Car Hire in Iceland – 8 Things You Should Know (2020 Update)

UPDATE: August 2019

Going to Iceland? Great choice, the beauty of this country will leave you speechless, I can promise you that!

What transportation option should you choose? Let’s see: Iceland has no trains, buses are almost non-existent, hitchhiking (although possible) can be frustrating as there are not that many empty cars passing by. Thus, there is no better way to explore this 100,000 square km island (40,000 square miles) than by car!

Out of all the countries I visited, I loved traveling by a rental car in Iceland in particular because it gives you the freedom to choose your own route and the flexibility of doing things at your pace. Not to mention that Icelandic roads take you to some out-of-this-world landscapes!

By the way, if you are up for renting a car for an epic Iceland road trip, I also have some pretty detailed posts that will help you plan your Icelandic vacation day by day with distances prices, accommodation suggestions and more so if you need help with that, start here!

Here in this post, I have put together a guide on how to rent a car in Iceland, which rental car company to choose and the type of car to choose depending on your trip and activities.

First of all, I recommend checking out these 2 price aggregators –  RentalCars and AutoEurope. Both offer price comparisons of all car rental companies available for your dates from which you can filter out car types, prices, location etc. I recommend checking them both out and going for the best available price on one of them!

At the moment these 2 are the best deal finders for rental car companies in Iceland and both have been in the market for years and have good reviews.

This is why I can vouch for both of them:

• They compare rates for car rental companies in Iceland – both International chains and reputable local companies.
• They offer a low rate guarantee!
• No need to use your credit card to book
• They have 24/7 support and great reviews

Everybody told me before the trip: “Driving in Iceland is nothing like driving wherever you are from” and I can only repeat it to you now.

But don’t worry, there is nothing to be scared of, it’s just a bit different. Keep reading and you will be fine!

First of all…

1. Think ahead when renting a car in Iceland!

Each year more and more tourists come to the Country of Ice. Even though there are many car rental companies in Iceland (mostly in Reykjavik), the most efficient cost/performance options will be sold out quickly.

You want to be among the ones to get the best deal, right?

If you know for sure you are going, booking in advance (even a year in advance!) is the best option, especially if you are visiting in the high season!

Remember, if you rent with RentalCars or AutoEurope, most of the time you can cancel with no charges, but booking last minute will not get you a good deal.

The earlier you manage to book it, the cheaper your car rental will be. There is no such thing as a last minute deal in Iceland, trust me!

It does not matter how far in advance you are planning, you can already check the rates for your dates now:

See Bonus 2 below to choose the most convenient car type for you and for the type of trip you are going to take.

This might be obvious, but if you want to further reduce on the cost of a car, invite your friends to join the trip! You will benefit twice by sharing this amazing journey with people you love, and by reducing the cost, per person, of transportation! We went in a group of 4 and it was pretty awesome!

PRO TIP: Most rental car companies are located directly in Keflavik Airport (which is the name of the Reykjavik International Airport). Renting a car as soon as you land makes sense because getting to Reykjavik city is about 13 EUR per person. Or, maybe the car rental company you chose offers free transfers from the airport to their office? If not, how much will it cost? The company I used and can highly recommend (Lagoon Car Rental) has an office about a 5 minute drive away from the airport. They were waiting for us with a sign and gave us a ride to the office free of charge!

2. Get that extra insurance!

So, you have already chosen your best car rental and you are ready to go exploring?

Great! Now, don’t argue, just get the gravel road insurance (consider ash and ice insurance if you are going in the winter, sand and ash insurance in the summer or in an areas with a lot of volcanic ash). Below is a hack on how to significantly lower your insurance price so read on.

Gravel roads are roads that are good enough to drive on (and usually lead to a spectacular natural wonder!), but they are full of little rocks. It only takes one little rock thrown on the body of your car, or worse – on your windshield, to open a crack that will make you need to pay for a new windshield/paint job. The same goes for the ash and ice in high winds. Those act exactly like rocks and can damage your car in no time.

