A Complete Guide to Renting a Car in Iceland: 13 Tips for a Smooth Trip

Hello from the land of fire and ice! If you’re planning a trip to Iceland, renting a car is the best way to explore its surreal landscapes at your own pace.

In this blog post, we’ll take you through every step of renting a car in Iceland, so you can have the easiest possible rental experience. We’ll go over the various aspects that affect your choice to hire a car, reliable rental car agencies and where to make your reservation, different kinds of cars, necessary paperwork, and some crucial advice.

So get ready to hit the road, discover Iceland’s mysteries, and have an adventure you’ve always dreamt of.

1. Why is renting a car the best way to explore Iceland?

Public transport in Iceland is almost nonexistent. There are some buses that go around the Ring Road, but they will only take you to the towns and not to all the amazing places you’d like to visit in Iceland. And tours can be pricey and restrictive.

Unless you stick to exploring only Reykjavik, you will need a vehicle to get around Iceland, be it a car or camper van.

It’ll give you the utmost flexibility to go wherever you like, whenever you like!

2. Understanding the road conditions in Iceland

It can be challenging to drive in Iceland’s unique terrain and weather conditions, especially if you are not familiar with the local conditions. Here are some things you should know about the roads in Iceland:

• The Ring Road is the main highway that circles the entire country. It’s well-maintained and suitable for all types of vehicles, including regular hatchbacks and sedans.
• Gravel roads are common in rural areas. You can drive on these roads with a regular hatchback or sedan. However, it is important to exercise caution. Reduce your speed, maintain a safe distance from other vehicles, and be prepared for loose gravel and potholes.
• F-roads are rough mountain roads that require a 4×4 vehicle. These roads are only open during the summer months. If you drive here with a regular 2-wheel drive, then not only will it be dangerous, but you may also be fined, and your car insurance will go to waste.

Check out the complete list of F-roads here.

3. Which side of the road to drive on?

Like most of the world, in Iceland, you drive on the right side of the road and overtake on the left. If you’ve never driven on the other side of the road and are wondering if it’ll be difficult, then the answer is that it depends on you. For us, it was not that difficult. It took a few hours to orient ourselves, and we had to put in a conscious effort to stay on the right side of the road. But after that, it was okay.

4. Important factors to consider before renting a car in Iceland

Before you get down to renting a car in Iceland, there are a few important factors to consider.

• Season: Iceland experiences extreme weather conditions, especially during the winter months. If you’re planning a trip during this time, it’s crucial to choose a vehicle that is suitable for driving in snowy and icy conditions. Opting for a 4×4 or a car equipped with studded tyres is essential for traction and stability to navigate the challenging conditions.
  
• Budget: Depending on the season and duration of the trip, the price of rental cars in Iceland changes significantly. More on this below. Cars will be pricier during the summer months and will not cost as much at other times of the year.
  
• Size of the vehicle: If you’re travelling solo or with a partner, a compact car will be sufficient. However, if you’re travelling with a group or carrying a lot of luggage, you may want to consider renting a larger car or even a camper van.
  
• Fuel: You can rent petrol, diesel, or electric cars depending on your choice and on their availability.
  
• Plan your route: Planning your route beforehand is essential to understanding what kind of car will suit you best. For example, will you need a 2-wheel drive or a 4-wheel drive?

5. Choose the right kind of car

• Manual vs. Automatic: Most cars in Iceland are manual, and automatic cars cost a bit more (but they’re so worth it, especially if you’re from a country that drives on the left side of the road).

• 2 Wheel Drive vs. 4 Wheel Drive: If you plan to stick to the paved roads and popular tourist attractions (aka Ring Road), a regular sedan or a compact car should suffice. These vehicles are generally more affordable and fuel-efficient.
  However, if you’re planning to venture off the paved roads to the f-roads or explore the remote highlands, you’ll need a more rugged vehicle, like a 4×4 equipped with better ground clearance, larger tyres, and increased stability, allowing you to tackle the challenging terrain with ease.

Note: Driving off-road is strictly prohibited in Iceland, and if caught, you’ll get a heavy fine. So, stick to paved roads with a 2-wheel drive and designated F-roads if you plan to explore the Highlands on a 4-wheel drive.

6. Should you choose a car or a camper van for your Iceland road trip?

A car and campervans are the most popular vehicles to rent, and hence the burning question is always: which one to rent? This will depend on the type of person you are, your budget, and your needs.

