The Ultimate Guide to Renting a Car in Iceland (2024)
INTRODUCTION
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Exploring Iceland by car offers unparalleled freedom to witness the country’s stunning landscapes at your own pace. From cascading waterfalls and geothermal springs to volcanic craters and black sand beaches, Iceland’s natural wonders are best discovered on a road trip.
My name is Tara Cannon and I have been taking road trips in Iceland since 2016. I created this comprehensive guide to provide you with everything you need to know about renting a car in Iceland, including choosing the right vehicle, understanding insurance options, driving tips, and practical advice to ensure a smooth and enjoyable trip. I want to help you find the best Iceland rental car and have a seamless rental experience – without overpaying!
Affiliate Disclosure: This Rental Cars Iceland Guide contains affiliate links. If you click a link and make a purchase, I may receive a small commission at no cost to you. All opinions are entirely my own.
CHOOSING THE BEST ICELAND CAR RENTAL COMPANIES
When selecting the best Iceland car rental company, several factors need consideration, including price, vehicle options, insurance policies, and customer service. Here’s an overview of the best car rental companies Iceland has to offer.
BEST CAR RENTALS ICELAND – INTERNATIONAL
Most visitors to Iceland fly into Keflavik International airport. Hertz, Budget, Avis, National and Europcar all offer car rentals with in-terminal pick up at (KEF) Keflavik Airport (without a shuttle).
They provide a wide range of vehicles (whether you need a compact small car or a four-wheel drive SUV), and may be of particular interest to those benefiting from loyalty status with a particular brand. However, they can be more expensive than local companies and the reviews for the Keflavik Airport outlets are sometimes a bit spotty. (I highly encourage you to read reviews and avoid companies with ratings of less than 4 out of 5★ or 80% positive reviews.)
See rates for Car Rentals in Iceland with EXPEDIA.
BEST ICELAND CAR RENTALS – LOCAL
Personally, I prefer renting from local companies offering car rentals in Iceland. I find that they provide more competitive rates and personalized customer service. Furthermore, if you run into an issue, you can talk to a real person in real-time, located in Iceland, as opposed to getting routed through a call center on the other side of the world.
The other real advantage to booking with a local company is the transparency that is provided around car insurance in Iceland. While I will explain Iceland’s unique insurance needs further on in this post, the best local car companies in Iceland tend to explain these fine, but very important details clearly when you make your booking. I just hate when I am presented with a bunch of add-on insurance options at a rental car desk when I am exhausted after a flight!
I have used both Blue Car Rental and Lava Car Rental. Both have been good, but in my opinion Lava is Iceland’s best car rental company. (Please also see Lava Car Rental reviews from Trustpilot.)
I have found Lava’s car rental rates to be very fair, their vehicles good, their booking platform easy to navigate, and their customer service to be spot-on. Renting with Lava does require a very short shuttle bus ride (10 min.) from Keflavik Airport to their office, but I think it is fully worth it for the value and peace of mind they offer.
SAVE MONEY!
Get free 4G Hotspot WiFi (1500 ISK/day value) from Lava Car Rental by using TARAWIFI at checkout. Tick the box for “4G WiFi” when selecting your additional features and the fee will be removed upon checkout.
BOOKING TIPS
1. Book Early: Due to high demand, especially during peak tourist season (June-Sept.), it’s crucial to book your rental car in Iceland as soon as your travel dates are confirmed. This will allow you to secure the best deal while there is still good availability at the most competitive prices. Most Iceland rent-a-car providers have flexible cancellation policies so you can usually cancel and rebook if you find a better rate.
2. Read Reviews: Research rental companies and read reviews on platforms like Google Reviews and Trustpilot to avoid unreliable providers and hidden fees. Ensure the company has positive feedback regarding customer service, vehicle condition, and transparency in billing. (Please note: Most of the unfavorable reviews from people who rent a car in Iceland have to do with them being underinsured for the road conditions.)
3. Unlimited Mileage: Ensure your rental includes unlimited mileage to avoid extra charges. I would especially pay attention to this if you plan to drive the Iceland Ring Road. Although the official published distance is 1320km, we drove more than 2100km on a recent trip to see everything we wanted to see.
4. Compare Prices: When comparing prices of Iceland rental cars, consider additional expenses such as insurance, fuel policy, and extra driver fees. Sometimes a company with a lower base rate may end up being more expensive due to additional costs.
5. Understand Fuel Policies: Different rental companies have different fuel policies. Some require you to return the car with a full tank, while others charge for fuel upfront. Understanding the policy can help avoid unexpected charges. It’s also worth noting that fuel in Iceland is very expensive (double what you would pay in the U.S.) If you don’t mind waiting for charging, you may wish to consider an EV.
6. Don’t Overbook: Reserve the best type of car for your needs, but no more. Rental cars in Iceland are really expensive compared to most places in the world. If you don’t need a 4×4, I would highly suggested just going with a more affordable sedan. (Our 4×4 rental cost us about $250 USD/day including insurance and fuel on a recent trip.)
