30 Tips For Renting A Car In Iceland (2024)

Renting a car in Iceland is one of the best ways to see the beautiful country. Iceland is a wonderful country, and with every twist and turn in the road comes a new breathtaking view. If you want to see the most stunning spots in the country on your terms, this means renting a car.

Although this is, for the most part, not a complicated process, there are some things you need to know. Here, we list our tips for renting a car in Iceland, making the process easier for you!

Tips for Renting a Car in Iceland

Planning your trip to Iceland

Having a rough idea of where and when you want to go to Iceland before leaving home will make the process of renting a vehicle a whole lot simpler when you get there.

At this stage, you don’t need to have an hour-by-hour breakdown, but knowing the significant destinations you’re desperate to visit is a huge plus. For many, this means driving the iconic Ring Road and the Golden Circle, but it’s nice to get off that path a little too. We have a great Iceland itinerary if you want to see what we got up to!

It’s also time to decide on your flights. For almost everyone, this means arriving at Keflavík Airport outside of Reykjavik. The outskirts of the Iceland capital is the country’s main international airport and has all the biggest rental agencies on site. Picking up your Iceland rental at the airport can make your life a lot easier and even cheaper – but more on that later.

Is renting a car in Iceland safe, and is it safe to drive in Iceland?

Iceland is one of the safest countries in the world! It was the third country I traveled to solo and the very first country I hitchhiked around. The crime rate is shockingly low, which makes it an ideal place to travel for solo female travelers. If you’re thinking about renting a car in Iceland to get around then it’s a great choice.

However, do not be lulled in by low crime rates because Mother Nature could easily be your number one enemy. Clueless tourists find themselves in life-threatening situations as many as three to four times a day in the high season. It is usually of their own doing. Iceland’s weather is notoriously unpredictable and life-threatening, especially if you traveling in Iceland in the winter.

Always use your head when in the wilderness, tell someone where you’re going, and make sure that you have a cell signal so you can call 112 in you are in unsafe conditions. I suggest checking outSafe Travel to stay updated on weather conditions. Take the waves seriously, like on Reynisfjara black sand beach, as several tourists have drowned after being swept away.

Booking your rental vehicle

It’s advisable to pre-book your rental car in Iceland. It’s straightforward to do online before landing in Iceland. Though it’s unlikely a rental agency will ever run out of vehicles, turning up without a booking means the company might not have any of the size or type of car you’re looking for and will also result in higher last-minute pricing.

If you’re traveling as a group, it’s worth considering whether to name more than one driver. By doing this, you can divide up the driving time – but most rental agencies will charge you more for the privilege.

So, if you have specific requirements (see choosing your rental vehicle below), or want to keep costs to a minimum (and who doesn’t?), it’s doubly important to pre-book! A few great places to start researching are:

• If you want to rent a camper van like us, an excellent company to go with is Happy Campers. You can find their booking site here.

• You can rent a car with Lava Car Rental, a local and family-owned company in Iceland. The rental company has many good reviews online.

You can drive in Iceland with a Latin license

You only need a valid driver’s license to rent a car in Iceland. You do not need an exclusive International driver’s License, but your license does need to use the Latin alphabet.

Choosing your rental vehicle

Drivers in Iceland drive on the right-hand side of the road, the same as in North America, with the steering wheel on the left-hand side of the vehicle as a result.

Most vehicles in Iceland – including rental cars – are manual transmissions with a gear shift. Automatics are generally available for a higher price if you don’t think you’ll be happy driving a manual car. Make sure you make this desire clear when booking.

Campervan vs. Car Rental?

The two main types of cars to drive around Iceland are a campervan and standard car rental. You’ll see plenty of both on the roads. We went with a campervan because this meant we didn’t have to pay for hotels along the way. Plus we could properly enjoy being in nature, staying at campsites, and enjoying the company of other campers.

Cars are more fuel efficient, easier to drive, and cheaper to rent, but you will need something to sleep in every night, and you may not feel that sense of community you get at campsites.

Rent your car from the airport

If you plan to rent a car or campervan in Iceland, make sure to pick it up and drop it off at the airport. It could end up saving you a buck. There is no public transport, and the Reykjavik Express, one of the only buses from Reykjavik city to Keflavik airport, is 2400 Icelandic Kroner one way. That’s a $24 airport transfer on a bus! I would recommend picking up and dropping off your car at the airport to save on this fee.

