Ultimate Guide to Renting a Car in Iceland

With wide-open roads and epic viewpoints around every corner, renting a car in Iceland is the ultimate way to explore this island nation. Download a sweet audiobook, pack your favorite snacks, and get ready for a road trip of a lifetime!

Actually, hold up! We’re getting ahead of ourselves...

There are some important things – really important things, actually – that you need to know before you hire a car in Iceland. Things that could cost you thousands of dollars if you’re not aware.

Renting a car in Iceland is different than many other countries, and even if you’re a pro at car rentals you might be surprised. Don’t worry; we’re about to go over everything you need to know about car hire in Iceland so you’re super prepared and have an unforgettable road trip!

Before we delve into the nitty gritty, let’s go over why you should get an Iceland rental car in the first place...

Why should I rent a car in Iceland?

Whether you hire a car or rent a campervan, being behind the wheel gives you a sense of freedom you wouldn’t have otherwise. Many of Iceland’s most scenic spots are far from any town, and you simply won’t be able to get to them without your own mode of transportation. 

Plus, with few public transportation options outside the city limits of Reykjavik, your best alternatives would be a bus tour, where you have no control over the schedule, or hitchhiking, which gives you basically no control of your travels. (Though if you’re up for it, hitchhiking through Iceland could be quite the adventure!)

Sitting in the drivers seat, or having a partner who’s driving (cough, cough, Ben!), gives you the freedom to discover hidden waterfalls, remote black sand beaches, and hot springs that only the locals know about.

Alright, are you convinced? Let’s get started planning the road trip of your dreams!

Are you ready to pick you rental car? Jump down the article to see which rental car company we recommend your trip to Iceland.

Essential Tips for Driving in Iceland

Driving in Iceland might be different from what you’re used to. We’re going over all the important stuff, from things you need to know about gas stations in Iceland, to

1. Understand Gas Stations in Iceland

Let’s talk about GAS, baby!

It’s not the sexiest subject to talk about, but it’s an important one.

a) Gas is expensive. I mean, it has to be shipped into this island country, so I can understand why. I’m not gonna go into too much more detail other than to say at the time of writing this article (April 2019) the price of gas in Iceland was 225.7 ISK per liter ($1.84 USD). That works out to be just shy of $7 USD per gallon. Ouch! Be sure to take the high gas prices into account when planning your Iceland travel budget.

b) Gas stations are generally open 24 hours a day. However, there’s a but… The building itself will be closed at night, usually around 8 p.m. (some are open as late as 10 or 11 p.m.). You can still fill up at the pump using a card. But read the next point, because it’s a biggie…

c) Know your PIN number. At gas stations in Iceland, you’ll be asked to type in your pin at the pump. If you’re using a credit card that doesn’t have a pin, you will be declined! If this happens, you can simply walk inside and hand your credit card to an employee who can authenticate it for you. However, if you’re trying to fill up at night or early in the morning, you’ll be outta luck. We’d recommend bringing a back up debit card (with a pin!) for this purpose!

2. Don’t let your tank get empty

While we’re on the subject of fillin’ yer tank, let me indulge with an anecdote...

When I was a teenager, I used to do this thing where I’d let my tank go past empty before filling up. Every single time. It drove my parents nuts. I had other things I’d rather spend money on, like clothes and makeup and food and movies and, well, just about anything besides gas.

Lesson: Don’t be like 16-year-old Katie. (For many reasons…)

In Iceland, there are many stretches of road (once you get outside Reykjavik and Ring Road) where you won’t see another soul. This is usually a good thing, and likely part of the reason you’re visiting Iceland. However, if your gas tank is nearing empty, it can be a nerve-wracking ride until you find a petrol station.

So you’re driving along with a tank that’s half full when you pass by a gas station. What do you do?! Flip a U-turn and go fill up! Don’t risk it.

3. Watch your speed

This is an important one. (Be sure you read it!)

While driving in Iceland, be sure to be extra cautious about your speed. For safety reasons, obviously, but also because there are speed traps set up around the country just waiting to catch drivers over the limit and give them hefty fines.

More often than not, it won’t be a police officer flashing their lights that’ll let you know you’re in trouble. Instead, it will be cameras that detect your speed and flag you. If you’re not paying attention, you might never even notice them.

No, this does not mean you’re approaching a photogenic landscape! It means you are about to pass a speed camera. Don’t slow down and you’ll get a ticket!

