The current study aimed to examine participants' localization ability in a simulated road traffic environment using subjective and objective methods. The study involved 40 participants between 40 and 60 years old, divided into a control group with normal hearing sensitivity, and a clinical group with varying degrees of hearing loss. The clinical group was further divided into three subgroups, each consisting of ten participants. Participants were fitted with digital hearing aids and exposed to simulated road traffic noise to assess localization errors and functional index. Aided speech in noise tests and audiograms were also assessed. The study found that hearing loss increases localization error and reduces localization functional index scores (LFI) and aided speech identification scores (SIS). The noise level also affects localization error. LFI and error are correlated with audiological findings. A regression model predicts error and LFI from audiological findings. Aided thresholds were within the speech spectrum regardless of hearing loss severity. The findings of the study suggest that a localization test should be included in the protocol for assessing hearing fitness for driving licenses, rather than relying solely on an aided audiogram. However, the eligibility criteria for issuing a certificate of hearing fitness for applying for a driving license is yet to be decided in the upcoming study.