Learn Icelandic: Það er bíll.

Það is the neuter singular pronoun for "it". In Icelandic, when you are simply introducing or pointing something out with "It is a...", you always use það as a default starting word, regardless of the object you are pointing at.

Which pronouns use the verb form er?

er is the present tense form for "is" used with all third-person singular pronouns: hann (he), hún (she), and það (it). It is also the word for "am" when used with ég (I)!

Where is the word for "a" in this sentence?

Icelandic does not have a word for "a" or "an". The noun bíll stands completely on its own, so it means "a car" just by itself.

How would I change this into a question to ask "Is it a car?"?

You simply swap the pronoun and the verb. Putting the verb at the very beginning turns the statement into a question: Er það bíll?