How to spot the speed cameras: Before every camera, there is a blue sign to warn motorists. (pictured left)

The sign is in Icelandic, so take a good look at it and memorize it so you know when you see one!

It’s also good to know that all tunnels in Iceland have at least one speed camera (if not more!), so be sure you follow the 70-kilometer speed limit in tunnels.

Speed Limits in Iceland

The highest speed limit you’ll find is 90 kilometers per hour on highways. That’s about 56 miles per hour, folks. It’s going to feel kind of slow if you’re used to highways in the US, like we are.

Always look for signs with the speed limit posted, but here are some general rules of thumb to keep in mind:

  • 90 km per hour on highways (Nowhere in Iceland are you allowed to drive faster than this.)

  • 80 km per hour on gravel roads

  • 70 km per hour in tunnels

Speeding Fines are high (Like really high!)

Find out just how expensive the speeding fees are on this website (They’re pricy, like $670 USD for going 13 mph over). It will give you an idea of what to expect for fines depending on the speed limit and how much faster you’re driving. Spoiler Alert: The fine increases exponentially the higher above the limit you’re going!

Note: The site is in Icelandic, but you can select the option to translate the page.

What if you get a speeding ticket?

If you’re pulled over by a cop, you may be expected to pay your fine on the spot using a credit or debit card. We’ve read that some police officers will also give you the option of mailing in the payment later (though the fine will be higher).

If a camera catches you speeding, you’ll receive a ticket by mail. Rental car companies are required by law to disclose your information to police. It might take a few weeks before you receive the bad news.

The Internet is full of forums and threads from people who returned from a lovely vacation in Iceland, only to find out they owe more than $1,000 USD in speeding tickets a month later.

While information varies a bit, it seems that there is a “discount” offered for those who pay their fine by a certain date. It also seems that some people brag about not ever paying their fine. We’re not going to debate the unethical nature of this, so instead we’ll just leave you with our advice...

DON’T SPEED, DAMNIT.

Put on that sweet, sweet cruise control (fingers crossed your vehicle has this function!) and respect the speed limits.

Sure, you might see locals speeding, but they tend to know where the speed traps are and can slow down in time. They also have a better understanding on how to handle the Icelandic roads, which might be quite different from what you’re used to.

Plan your trip with enough time so you don’t have to speed. Simple as that!

Oh, and while we nearing the point of sounding like your mother, please wear your seatbelt too, it’s the law in Iceland!

4. Be prepared for sudden changes in weather

The weather in Iceland is notoriously fickle. Sunshine in the morning, wind by noon, rain storm in the evening, and snow at night.

There’s a joke amongst Icelanders that says “if you don’t like the weather, wait 5 minutes.”

If you’ve got a long drive ahead of you, there’s a good chance you’ll experience different weather patterns. Keep up to date with the forecast by checking before your drive. This website breaks down road and weather conditions by region, which is helpful.

And be prepared for winds. Strong winds. On those open roads with no trees to shield your car, they can seem brutal.

Warning: Be very careful when you open your car door in high winds, as it can catch!

5. Know the protocol at single-lane bridges

Highway 1 has quite a few single-lane bridges, and there’s a good chance you might wind up at one at the same time as another car.

The general rule to follow is the car that’s closest to the bridge will have the right of way while the other waits for them to cross. However, it’s a good idea to slow down just in case that other driver isn’t as prepared as you (and hasn’t read this article!).  

6. Watch out for Livestock

Why did the sheep cross the road?

Because she COULD, damnit.

In the Icelandic countryside, many livestock roam freely, uninhibited by fences. Sheep, cattle, horses, you name it.

Yes, this is a real thing you need to look out for when driving in Iceland. In fact, in some regions of Iceland, there are reports that 2 to 3 sheep or lambs are struck in day. Don’t be that person. Watch the road, especially when you are driving through an area where you see livestock roaming.

7. Get ready to drive on unpaved roads 

Iceland has more than 8,000 miles of roads, fewer than 3,000 miles of which are paved. That means you will most definitely be driving on some unsealed roads during your trip in Iceland.

For the most part this shouldn’t be too big of a deal. Simply observe the reduced speed limits on gravel roads (80 km / hour).

Good to know: One of the most common places for accidents in Iceland is when a paved road turns to gravel, as a car can easily skid out of control. Avoid this by reducing your speed as you approach the unpaved section.

Unpaved roads tend to be a bit more narrow than their paved sisters and brothers, so pay extra careful attention to oncoming traffic.