Most Icelandic car rental companies give you the option to purchase insurance in their online form, BUT I recommend doing the following:

1. Check if your personal vehicle insurance covers car rentals. Some do and that would save you a lot of money
2. Check if your credit card covers overseas car insurance (you can call the bank directly if you are not sure)
3. If you do need to buy the insurance, here is my good tip for you – use Bonzah. Bonzah is a third-party insurance provider that has MUCH better rates than using the car rental company directly – about 7 euros a day on average instead of 27 euros that we paid per day. NOTE: Make sure to buy it BEFORE you start driving, otherwise it will not work.

Sadly, Bonzah is only available for USA citizens for now. If you are not from the US (I know the feeling, I am from Russia) and there is no insurance coverage from your bank, etc., you should buy the extra insurance online when booking your car. I know it is more pricey, but better safe than sorry!

Here are a few simple tips for safe driving on gravel roads in Iceland:

• just keep your speed low enough not to throw rocks into the sides of your own car;
• when driving in behind another, keep the distance from the car in front large enough so that the rocks thrown with their rear tires don’t reach your hood or windshield.

 You can also opt for theft insurance, but to be honest, Iceland is a very safe country, and most of the cars have GPS trackers. Not to mention we are talking about an island. Thefts are rare, if any. It’s up to you if you want to get the theft insurance, I just laid out the facts for you.

UPDATE: Check out my article about multi trip travel insurance to find best option for you!

3. Watch out for sheep, horses and birds

Did you think it was that easy?! Like in a Super Mario game, you will encounter all kinds of fauna that want to delay you!

Iceland has many sheep roaming free in the warm season. In fact, once you get out of the Golden Circle, you will probably meet more sheep than people! They are free to graze wherever they please, and that means they will cross the roads sometimes (many times!).

Whenever you see sheep nearby, I strongly suggest you slow down and pay extra attention. An angry ram can damage your car, or, as stories go, people have flipped cars with their wheels up trying to avoid sheep.

Same goes for horses (who are sometimes moved around pastures on the roads) and even birds which fly low.

Watch out in the evening; we were once surprised by 2 owls that flew over the road at low altitude at sundown. Luckily we had enough time to slow down and let them pass! They got to go back to their nest and we got to give our rental car back without a scratch. 🙂

4. Avoid speed traps

Iceland has a number of fixed speed traps and police cars which patrol the ring-road and equipped with mobile detectors.

And now I will share with you the ultimate way of avoiding fixed and mobile cameras. Are you ready?

The best ways to avoid getting a speeding fine is staying within the speed limit (which is 90 km/h outside localities). Hah, bet you did not see that one coming!

This is the sign you should be looking out for (it can also be black and white).

Even if you do get a fine, you will not know right away, but your rental company will charge your credit card with an unpleasant surprise a few weeks after your trip. We do not want that to happen, right?

As the fines are large, you should really consider this point.

NOTE: The fixed cameras are always signaled a few hundred meters before you see them. There is a specific sign letting you know there will be a detector well in advance, so keep your eyes open!

5. Think ahead about fuelling up

Depending on which road you are taking, especially if going through the mountains, check ahead where the next gas station will be, don’t leave it to chance! I remember quite well that there are parts of about 250 km, somewhere on the Ring Road, where we didn’t see any gas stations.

The good thing was that my car’s GPS had an option to show me where the closest gas station was; it was really convenient! Please do not forget to keep an eye on the fuel meter, – even if it will be a funny story for your friends, it won’t be funny if you can’t move your car in the middle of nowhere on a deserted road.

There are self-service gas stations (the majority) that work 24 hours and you just need to pay with a credit card. There are also larger gas stations where you can buy some snacks and hot-dogs and maybe even connect to free Wi-Fi – in this case, you have to fill your car first and then go to the cash register to pay.

PRO TIP: Talking about gas stations – as a bonus, you should know that most gas stations have a free self-carwash in Iceland! It’s quite well organized and it pays off to clean your car every few days. The roads and the weather in Iceland take their toll on the cars’ exteriors.

6. Before renting a car – check if you have mileage limits

Verrry important!

Remember that some car rentals impose mileage limits. This might be really inconvenient if you are going to cover a lot of ground each day, and it can bring your rental cost much higher. Remember to ask and check ahead if you have chosen such a company to rent from.

