I was in Garmisch in July. We did rent a car (we rented it the Vienna Airport) and we didn't have any major issues at all. We drove from Vienna to Munich and then made our way through the Bavarian Alps region and down to Innsbruck. The mountain roads were really fun (and so was the autobahn)!
Beautiful!! Beautiful! It was like visiting a fairytale...breathtaking landscapes wherever we turned...and teh food and people were wonderful!
You'll love it!!
Also, we didn't speak much German at all. I did try...but I was relying solely on my guidebook. In the smaller towns, the servers and shopkeepers did not speak much English...but there were a few that had English menus...or we would just point. It all worked out fine!
By the way....we found "Mezzo Mix" soda---just like at Epcot! My friend with whom I was traveling didn't quite understand why I was so obsessed with it...but it was a fun little connection.
Also, I had an amusing time at an internet cafe trying to use the German keyboard to touch type my e-mail. It made it fun for the recipients!!