Here’s a quick comparison between the two:

	Camper Van	Car
Comfort	Not so comfortable as they do not have good heating, a toilet, a shower, or a kitchen inside the vehicle	Very comfortable if you’re staying at AirBnBs and hotels
Flexibilty	Very flexible, as there are campsites all over the country. Campsites work on first come basis. No pre-booking is required!	Not flexible and accommodation needs to be pre-booked
Cost	Cheaper as your vehicle doubles as accommodation	More expensive (unless you stay in tents at campsites)
Ease of driving	More difficult as the vehicle is large	Easier
Seasons	Camping outside of the summer months can be harsh and a lot of campsites close down	Can be used all year round

What did we do, and why?

We chose to rent a car for our summer road trip in Iceland for a variety of reasons. The main point was:

Comfort! A warm bed, kitchen, shower, and toilet in an enclosed space can be so essential. You’ll have so much more comfort than staying in a camper van. The weather in Iceland, even in the summer, can be harsh. It is such an advantage to have a warm space to come back to at night.

The heating is better than in a vehicle; you don’t have to go to the toilet at night in the rain; you have hot water to shower with at any point in time; your entire space will not get wet when you step out in the rain and get back; nor will you get cold; and you can cook whether it is raining or windy outside.

So what should you do?

Choose a camper van if you’re used to camping a lot and are okay with the discomfort, love the flexibility, and can’t be bothered with booking hotels, or if budget is a constraint but you don’t want to pitch a tent.

You can also choose to go with a motorhome if you’d like to camp, but with all the comfort possible. These vehicles have a kitchen and toilet/shower inside the vehicle. This takes away most of the discomfort associated with camping, but it’s also more expensive and obviously more difficult to drive and park.

Choose a car if comfort is important to you or if you’d like to save big by pitching tents at campsites.

Tip: It is best to book an accommodation with a kitchen outside of Reykjavik. Food in Iceland is expensive, and restaurants are often hard to come by in remote areas. Therefore, it is best to book a hostel, farmstay, or apartment with a kitchen as opposed to a hotel unless you’re on a luxury vacation.

7. Rent a car in Iceland from a trustworthy local company

Choosing the right rental car company is extremely necessary for an Iceland road trip, as it can make or break your trip. A lot of Icelandic car rental companies are not good. They often rent out more cars than they have, do not have well-maintained cars, and charge you a lot when they find even a bit of damage on the car while returning it.

The best way to avoid this is to read a lot of reviews, compare prices, and check the rental company’s terms and conditions before finalising your car. Look for companies that have positive customer feedback, transparent pricing, and good customer service.

Also, it is best to rent a car from a local company. International companies like Hertz and Avis do not understand Icelandic conditions like local companies do and may charge you for little scratches and bumps that you’re bound to get on a road trip in Iceland.

Well-rated local rental car companies: Lotus Car Rental, Blue Car Rental, Go Car rental

Local rental car companies to avoid:

1. Fair Car, Nordic Car Rental, City Car Rental, Iceland Car Rentals, Wheego, Right Cars: We rented a car from Faircar because it was the most inexpensive for our dates. We didn’t see many reviews online, so we thought it’d be okay. It turns out that all the above companies are the same, and some of these have horrid ratings. We had to wait for our car for 4 hours, and they weren’t even helpful or apologetic about the delay. Their car was in a bad state as well.
2. Ice Car Rental: Company that charged my friend exhorbitant prices for a tiny scratch

Compare rental car companies and prices from trusted car companies below!

8. Insurance for your rental car

Get full insurance for your rental car.

Iceland’s conditions are unique, and a lot can happen to your car. Things you would not have thought possible.

Our car got a bit of a dent because the person who parked beside us didn’t anticipate the wind speed while getting out of the car. They might have hit our car with their door in the process. We were not charged for it by the rental car company, but anything is possible.

Not to mention that because of the barren landscape and high wind speed, it’s easy for small rocks to come flying at your car and damage parts of the outside body, the windscreen, mirrors, etc.

If you have rental car insurance from your credit card company, then do confirm what all they cover!

Consider purchasing insurance that especially includes gravel protection, sand protection, and ash protection if not already included in your insurance

Our friend was charged a very high fee while returning his car because the car company said their was gravel damage. He did not have gravel protection and said he paid around 1/3 of their trip cost for just a small dent.

9. What do I need in order to hire a car in Iceland?

1. A valid driver’s licence: An international driving permit is not required if your licence is in English. Licences in another European language that uses the Latin alphabet are generally accepted in Iceland, but do check with the rental car company. If a translated copy of the licence in English cannot be provided, then you need an international driving permit in addition to your licence.
   Get your International Driver’s Permit here. It takes only 8 minutes to apply and get a soft copy, and about a week or two for a physical copy.
   