PRO TIP: Many car rentals offer 2 types of rentals: limited mileage or unlimited mileage. Usually, the difference in rates between the two is small and it represents the difference you what would pay if you traveled an extra 10km. Thus, I would say go for unlimited, unless the limit is somewhere at 250 – 300km per day or if you know exactly how many km (miles) you are going to drive.

The company I used, Lagoon Car Rentals, did not have any mileage limits, which was one of the main criteria for me and I considered it one of the best car rentals companies in Iceland (for my needs at least).

7. Don’t stop in the middle of the road to take pictures

I know, we are all guilty there! 😉

The island-country is full of beautiful spots who just beg you to stop and take a picture. We are all tempted by this, I also wanted to stop and take a picture literally every 100 meters.

When you do stop, please stop in a place where you do not block traffic. There are plenty of side roads and parking lots. I have seen many tourists stopping more or less in the middle of the road and casually opening their doors to take pictures. It is quite dangerous, especially as sometimes the roads are narrow.

NOTE: Just a little extra about items to pack – you’ll need some stuff for this trip and it’s a lot better if you can buy them at home. Iceland is very expensive compared to any country I’ve been to, so I think getting some items at home might save you a lot of money you can later use for your fuel!

• A good waterproof and windbreaker jacket – a must have in Iceland, I’ve been there in August and although it was summer, it was cold, rainy and windy almost everyday.
• Hiking boots – you’ll need a good comfortable pair, and the prices for these in Reykjavik were plain scary.
• A thermos – sometimes you’ll go for hours without finding a place to buy a coffee or tea, and I love tea! This was one of my most used items.
• A GPS device – it will be at least 9-13 euros per day if you rent one. This way you can bring your own and use it back home as well!

Don’t leave home without these essentials for your Iceland vacation:

8. Be prepared for rapid weather changes

Let’s face it – Iceland has very specific weather conditions. It can be sunny one minute, and heavily raining the next, making everything slippery. Not to mention that you can drive in clear weather and just wake up in a thick layer of fog after a few curves!

Keep in mind that the safest way to tackle the weather conditions in Iceland is to match your speed to the current weather. Sometimes, maybe you will even have to stop for a few minutes, until the visibility returns or the wind speeds slow down.

So, when is it better to go to Iceland?

I went in August and I found it to be the best time to visit – you can enjoy a never-ending day, the weather is mild and all the roads (and the attractions) are open.

True, July and August is the most touristy season, but it is touristy for a reason – it is pretty much the only month when it is not freezing in Iceland. Plus, touristy means a different thing in Iceland – you can still drive for hours and not meet another car despite being in the high season. CONS: the car hire prices are also the highest and the chances of seeing the Aurora Borealis are almost non-existent in August. But hey, at least it is relatively warm and there is sun!

If you want to avoid higher prices and accommodation, I would suggest visiting in the shoulder season June or September, when the weather should still be fine.

BONUS 1 – Choosing the right type of car for your Iceland trip

What is the best car rental company in Iceland, which is the cheapest car hire? Which type of car to choose? There are so many options!

The first question you should ask yourself is “Which type of activities am I likely to do in Iceland?”

If you only plan one thing about your Iceland trip, then plan the car!

As I experienced, there are 4 types of journeys and 4 types of cars suited for them.

Let’s see – which one are you?

1. You are an off-road warrior. An adventurer

TYPE OF ACTIVITY: Do you like going on hard roads and climbing steep mountain slopes, hike and use your tent to sleep overnight?
Do you want to have the ultimate Iceland experience by going through the middle of the country, and set up camp in the mountains instead of sleeping in hotels?

RECOMMENDED CAR: you have a choice and one choice only: you need a car that can reach the Icelandic F-roads (a type of road I will describe later).
Your choice should be a 4×4 (an all-wheel drive). There are a wide variety of SUV rentals in Iceland that offer 4w4 cars. It is not allowed to drive any other type of car on these F-roads, and for good reason. Of course, the bigger the car, the more interesting and fun it will be, but it also depends on your budget.

PRICE PER DAY: 65 -130 EUR per day for the cheaper models, or up to 150 -250 per day for the high end options, depending on the season.

As I mentioned above, there are 2 sites where you can compare all the deals and choose the best prices according to your needs and dates

• See the cars available on your dates – RentalCars
• Check the rates on AutoEurope

The closer you get to the peak season (July – August), the more expensive cars can get!