Also, avoid damage to your windshield by not getting too close to the car in front of you. This will prevent small rocks from flying up and creating one of those awful spider web cracks.

8. Know where you can (and can’t!) drive

If you’re renting a regular 2-wheel-drive vehicle, listen up… There are some roads you cannot drive on. And I’m not just saying you shouldn’t drive on them. You literally CAN’T because a) it’s illegal, and b) your car will not make it. Oh, and your insurance will not cover anything that happens on these roads, since you are there illegally. Have I made my point? Good…

So how do you know which roads to avoid? Luckily, it’s easy. Just don’t go on any “F-roads”.

What the efF are “F-Roads”?!

In the US, these are akin to “fire roads”, and they’re really not maintained at all. These mountain roads bring you into the backcountry, and can lead to some epic adventures.

If you want to really get off the beaten path in Iceland, be sure to rent a 4x4 vehicle so you can legally (and safely!) drive on the F-roads! Oh, and read this guide on how to drive in the highlands.

It’s also worth noting that F-Roads aren’t open all year long. These mountain roads are only open during the summer months, typically June/July - September (or after the first snow). Check the current conditions here.

9. Don’t EVER drive off the road

It is illegal to go “off roading” in Iceland. The ecosystem on this volcanic island is incredibly fragile, and your car’s tires will do damage that can take many, many years to heal.

Be a responsible traveler, and stick to the roads!


Guide to Renting a Car in Iceland

Which Iceland car rental company is the best?

It’s honestly overwhelming when you start to look at all the rental car companies in Iceland. There are a lot to choose from, and we always suggest looking around for the best rates, and also taking into account the service you’ll be getting in exchange.

We personally like using RentalCars.com wherever we are in the world because it allows us to compare the prices and offerings of many different rental providers. You can also use a bunch of different filter options to narrow down what it is you’re looking for.

Another huge perk to using RentalCars.com is that there is free cancellation up to 48 hours before you pick up your vehicle.

Don’t wait until the last minute

All cars must be imported to this island nation, which means there’s not a ton of vehicles just sitting around waiting for you to score a great last minute rental deal.

As tourism to Iceland has risen in the past decade, rental car companies are trying to keep up with the demand. However, during the busy times of year, there just straight up aren’t enough (good quality) vehicles for all the people who want to rent. If you wait until the last minute, not only are you not going to get a deal, but you won’t have much to choose from: Think an old clunker with manual transmission.

As we mentioned above, one of the benefits of booking through RentalCars.com is the free cancellation policy (up to 48 hours before your trip!). So just go ahead and book it so you’re not outta luck...

Understand Car Rental Insurance in Iceland

No matter where in the world you’re renting a car, you’re always going to have to make decisions about whether or not to turn down the insurance.

But in Iceland, it seems to be even more confusing than normal.

CDW. Super CDW. Sand and Ash? Gravel?

Umm, what the heck does all that even mean? Let’s break it down:

Collision/Damage Waiver (CDW): Most rental car companies include this, but if you read closely it’s basically a wavier that you’ll pay the deductible if anything happens to the car. This can be anywhere from $1,500 to $3,000 if there is damage on the car. Be sure to read the fine print.

What about theft? While not impossible, the crime rate in Iceland is incredibly low. Like really, really low. It’s a small islands country, so people aren’t going to get very far with a stolen vehicle, after all. Plus, since you should always travel with travel insurance (like we do!) you will be covered for theft.

Super CDW (SCDW): It’s a CDW that can fly and shoot laser beams from it’s eyes. Okay, maybe not, but it will decrease your deductible if you have any damage but you pay more per day. The deductible can decrease down to $250 but you have to pay around $10 per day.

Gravel Insurance: Coverage beyond the CDW and SCDW that is specifically for gravel and rocks hitting the car leaving dents. Typically is $5 per day and not a bad idea if you are going on F-roads.

Sand and Ash Protection (SAAP) Insurance: This is coverage for if your car gets “sandblasted” in a wind storm, and not covered by SCDW or CDW. This really depends on the weather during your travels, which can be predicted. You can look at the forecast before you leave (sometimes even when you arrive) and decide if you want the coverage. If you’re really concerned about it, you can purchase this, but I would not get it. Just avoid the storms and volcanoes, I guess.

Random Note: Cross rivers at your own risk in Iceland, as this is not covered by insurance.

“My credit card has rental car insurance, so I should be fine, right?”

