IME owning a foreign plated car can be a serious hassle and getting it put on Spanish plate expensive (though apparently the charge is proportional to emissions, so a Prius might be much better off). Though there are plenty of companies offering insurance for UK cars resident in Spain, one of the operators I spoke to once let slip that in truth it wasn't that water tight - I suspect it might be even more dodgy for anyone with a non EU plated vehicle.
The authorities don't like people importing cars and over the years have put up various obstacles, some of which have been overturned by the european parliament, others which remain. In reality though that doesn't matter, because in practice the Guardia will apply whatever they believe to be the law and if they think you should have a certain piece of paperwork that you don't or that something is the law that isn't they will give you a fine, which would probably more hassle to dispute than pay.
On the other hand, a friend of mine has also been fined for driving a spanish plated car with a UK (EU) driving licence, even though it is not clear cut in the law that it should have been exchanged for a spanish one. You can't win!