2. You’re looking for a comfortable trip, along Iceland’s Ring Road

TYPE OF ACTIVITY:  You are doing the classic Ring Road and you going to take alternative routes, or gravel roads to see fjords, waterfalls or other natural wonders only occasionally?

RECOMMENDED CAR: a 2WD would suffice. You can choose any of the “normal” cars depending on your budget and the comfort level you are looking for. That was the one that I took.

PRICE PER DAY: 50 to 100 EUR per day, again, depending on the model and the season.

• See the cars available on your dates – RentalCars
• Check the rates on AutoEurope

3. You are on a quick trip just around Reykjavik

TYPE OF ACTIVITY: You don’t have much time and will not wander more than the Golden Circle? Are you searching for the cheapest car rental in Iceland?

RECOMMENDED CAR: You are almost surely going to be fine with the cheapest tiniest car. Unless of course you need more comfort (and maybe more room for your luggage)

PRICE PER DAY: expect to pay anywhere between 50 to 180 euros depending on the model and the season (This is the cheapest car rental price in Iceland, unless you find some super limited promotion)

• See the cars available on your dates – RentalCars
• Check the rates on AutoEurope

4. You don’t mind sleeping in the car

TYPE OF ACTIVITY: If you don’t mind spending a night in your car, renting a campervan might be just what you need! A huge part of our Iceland budget went to accommodation and you can easily save up on that! Camping sites in Iceland are really clean and well taken care of (and costs about 7-9 euros per person).

RECOMMENDED CAR: How about renting a van in this case?

Again, RVs can be rent at both the International Airport and in Reykjavik city centre, whichever you prefer

PRICE PER DAY: from 90 EUR per day for a small one (2 people), about 200 EUR a day for a bigger one (up to 5 people). From 300 EUR for a motorhome (toilet, hot shower, sink and stove all included). Campervans are more expensive than normal cars and they consume more gas, but overall it should be cheaper because you will not pay for lodging, especially considering you are a group of 4 or more.

Check Guide To Iceland

(they offer the best prices for camper vans and have great reviews from my research)

BONUS 2 – Iceland Car Hire during the winter time

Ok, even if I did not personally visit Iceland in the cold season (yet!), I have asked around about the best practices of driving in Iceland in the winter. The scenarios will be very different than in the summer, and it’s very likely you will see the Aurora Borealis.

You just need to be smart and careful so here is what you need to know:

• Go for a 4×4 car. Remember that the weather can change and you are far up north, so the possibility of heavy snowfall is big.
• Always check the road.is website or Veður App It provides the best report on the road conditions of your route.
• If you are given the choice rent a vehicle with studded tires. That will help a lot on the icy roads.
• Speaking of icy roads, don’t go fast. You are in a new country, you don’t know the roads and where ice could be so keep it safe.
• Fuel up all the time. Better safe than sorry!
• Daylight is limited. Make the most of it by driving in the hours with light.
• Watch out for animals in the dark
• Make a stash of snacks, water and even blankets. Iceland is a very developed country, but even there, in case you are stuck, it can take some time until someone reaches you.

Please don’t sacrifice your safety for financial reasons. There are some great rates for 4×4 cars that you can easily compare for all Iceland car rental companies in one click here.

By following those safety guidelines you are in for a great experience, it will feel like time stopped, along with the frozen waterfalls! I can’t wait to get back myself in the cold season, so I can see the Aurora Borealis!!

Essential packing list for visiting Iceland in the winter time!

If you are going to travel in the winter, there are a few items that you need to take with you. And since in Iceland these will be quite expensive (an Icelandic wool sweater will rarely go under 180 euros), I suggest to get them from home. Remember that it’s going to be very (very!) cold and windy, so you’ll need to dress in layers and be able to maintain a comfortable warmth at all time. Here you go, your packing list for winter time in Iceland:

• A proper warm jacket. It has to be waterproof, windproof, well insulated, and it has to look good too 🙂
• Fleece
• Body thermal shirts
• Snow boots – they have to be comfortable, let your feet breath and also practical both on snow and on dry surfaces
• Proper winter socks – you don’t want to get sweaty and then cold in the winter
• Thermal Leggings
• Hiking pants – also need to be waterproof and windproof

Remember to pack these items before your trip:

BONUS 3 – How to book an affordable car in Iceland on RentalCars.com

Here is a step-by-step tutorial on how to rent the best car for your need in Iceland:

Step 1: Go on RentalCars.com

Step 2: Enter your preferred pick-up location, the dates and hours of your pick-up and drop-off. Click on “Search”. You can enter Iceland or “Car rental in Reykjavik downtown” for the list of all car hire companies in the city.