If you want to rent a camper van like us, an excellent company to go with is Happy Campers. We had an enjoyable experience with them, and their location is nearby the airport and will provide you with a free transfer to their offices once your flight lands. You can easily book using this link, but make sure to book well in advance during the high season. Seriously – they made our trip to Iceland so amazing. Book it now!

Car and van rental tips

Manual vs. Automatic

You should be prepared to drive a manual car when you rent a car in Iceland. As with the rest of the world (besides the US), most of the campervans in Iceland are manual, but there are a few automatic vehicles. If you require an automatic car, make sure to book well in advance and expect to pay a premium.

Size Matters

Consider the size of your campervan and car before you book. For campervans, there are a few different size options ideal for one, two, three, and up to five people. We went with a Happy 2 for the two of us.

The van was spacious and comfortable for two people. However, with a larger car comes reduced fuel economy, so you’ll be paying more for that larger vehicle in more ways than one. Gas is really expensive in Iceland, almost $8 a gallon. Think carefully about the model of the car you choose.

Insurance issues

When checking out a campervan or car in Iceland, you have many options for choosing insurance. Happy Campers, for example, includes CDW as it is mandatory in Iceland. Also, look into what your credit card covers for auto insurance.

Most American credit cards offer auto rental insurance as a benefit, and I would recommend calling your credit card company beforehand to double-check what they cover. If you don’t have a credit card, it’s time to get one, as it’s an essential part of travel banking. More on that later.

A 4×4 car rental is not necessary for driving around Iceland

If you’re planning to drive Iceland’s iconic Ring Road (Route 1 around the country) or the Golden Circle, a 4×4 vehicle is unnecessary. Most of the roads are paved and easy to navigate with a sedan.

If you want to go down an unpaved or unmarked road, make sure your car can handle it first! We saw numerous small sedans trying to push their car too much down bumpy roads and ended up getting stuck or tearing out the bottom of their rental!

Upfront costs with renting a car in Iceland

Arriving without a booking will almost certainly cost you more. Understandably, the larger the vehicle, the higher the price will be.

Making life a little more complicated, most online prices will be a ‘from’ price. In other words, the lowest possible price for your rental could be theoretically. You’ll only find the actual cost (generally somewhere close to the ‘from’ price) when going through the booking process to the end.

As is the case when renting a car almost anywhere in the world, you are responsible for fuel costs when renting a car in Iceland, which means returning your rental car to the agency with a full fuel tank or at least what they gave you the vehicle at.

These days, agencies will be happy to fill up the vehicle themselves on its return, but it will generally cost you more than visiting a gas station for yourself. On that point, don’t be surprised by the cost of either gas or diesel in Iceland; it’s significantly more than in the US.

Gas or diesel?

So, which should you choose – gas or diesel? Knowing roughly how far you’ll be going will help you understand what sort of vehicle you want – one with gas (petrol here) or a diesel engine. Diesel vehicles are better for longer journeys, such as if you are planning to drive the whole Ring Road.

Diesel is also slightly cheaper per liter. All gas stations (petrol stations) also sell diesel, making it much easier to find than in the US. However, on the average vacation, you probably won’t notice any economic difference between the gas (petrol) or diesel.

Either way, make sure you know whether your vehicle uses gas or diesel. The two are not interchangeable.

Be prepared to spend a lot on fuel

When you are renting a car in Iceland, prepare to budget for it. I thought I was only going to have one heart attack in my life when we paid $2 a liter for fuel in the middle of nowhere Zimbabwe. We just hadn’t traveled through Iceland yet. Fuel in Iceland is expensive at about $2 a liter – that’s roughly $8 a gallon for all my American friends out there!

If you want to save what you can on fuel, then opt for a fuel-efficient vehicle. Be prepared to buck up and pay if you’re traveling in a campervan or 4×4 like us. We spent $400 on fuel to drive our campervan around the country for ten days.

Car rental insurance in Iceland

See Also

Best Advice For Renting a Car in Iceland | Guide to Iceland

You should not drive a rental car in Iceland without collision damage waiver insurance. What this means for those renting a car in Iceland is having the additional cost of CDW insurance added to any rental car check. The upside is that if you have any sort of accident, you’re covered and will not have to shell out any more than an excess of a couple of hundred dollars.