Well, you’ll have to read the fine print of our credit card agreement. Some policies make you decline all other forms of insurance while only cover you as a secondary insurance. If you do decide with just the coverage on your credit card, make sure to pay for the rental hire in Iceland on that specific card.

“Travel Insurance should cover car rental damage, right?”

I just checked our travel insurance policy from Allianz Travel, and YES they do cover rental car damage. The person on the travel insurance has to be the one on the rental agreement and the damage has to be reported withing 24 hours of the incident, but it appears to be covered.

You can also call Allianz Travel to double check (they have excellent customer service when we’ve called them in the past).

“I’m still confused, I just want to be covered.”

Iceland car rental insurance is complicated, we get it. For US citizens, you can purchase a third party insurance from a company called RoamRight. Select your state and the “Rental Car Coverage” in the drop down for the quote. It’s $7.99 per day and you don’t have to decline the other coverages.

Insider Tip: Take photos of your rental

Before putting your keys in the ignition, be sure to walk around the car and take close up photos (or maybe even a video) of any nicks and scrapes you see. While the rental company we went through didn’t make too big of a deal about inspecting our car upon return, we’ve heard many people who have had the opposite experience.

Best car to rent in Iceland

There are many options when it comes to the type of car you will rent, and it depends on what type of trip you are interested in taking. Below, we’ll go different types of cars, different features, and type of trips you might want to think about. This way you can consider everything and find the best car to hire.

  • Budget: There are plenty of economy rental cars to choose from, but you might want to consider a medium sided car because they are only a few bucks more per day and you’ll be much more confortable.

  • Manual or Automatic Transmission: Automatic is more popular and get reserved first, but tends to costs 10% more.

  • Travel Route: Depending on where you’re planning to explore, you might need a 4x4 rental car. If you stick to Ring Road or Highway 1 you’ll be fine with a standard car, but if you want to go venturing off on F-roads, you’ll need a 4x4.

  • Time of year: It will snow in Iceland in the winter, guaranteed. You’ll want a rental car with good tires so you don’t slip around on snow and ice. Also, you might want a slightly bigger car in the winter, not only for more and power, but because you’ll have more luggage. If you’re traveling in the summer, you’ll still need decent tires because it tends to rain out of the blue.

  • Group Size: You’ll want to make sure you have enough seats for your whole party, unless you want to look like a clown car. You should also think about if there will be space for everyone’s luggage as well. You don’t want a suitcase on your lap for the whole trip.

  • Comfort Level: There are plenty of luxury rental cars if you want to ride in style. Heating and cooling seats - Yes, Please! Or if you’re okay with the bare bones that’s cool too.

Should you consider a renting a campervan instead? 

Rental Car or Campervan....? That is the question...

We are obsessed with campervans. So it might be obvious what our answer to this question would be. However, when we traveled to Iceland, we rented a car and slept in a tent.

Why did we choose a rental car over a campervan? Well, there are 2 main reasons:

  1. We were on a SUPER tight budget. Iceland was our last stop on a yearlong round-the-world trip. And we were running out of money. The absolute cheapest way to travel in Iceland is by renting a car and tenting. So that’s what we did. 

  2. We didn’t know how amazing campervans were. We didn’t build our own campervan until 9 months after our trip to Iceland. Had we known how awesome campervan travel is, we probably would have gone that route.

There are other reasons to choose a rental car over a campervan. Perhaps you just don’t like camping, which is fair. Staying in cute Airbnbs and guesthouses along the way might be a much more comfortable way to travel, especially if you have kids in tow.

You might prefer a campervan if...

a) You have a medium-sized budget to work with. Campervan rentals are around $110-$150 USD per day, which is more expensive than sleeping in a tent, but it can be cheaper than staying in hotels each night.

b) You’re seeking a grand adventure! Having a campervan allows you more freedom than traditional camping, as you can cook, eat and sleep all inside the comfort of your van. You don’t have to squat over a camp stove and boil your pasta noodles.

If you do decide to travel in a campervan, we recommend Happy Campers because they are a small, family-run local company with great service and van options.

Note: New legislation prohibits overnight parking outside of designated campsites, which if you think about it, is better for the natural environment of Iceland. Although it does limit your freedom of camping anywhere you want.

Read more about the differences between tent camping and renting a campervan in Iceland.

Driving in the winter?

Studded snow tires should come standard with most rentals, but double check to make sure your vehicle is properly equipped. Having a 4x4 rental car does help a lot compared to a 2-wheel drive vehicle. Some companies offer a Winter Supplies Kit which typically consists of flashlights, jumper cables, shovel and other winter gear to keep you warm and safe in case of an accident.

