In this report, a hybrid observer is proposed as a method of estimating position and velocity of a vehicle when the primary output is a series of discrete magnetic markers placed along a roadway. For the preliminary studies, the vehicle was modeled as a pure inertial system with acceleration input. Two methods of determining the time "tk" at which the "k-th" marker is passed are discussed, and simulations using both methods are shown. Compensation for errors arising due to inaccurate measurement of this time is proposed and validated. A Proportional- Integral-Derivative (PID) controller acting on error signals from the hybrid observer is also developed and simulated. An "optimal" trajectory for marker advance/fallback and velocity change commands is calculated and verified in simulation, and its effects on the PID controller are discussed.