If you have a US credit card, you may already have CDW insurance and don’t know it! It’s worth checking your documentation and calling your credit card to find out. It’s even worth considering signing up for a new credit card that does offer this. It’s up to you to check with your credit card about your rental car insurance privileges.

If you’re already covered, take a copy of the paperwork as proof.

Get the right credit card

Bringing me to my next point – credit cards with primary rental insurance. The Chase Sapphire Reserve is my favorite travel credit card for many reasons, but the primary rental insurance is one of its best perks (including Priority Pass membership). When you put your rental car on your Chase Sapphire Reserve card, you get primary coverage around the world up to $75,000.

That works out great for us since we are nomadic and don’t have a car or home. Car rental companies in Iceland and worldwide love to scare customers and upsell all their insurance packages. You need to make sure if you need it or not before falling victim to their trap. Call your credit card company and always find out before you get to Iceland.

Make sure you don’t have mileage limits

It can be common for car rentals in Iceland and around Europe to have mileage limits. Usually, this is something like 200 km/day that can be driven. Of course, they can’t know which day you are driving 200km/day and what days you are not, so it all totals up to the end.

Say you rent a car in Iceland for six days with a mileage limit of 200 km/day. So in that scenario, you have 1200 km of free driving. If you return the car having driven 1300 km, you will be charged for the overage of 100 km. If you want complete freedom when driving around Iceland, make sure you choose a rental with unlimited mileage.

Expect a hold charge for your Iceland rental car

Every single one of our forty or so rental cars has put a hold on our credit card for the rental period. Holds can range anywhere from a few hundred bucks to $1000+ in some countries.The “excess charge,” as it is called, is typically stated in your reservation details, but it is easy to miss.

We know that they must put this hold on our card, but it can be a massive shocker if you are unsuspecting and end up exceeding your credit card credit limit. These excess charges are for scenarios where you disappear with the car and are never seen again or get in a crash and refuse to pay.

Navigation in Iceland

It’s worth mentioning that distances and speeds in the Republic of Iceland are recorded in kilometers rather than miles. This can make sights seem further away than they actually are, although the winding country roads you’re likely to encounter mean travel times are a little longer than those in the US.

It’s unlikely your rental vehicle will have a built-in GPS navigation system, generally referred to as SatNav (satellite navigation); however, it is likely that you will be offered a separate GPS (at additional cost, of course) instead. The good news is that if you are driving the ring road, it’s a ring around the country and easy to follow.

Still – whether you are traveling alone or as a group- we think navigation is a must. It takes much of the stress out of driving on roads you aren’t used to and relying on road signage. You might be happy using paper maps, but it’s not normal for them to be supplied with a rental car, which means you may as well opt for the GPS instead.

Smartphone apps such as Google Maps are a brilliant free alternative, giving you the advantage of knowing up-to-the-minute traffic and road conditions. You should download a map of Iceland to your phone from Google Maps while you’re on good WiFi. If you forget to do this, Reykjavik Airpot has free WiFi where you can download Google Maps to your phone before you hit the road.

Car rental pick up and drop off

When renting a car in Iceland, you should think about inspecting the vehicle. After all the paperwork is sorted with the rental company, you’ll be asked if you want to be shown around the vehicle. We always feel a little foolish agreeing to this, but it’s always worth it! Unless your rental vehicle is exactly the same as your home car, several systems are likely to be different. If you choose a rental car, you 100% should be shown around. There are a lot of aspects to a campervan!

When the agent shows you around, make sure you ask them to show you how all the essential systems function. When you depart, you should be completely happy with using the vehicle – remember, you are legally responsible for it. So, ensure you know how to operate the headlights, indicator lights, hazard lights, and windscreen wipers. Also, be sure to understand how to engage reverse gear.

Inspect and take photos

If you run into a guardrail with your rental, you will be charged for damages. If someone else ran into a guardrail before you and you don’t note it when you pick up the rental car, you could also be charged for damages. Always, always, always, inspect every single rental car you get with great detail – inside and out.

