The only place I would prefer not to drive is Naples, but even Naples isn't too bad. Even then I just always follow the rule that right of way goes to the bold. I've never even had a fender bender. I have a scratched mirror from a really tight alley in Orvieto, a dinged fender from a sharp corner in Siena, and another minor nick from Bressanone, but that's it after well over three years.

Without a car, you barely scratch the surface of Italy. This is especially true in the Dolomites, South of Naples, Umbria, Sicily and Sardenia.  The more people you have, the more economical a car becomes.

The biggest issue with a car in most is cities is accidentally driving into a ZTL (unless your hotel is in the ZTL, then they'll give you directions).

But while not as controlled as Germany, Italy isn't bad to drive in at all - especially when you spot that small castle, or the little hill town, or a great spot to pull out at on the Mediterranean coast. You can only do that with a car.