2. A credit card: a credit card in the driver’s name for the car rental deposit. Most rental companies require a credit card for the security deposit, and debit cards or cash deposits are generally not accepted. However, there are companies that do not take deposits at all, but do check this before finalising your car.
   
3. Meet the age criteria: You must also be at least 20 years old to rent a car in Iceland, although some companies may require you to be 23 or older. Also, to rent a 4-wheel drive, you need to be over 23 years old. Drivers under the age of 25 may face additional fees or restrictions, so make sure you check the rental company’s policy before making a reservation.

10. Which airport or city should I rent the car from in Iceland?

If you’ve already planned your route or booked your flights, then you would know that the international airport in Iceland is at Keflavik and not Reykjavik.

I would suggest renting a car in Iceland from Keflavik Airport itself unless you are planning to spend a few days in Reykjavik, in which case you can rent your car on the day you’re planning to drive around the Ring Road.

11. Book your vehicle in advance

Iceland is a popular tourist destination, especially during the summer months from June to August. Book your rental car well in advance to ensure availability and better rates. The sooner, the better! Prices can vary depending on the time of year, the duration of your rental, and the type of vehicle you choose. Shop around and compare prices below to find the best deal that suits your needs, budget, and car.

We usually use RentalCars.com and DiscoverCars to book rental cars all over the world. You can use these to compare the prices of rental cars; however, the platforms are not specially built to suit Iceland’s unique requirements.

For Iceland, I would suggest booking via Northbound Iceland Car Rental for the following reasons:

1. They’re an Iceland-based aggregator so they know local conditions well and have built their website accordingly
2. They have over 30 trusted local car rental companies listed
3. It is easy to compare prices between rental car companies
4. You can rent any sort of vehicle, from a car to a motorhome
5. They provide gravel, sand and ash insurance
6. Let you know if a car can be driven on f-roads

A quick list of things to look for while booking a rental car in Iceland:

1. 4WD or 2WD
2. Hatchback, sedan, or SUV
3. Automatic or Manual
4. Petrol or Diesel Car
5. Unlimited Mileage
6. Rental Car Company reviews
7. Full insurance, including gravel, ash, and sand protection
8. Location of rental car company
9. Timings of rental car company
10. Terms and conditions
11. Cost

12. Don’t forget to take a video of your rental car at the time of pickup

• This is extremely important. Inspect the rental car for any pre-existing damage before accepting it. Take pictures and videos of the entire car—the exterior, interior, undercarriage, and roof. Notify the rental company of such damages before you leave their premises with the car, and make them note it down on the document meant for this purpose.
• Also, check if you have a spare tyre and the required equipment to change the tyre.

13. Tips to save money on rental cars in Iceland

1. Rental cars and accommodations will take up most of your Icelandic budget. If you are travelling in the summer months and your budget is low, then consider a campervan, renting a car, pitching tents at campsites, or renting a small car (hatchback).
2. Travelling in the off-season can help save money on rental cars. The price of a rental car in summer (June–August) is nearly double that in other seasons.
3. Take a manual car instead of an automatic one.
4. Consider a diesel car instead of a petrol car to save on fuel.
5. Book your rental car 5–6 months in advance for the best deals on good rental car companies. You will still find good deals closer to your date; however, the cars will be older, and car rental companies offering these cars will not be good.
6. Carjet (an aggregator) has the lowest prices on rental cars I’ve seen, and it is possible to save big. But ensure the rental company you’re considering is a good one, as they have a ton of bad ones listed. Also, the insurance they offer doesn’t cover sand, ash, or gravel. I would not suggest hiring a car from them for f-roads.
7. Do not take unnecessary add-ons like GPS (Google maps works just fine for offline use)
8. Do not forget to use the fuel discount chips on your car key for discounts at gas stations.

Easily compare prices and book your rental car below!

Drive safely and slowly; do not go off-road, and keep an eye out for weather conditions. Read this post on driving in Iceland for all our tips, must-knows, and regulations for driving in this country

With this complete guide to renting a car in Iceland, you now have all the information you need to make the process of renting a car as smooth as possible. Remember to plan ahead, choose the right vehicle for your needs, and always prioritise safety.

So pack your bags, buckle up, and get ready to embark on an extraordinary road trip through the land of fire and ice. Your Icelandic adventure awaits!

This blog post on the ‘Guide to Renting a Car in Iceland’ has affiliate links that enable us to earn a small commission when you make a purchase, with no extra cost to you. We only recommend products and activities we like and those that might interest you. If you like any suggested product, do buy from the given links.