What if you break down in Iceland?

112 is the emergency number in Iceland and you should call if you get in an accident.

If you get a flat tire or your car won’t start, many rental providers include roadside assistance, check to see if the company you’re going through offers this.

Check to see if you have Mileage Restrictions

Depending on which rental company you go with, they might limit the number of miles you can drive each day. It will likely come at a cheaper rate than cars with unlimited mileage.

Personally, we wouldn’t want to be restricted by the number of miles we could go, so we always choose to opt for the unlimited mileage option. However, depending on your trip plans, you might not be inhibited by the restrictions.

Do you need a 4x4?

Mayyyybe? Alright, we’ll do a better job than that to answer your question. But let’s just say that it depends on your situation.

You’ll need to consider a few things:

a) Where will you be traveling?

If you’re just planning to get a rental car in Reykjavik and drive on the Ring Road, then it’s not necessary to get a 4WD vehicle. Not a bad idea, but definitely not essential.

However, if you plan to go to places like the West Fjords or the northern regions, you will definitely, 100% NEED a 4x4 car rental. If you get off the Highway 1 in those areas, the F-roads that take you into the backcountry are only suitable for 4WD vehicles. In fact, you are forbidden to drive on them without a 4x4 vehicle!

b) What is your budget?

If you have a super tight budget, this might be a limiting factor, as in Iceland 4x4 vehicles are typically a bit more expensive. But not by that much, usually only $10 to $20 more per day.

c) What time of year will you be in Iceland?

If you’re traveling in the winter, you might want to consider upgrading to a 4WD vehicle if you’re not all that comfortable with winter driving conditions. However, a 2WD car might be just fine if you’re a confident winter driver.

Our thoughts: You will still be able to see many of Iceland’s most epic sights without 4-Wheel-Drive. We had a 2WD car and fared just fine, so don’t debate too hard!

Should I rent a GPS?

Most rental companies will offer the option of adding on a GPS. Personally, we find these devices to be out of date compared with what you can get on your phone. We would recommend declining the GPS and using your phone instead.

Here are 4 important tips for using GPS on your phone:

  1. Pack a car mount like this one, so you can easily see the map while driving and can use your phone hands-free! (We like this one because it clips into the vent system, so you can easily take it in and out of a rental car and don’t have to worry about mounting it.)

  2. Get a local SIM card or pack a portable Wi-Fi device. This will give you cell service and/or data so you can access your map and get directions along the way. We’ve traveled with this portable Wi-Fi hotspot, which essentially gives you Internet wherever you’d have cell service.

  3. Download the offline version of Google Maps before your trip. This means you will have access to the map even if you don’t have cell service. Yes, it will even show your up-to-date GPS location, as long as you have this feature enabled on your phone’s settings.

  4. Pack a battery charger for back-up. You wouldn’t want to end up stranded somewhere with a dead phone and no way to find your location. It’s easy to prevent this with a portable battery pack. We are partial to the Anker PowerCore 20100 because it can charge your phone 7 times before needing to be recharged itself.


Car Rental FAQs

Do I need an international drivers license to rent a car in Iceland?

Most likely, you do not need an international drivers license to rent a car in Iceland. Simply bring your normal drivers license.

The exception is if you are from a country where your license is not in a Roman script (aka Japan or Russia, for example). In this case, you would need an international license, which basically serves as a translation.

What side of the road do they drive on in Iceland?

The right side. If you’re from the US or Canada, you’ll feel right at home. Until you realize there are no trees in sight and you’re surrounded by volcanoes…

What is the Iceland car rental age?

You must be 20 years old to rent a car in Iceland. We’ve read that the age is 23 years old to rent a 4x4 vehicle. Additionally, if you are under 25, some car rental companies may charge what they call a “young driver fee”. You don’t need to think long and hard about why they do this…

Does it cost more to have more than one driver?

Short answer: It depends on the company you rent through.  

Long answer: We tried several different companies listed on RentalCars.com as well as independent rental companies and found they differ quite a bit. One company didn’t charge anything no matter how many drivers. LagoonRentals charges 5 euro per extra driver each day. Other companies charged a one-time fee per extra driver, ranging from $22 USD to $30 USD.

If you plan to have multiple drivers, take this into consideration when choosing which rental company you go through.

We want to hear from you!

Are you planning on renting a car in Iceland? Has Iceland always been on your bucket list? Please leave your comments and questions below and we’ll get back to you.