Note any damages with the company and take photos just in case. Cam and I are both meticulous with rental car dings, scratches, windshield cracks, and cigarette burns. Never assume that a scratch or ding is unimportant or big enough to note. When you return your rental, make sure you get a slip signing off that all was okay on the car so they don’t come back and try to charge you later.

We’ve been blamed multiple times for things like “excessive sand on the floor in Mozambique,” random pieces of cheap plastic falling off in Mexico, and we were even charged for a small scratch on the hubcap in South Africa. Take photos and put up a fight if you think you are in the right.

Check Your Charges on Your Credit Card after You Leave Iceland

We’ve had multiple instances of rental car companies charging our credit card for damages weeks after we returned the rental car, and they signed off that all was okay. It’s important to document your Iceland car rental receipts in case this happens to you!

Watch for speed traps!

Iceland has numerous camera speed traps around the ring road. So it’s best to always stay within the speed limit. Fines are extremely expensive in Iceland. Between ISK 50,000 and ISK 130,000, so it’s best to follow the rules.

The good news is there is always a sign warning you about the speed camera a few hundred meters before. If you are speeding in Iceland, now is the time to slow down!

You may think that you will get away with not paying for a ticket because you are a foreigner and leaving the country. However, the rental car company has a copy of your credit card and is authorized to charge it in the circ*mstances like this.

Drinking and driving in Iceland

This should go without saying, but drinking and driving is a grave offense in Iceland. The threshold blood alcohol test (BAT) level is extremely low. Drivers can be charged with DUI with a BAT as low as .05%, and foreigners can be charged too.

The Icelandic people take this very seriously, and most do not drive if they plan on drinking. If you want to go out for a night at a bar, ensure you have a responsible way back to your accommodation.

Seatbelts and safety in Iceland

It’s a legal requirement for all passengers to wear a seat belt/safety belt at all times when the engine is running. Likewise, using a cell phone when driving in Iceland is not permitted to make calls or send/receive SMS text messages.

You can use your smartphone for navigation purposes, but it must be hands-free only (such as safely stowed on the windscreen), and you must not program navigation while the vehicle’s engine is running. I recommend getting a phone holder for your car dashboard for your travels.

How Much Will a Rental Car in Iceland Cost?

It depends on the season! Your rental car will likely be higher in the summer than in October and February. I know that Happy Campers offers low season rates and high season rates. So if you’re goal is to save money, book a car rental in the off-season. Here are some tips for getting a good deal on a rental car in Iceland:

• The sooner you book, the better
• Do searches on RentalCars, AutoEurope, Skyscanner Car Rentals, Kayak, and Momondo and see the best deals.
• Do your research and go with the companies that have good reviews. They are often the ones who won’t rip you off for extra charges.

Know the Emergency Number in Iceland

112 is the single emergency number in Iceland. Remember it and store it in your phone if you ever need it. You never know when you’ll be faced with a life-threatening situation – but remember, only use it if you need to. Safetravel.is puts up all relevant alerts and warnings and should be checked regularly when driving in Iceland.

I also like to join relevant Facebook groups to stay current on current travel situations. People are generally quite helpful!

Mind the Animals

There are plenty of sheep, cows, and horses to keep you entertained in Iceland. Most of them are pretty friendly and will let you take photos with them. If you see an animal you want to take a photo of, remember to pull over safely and to the side. Don’t stop traffic for a photo – there is nothing more annoying or dangerous!

Also – sometimes these furry creatures may make their way into the road. Give them their space and respect and wait patiently for them to cross. This also means driving in Iceland at night can become dangerous with animals on the road. So try to get an early start and plan your journey to avoid driving at night.

Do You Need to Drive in Iceland to Have a Good Time?

No! A car is not essential to your enjoyment in Iceland. However, it will greatly enhance your experience, especially if you are short on time or want to explore as much as possible with endless freedom.

The first time I visited Iceland, I did not have a car and based myself out of Reykjavik making day trips. My only methods of transport were hitchhiking, finding another traveler or group to tag along with, or paying for a bus tour.

All are good options. However, I don’t think you see as much, are in large groups herded like cattle, and have to stick to a set route with a bus tour. Hitchhiking will only get you so far, although if you’re up for an adventure hitchhiking in Iceland is pretty safe. Meeting another group of travelers either online or at a Reykjavik, the hostel is excellent for solo travelers.