Step 3: Do not worry, you can sort the results out for the location and type of car. For example, you can filter out the options on the left to only show you car rentals in Reykjavik downtown. Or you can choose “Keflavik airport car rental” if you want to rent your car right when you arrive in Iceland.

Step 4: You can filter your search by supplier, fuel policy, number of seats, supplier rating etc. Or by type of car at the top of the page (small car, medium car, large car, etc.)

Step 5: Once you have found a good car for you, click on “View deal” button.

Step 6: Check all the information you need to know from “Car Details”, “Customer Reviews” and “Important Information” and scroll down to see the rest of the details. See if Unlimited mileage is included (recommended).

Step 7: Select “Go to Book With Full Insurance” or “Go to Book Without Full Insurance” (I recommend taking insurance).

Step 8: Enter the driver details and flight details (in case you are renting your car from the airport), then click on “Book now”.

Step 9: Enter your payment details and… that’s it! You will receive a confirmation email with the address of the office (or, if the company arranges airport pick-up, they will ask for your flight number in the following email). Just show this confirmation on your phone when you are at their office and you are ready to go!
NOTE: In some cases, the company may require the driver to use her/his credit card for the deposit, even if the car was booked using a different card. It happened to me a couple of times – I would book the car with my card (I was not the one driving), and at the front desk they asked my friend (the driver) to provide her credit card too (no money would be charged from that one, this is just in case of an accident). Keep that in mind too!

Where to rent a car in Iceland?

Iceland is a very technically developed country, thus, the best way to rent a car there is definitely online. You could also use some private rental service, but I would recommend using a well-known supplier with a good reputation.

As I mentioned above, I suggest using price aggregators because this way you can compare all the prices in 1 click. What’s cool about them is that they offer a best-price guarantee and usually some better customer service in case something goes wrong (they are basically a middleman- in the chain between you and the car rental company, and they protect the customer, thus, you).

The cheapest way to rent a car in Iceland is, as I said, booking as much in advance as possible and the best place to rent a car would be either Keflavik International Airport or Reykjavik city. You can also find some car rental companies in Akureyri, but it will be much more expensive there.

Disclosure: Please note that some of the links above are affiliate links, which means I will earn a small commission at no additional cost to you. I only recommend products that I use and love myself, so I know you’ll be in good hands.

Conclusion

Iceland is an amazingly beautiful country which is best discovered by driving around with a rental car. Other options exist, such as hitchhiking, but having your own car will give you the freedom to enjoy the country at your own pace and according to your own itinerary!

Last, but not least, even if it might sound expensive, renting a car will always be more efficient than taking day tours. The tours are more expensive and they are far less flexible!

I hope I have convinced you that renting a car in Iceland is for now the best option to see what this mesmerizing country has to offer! I also hope my rental car and driving in Iceland tips were useful (they should be if you read through carefully enough! 🙂 )

Iceland is my favorite country so go explore and have fun, it is really worth it, believe me! 🙂

Ask me questions, I am always happy to hear feedback from my readers!

Yulia

RELATED ARTICLES:

Please read these for more great travel tips about Iceland:

All posts below:

1. Iceland – All Seasons Ultimate Packing List
2. Iceland’s Best Hotels – An Easy Way To Book Accommodation Before Your Trip
3. 10 Best Tours You Have To Take In Iceland
4. 9 Best Hotels In Reykjavik City Center
5. Reykjavik On The Budget (2019 Update)
6. Iceland Road Trip (Part 1): The Golden Circle Tour And The South
7. Iceland Road Trip (Part 2): The East And The North
8. Iceland Road Trip (Part 3): The West Fjords
9. Iceland Road Trip (Part 4): North of Reykjavik
10. Road Trip Around Iceland in 14 Days

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