden in Herbie’s cargo compartment. En route they meet an anthropology student named Melissa (Elyssa Davalos) and her extravagant, eccentric aunt Louise (Cloris Leachman), who is trying to find a husband for her niece. When Herbie wreaks havoc on board, Pete pretends to court Melissa, intending that her Aunt Louise will sponsor their race.
Meanwhile, Herbie helps Paco, who has dubbed the car ‘Ocho’, escape captivity. When the ship’s Captain Blythe (Harvey Korman) has his costume party wrecked by the boy and car, he has Herbie dropped into the sea. However, later on land, a rusty Herbie resurfaces from the water to reunite with Paco, who then goes into business with Herbie as a taxi.
Thereafter follow three villains (John Vernon, Alex Rocco, and Richard Jaeckel) seeking to capture an antique gold disc, and to find Paco as earlier he had pickpocketed their wallets which contained important film by threatening to use an acetylene torch to cut up Herbie; Herbie’s matador part in a bullfight; romance between Aunt Louise and Captain Blythe; and bananas initially used to conceal Herbie among farm vehicles traveling to market and later used by Herbie and Paco to stop the villains escaping justice by having them trip over bananas and Herbie wrecking their airplane to prevent them from getting away. The villains are captured by the police, and the protagonists re-unite on the Sun Princess. Pete and Davy resume their plans to enter Herbie in the Brazil Grand Prêmio with Paco dressed as the driver (Pete concedes that Paco and Herbie have a better connection than Pete would have if he drove Herbie in the race). Davy finally asks Paco why he keeps referring to Herbie as “Ocho”, since that is Spanish for eight. Paco looks at Herbie’s “53” and remarks that 5+3=8. After that Pete, Davy, Aunt Louise, and Melissa have a toast hoping for Herbie to win the race with Paco giving Herbie a thumbs up.