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

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 vehicles passing by. Thus, there is no better way to explore this 100,000 square km island (40,000 square miles) than by rental car! After you decided to rent a car in Iceland, read on!

Out of all the countries I visited, I loved traveling by 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 own pace. Not to mention that Icelandic roads take you to some out-of-this-world landscapes, so finding the right car rental for your journey will actually make your entire experience better!

By the way, if you have decided to rent a car in Iceland for an epic vacation, 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 pick and which 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 of them offer price comparisons of all best 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!

NOTE: You must be at least 21 years old in order to rent a car in Iceland! (If you are from Europe/North America or basically if your driving license are in Latin letters, International license are not required. If your permit is in Chinese/Japanese or other script, you need to obtain the International one first). 

First of all…

1. Think ahead when you plan to rent 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 or near Reykjavik Airport), the most efficient cost-performance options will be sold out quickly.

And 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:

NOTE: Check out BONUS 2 below to choose the most convenient Iceland car rental type for you and for the type of excursion you are going to take.

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

PRO TIP: Most rental car companies are located directly in Keflavik International 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 25€ per person with the bus/minibus and around 140€ for a private transfer. The company I used for my rental car in Iceland and can highly recommend (Lagoon Car Rental) has an office about a 5-minute drive away from the Airport and they pick up up 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 (also 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 the insurance price for your car rental, 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 rental 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 agencies 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). Make sure to read the fine print too!;
3. If you do need to buy the insurance, here is my good tip for you – use Bonzah or Allianz. These 2 are third-party insurance providers with MUCH better rates than buying it at the car rental desk – it starts from 3 USD per day instead of 27€ that we paid. NOTE: Make sure the insured person is the one in the rental contract and you need to buy the insurance BEFORE you start driving, and you are good to go!

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

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

You can also opt for theft insurance for your car in Iceland, but to be honest, Iceland is a very safe country, and most of the cars have GPS trackers. Thefts are rare, if any. It’s up to you if you want to get the theft insurance, that’s fine, I just laid out the facts for you.

PRO TIP: This holds true for any country you decide to rent a car in, but I highly recommend and I ALWAYS do it myself – take pictures of your car before you are handed the key. Any small scratch that was not protocoled can be used against you afterwards. Trust me, I’ve been there, done that! Better yet, take pictures and a video!

3. Watch out for sheep, horses and birds on the road

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 (read: many times!).

Whenever you see sheep nearby, I strongly suggest you slow down and pay extra attention. An angry ram can damage your Iceland 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 they’re almost always equipped with mobile detectors.

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

The best way to avoid getting a speeding fine is staying within the speed limit (which is 90 km/h (56 ml/h) on highways. Hah, bet you didn’t 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 car rentals company will charge your bank 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. Here is your “price menu” for all the fines. Driving at a red light? 50K ISK. Not using seatbelts? 20K ISK etc. 

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!

The best way to avoid a ticket is of course, to follow the rules – do not speed up, use your cruise control (I highly recommend choosing a car that is equipped with it by the way!), it will make your life so much easier!

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 at all!

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 (most of them are like this) 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. By the way, you can check the current gas price here (it is about 1,5 USD per liter or 5,9 USD per gallon, so, quite expensive).

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 you rent a car in Iceland – check if you have any mileage limits

This is 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 would pay if you traveled an extra 10 km. Thus, I would say to go for the unlimited option, unless the limit is somewhere at 250-300 km per day or if you know exactly how many km (miles) you are going to drive.

The company I used for my car rental, 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 top companies that offer car rental 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 know you won’t 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.

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 your car in Iceland 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.

The best website to check the weather conditions that is used by all the locals is road.is – it not only gives you weather info by region, but also up-to-date information about road conditions (especially important after October, when roads can easily close in no time).

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

What is the ideal 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 vacation, 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, hiking and using your tent to sleep overnight?
Do you want to have the ultimate Iceland experience by going outside of Reykjavik and 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). Please note that you actually CANNOT use a 2WD on a F-road because your normal car might not make it, and most importantly, if something happens to your 2WD NO insurance will cover the cost, it clearly states in all contracts that 2-wheelers are not allowed there.
Thus, 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€ 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

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 outside of Reykjavik and you are 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. Automatic or manual? It is absolutely up to your preference – manual tend to be about 10% cheaper though.

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

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 and you’re only planning to drive in Reykjavik or very close to Reykjavik?

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€ depending on the model and the season (This is the cheapest car rental price in Iceland, unless you find some super limited promotion)

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 centre, whichever you prefer

PRICE PER DAY: from 90€ per day for a small one (2 people), about 200€ a day for a bigger one (up to 5 people). From 300€ for a motorhome (toilet, hot shower, sink and stove all included). Campervans are not cheap and of course they’re 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 and Outdoorsy – both offer the most amazing variety of campervan, price comparison feature and great reviews!

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 top 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 agencies 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€), I suggest getting 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 times. 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

Where to rent a car in Iceland?

Iceland is a very technically developed country, thus, the easiest and most efficient 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 one 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). So if you have any questions or something’s not as you wanted it to be, you can always contact their customer service!

The cheapest way to rent a car in Iceland is, as I said, booking as much in advance as possible and the most convenient 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!

Staying connected while on the road

Do you really need internet while on the road in Iceland?

You can easily live without it to be honest – just make sure you have a GPS in your car or you have offline maps downloaded in your phone (maps.me is simply awesome for this!) and you are good to go! If, however, you prefer to have internet to listen to your favorite music/podcasts or just post those stunning pictures on Instagram while on the road (Iceland has a pretty good coverage everywhere)? No problem, there are a couple of options:

• Get a local sim card with internet connection. Price – around 17 USD for 2 GB internet in Siminn. Disadvantage – you would need to get one for each passenger in the car. You could share wi-fi to other devices but it will drain your battery really fast.
• Get a portable wi-fi hotspot. We had that and it was shared to 4 people (well, actually, 3, because the driver didn’t use the internet, duh). You can either rent it from your car hire company (check add-ons) or buy the device at home and use it for your future travels as well (you just need to insert the sim card)!

Also, check if you can charge your devices in the car (most of the cars are equipped with it), if not, you might consider gettin a portable power bank with you too!

What is the best time to go to Iceland?

I went in August and I found it to be the most pleasant 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 popular and 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: 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.

Fast facts

• Driving age in Iceland – 20 years old to rent a car, 25 to rent a 4WD (note that you might be charged a “young driver fee” if you are 21 to 25 years old, check with your company please)
• in Iceland they are driving on the right
• Amount of alcohol allowed to drive – 0.05% (small glass of wine. But I would not try it at all as the fine is about 500 USD)
• Emergency number in case of an accident – 112
• Gas prices – 1,5 USD per liter (5,9 USD per gallon)
• Any child between 13 kg (29 lb) should be secured in a forward-facing child seat
• Driving limits – 90 km/h (55 ml/h)on highways, 80 (49 ml/h) on gravel roads
• Most gas stations are open from to 8 am to 8 pm (self-service is open 24h, but the only payment would be with a Pin bank card)
• The Ring Road is 1300 km (800 ml)

Conclusion

Iceland is an amazingly beautiful country which is most conveniently 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  in Iceland 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 deciding to rent 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! 🙂

Thanks for reading and don’t be afraid to ask me questions, I am always happy to hear feedback from my readers!

Yulia

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