Spain and Portugal

Yes, a drop off fee is usually very expensive. But it may be worthwhile for you to continue on to southern Spain after the Algarve to drop off the car. It's less than 300 km from Lagos to Sevilla, 3-4 hours drive. Yes, you can rent a car in Spain and drive through Portugal. However, you will probably want to you the toll roads and not having a toll reader (only available for cars rented in Portugal) will slow you down.

I don't know the connections from Santiago to Porto. From there you can get to Aveiro by train, to go from there to Tomar, you'd probably have to return to Porto and change trains or take a very slow regional train. Check train schedules here. Tomar is not on the AP (fast) train line nor is Lagos, but Faro is. Coimbra is a good place to see on the AP train line between Porto and Lisbon. I think you would want a car to visit the sights around Tomar and the Algarve, though.

Hiring a car in Spain and leaving it in Portugal will incur a hefty one way drop penalty. Try doing a dummy booking on something like holidayautos.com. I have just tried this for a random week in June and the difference is £120 vs £550 for the same car. You can usually hire a car in Spain and drive it into Portugal or vice versa, but some companies charge an additional daily fee for this coverage.

Look at rome2rio.com for route options. I would look to take the train or bus from Santiago to Porto then hire a car for the Portuguese element. Where abouts in the Algarve do you want to visit? End of June is peak season, so you will need to book accommodation soon, as many places will get booked up.

I like Tavira, which retains some character, unlike most of the Algarve. I also like the beaches at the western end - Furnas, Figueira, Zavial and at Carrapateira. Further north, the cliffs and beaches are great at Zambujeira.

Public transport isn’t great on the Algarve, so you really need a car to explore.

Thanks

I never been in Algarve so I really like nice beches and small towns and visit diferents towns aroun the area

I like to have beach near by, dont want to catch ferry to go to the beach

If you can recommend

thanks

Dont give up on the idea of renting a car in Spain and dropping it in Portugal. Rental cars are generally cheaper in Spain than Portugal so we found that even with a 300 euro drop fee on a 3 week rental it was still cheaper than renting the car in Portugal and dropping it in Portugal.
Try Gamut Travel in Oregon. Ask for Andy. He will find you the best rate. They specialise in European car rental

Sorry, I would never go to Europe to go to the beach (if you are from North America).
The beaches in Florida or especially the Caribbean are nicer.

If you are going to travel the length of Portugal, you need to use the toll roads and therefore it is easiest to hire a car in Portugal that will have a toll transponder. Paying for toll roads without a transponder is hassle that you don’t need when on holiday.

There are many good beaches between Porto and Lisbon, so you don’t need to travel as far south as the Algarve. The sea is cold even on the Algarve, as it’s the Atlantic not the Med.

There are few places on the Algarve with much character, as most places are purpose built or have been ruined by over development.

I have never found car hire to be expensive in Portugal, compared to many parts of Europe.

I recall from a trip 2 years ago that Portugal has a website that you can register your vehicle license number and link it to a pre-paid account (via Visa card) that you can use for their automated toll system. There are way of estimating the tolls you will encounter on your route, and you just prepay a bit more than you need to be on the safe side. It took me a bit to get it figured out, and I recall going to the Post Office for help. Still, it worked well and no fines for non-payment!