CHOOSING THE RIGHT VEHICLE
1. Summer Travel: A standard sedan is usually sufficient for traveling on Iceland’s main roads (paved), particularly if you plan to stick to the Ring Road and major attractions. For the most part, the roads look like this in the summer:
2. Winter Travel or F Roads: A 4×4 vehicle is necessary for navigating Iceland’s highland roads. These rough and rugged “F-Roads” criss-cross the interior of the country are only open during the summer months. A 4×4 is also highly recommended if you are planning to visit Iceland during the winter months when weather conditions can be unpredictable.
Note: Having driven the South Coast of Iceland in the winter, I can honestly say that I would never do this without a 4×4. While it was an exciting and amazing experience, the roads were very challenging at times. The wind blew this little car off the road!
See also: A Guide to Driving Iceland in Winter
3. Manual vs. Automatic: Most rental cars in Iceland are manual transmission. If you need an automatic, make sure to book in advance as they are less common and more expensive.
4. Conventional or Electric Vehicle: Fuel costs in Iceland are very high (double what you would pay in the U.S.) Although the up-front costs are higher, an EV could be a great option if you don’t mind the extra time to charge. Most car rental companies in Iceland have the option of renting an electric vehicle and can provide you with what you need to know about charging around the country.
Confession: Although I have an EV at home, I have never rented one on a trip because I just don’t want to stand around waiting for it to charge or fuss around with an app I am not familiar with.
INSURANCE OPTIONS
In my opinion, what separates the best car rental companies in Iceland from the rest are how they communicate Iceland’s unique insurance needs.
Another Confession: I did not buy adequate Iceland car rental insurance on my first trip. While I was lucky, I witnessed someone else getting charged several thousand dollars upon returning their car due to “gravel damage”. (They were in tears, as I might have been had it happened to me.)
Basically, Iceland’s unique weather and driving conditions make insurance a critical aspect of your rental agreement. Standard insurance often isn’t enough, so consider the following additional coverage options:
1. Gravel Protection: Gravel damage is common due to the prevalence of gravel roads. This insurance covers damage to the car’s body, windshield, and headlights caused by loose gravel.
2. Sand and Ash Protection: Essential for areas near active volcanoes, this coverage protects against damage from volcanic ash and sandstorms. Does this ever actually happen you might be wondering? Yes! The following weather warning came up on my phone on a recent trip!
Note: Damage to vehicles from blowing sand and ash can happen at any time, but typically occurs when there is no snow covering the ground.
3. Theft Protection: Honestly, Iceland has a very low crime rate. This insurance is usually rolled into other packages but can offer peace of mind.
4. Third-Party Liability Insurance: This insurance offers coverage for bodily injury and damages to other vehicles or property in case of an accident.
5. Credit Card Insurance: Some credit cards offer car rental insurance when you put the full cost of the rental on the card. However, there are often exclusions (3rd party liability insurance is typically not part of the coverage). For example, one of my credit cards does not cover Iceland. My other card includes Iceland but does not cover trucks or vehicles over an MRSP of over $75K. I highly recommend calling your credit company to clarify these details and asking them to email you a copy of the coverage.
Understanding Deductibles: Check the deductible amount associated with your insurance coverage. Higher deductibles can mean lower daily rates but more out-of-pocket expenses in the event of damage.
DRIVING IN ICELAND
Driving in Iceland can be a unique experience due to its challenging weather conditions and diverse terrain. Here are some essential tips:
1. Fuel Efficiency: Opt for a fuel-efficient vehicle as fuel prices in Iceland are very high. Plan your refueling stops carefully, especially in remote areas where gas stations can be sparse (East Iceland, for example). Many gas stations are self-service and may require a credit card with a PIN.
2. GPS Navigation: A reliable GPS system is one of the most important things to have for navigating Iceland’s remote areas (like the Westfjords). Mobile phone reception can be poor in certain regions, so a dedicated GPS device or offline maps are highly recommended.
3. Road Conditions: Always stay updated on weather and road conditions during your Iceland road trip. Vedur.is is where you will find daily weather updates and weather warnings. Road.is is where you will find road condition updates (including closures).
4. Driving Regulations: Familiarize yourself with Icelandic traffic laws. For instance, headlights must be on at all times, and seat belts are mandatory for all passengers. Speed limits are generally 50 km/h in urban areas, 80 km/h on gravel roads in rural areas, and 90 km/h on paved rural roads.
5. Winter Driving: If you are not accustomed to driving in winter conditions, consider hiring a guide or driver. Roads can be icy and visibility poor during the winter months.
6. Hidden Fees: Thoroughly read your rental agreement to understand all potential fees, including those for additional drivers, young drivers, and late returns. Be aware of any restrictions on driving on certain roads, as driving on prohibited roads can void your insurance.
PRACTICAL CONSIDERATIONS
1. Payment Methods: Iceland is predominantly cashless, so make sure you have a credit card with a PIN or use mobile payment options. Debit cards are less commonly accepted for car rentals. Ensure that your card has enough credit to cover the rental cost and any deposit required.
Note: In a pinch, I’ve read that you can buy prepaid gas cards with a pin-less credit card inside gas stations.
2. Documenting the Car’s Condition: Upon pick-up, thoroughly inspect the vehicle to make sure it is in good condition. Look for any existing damage and document it with photos and videos. (Don’t forget to document the inside too!) Do the same when returning the car to avoid disputes over damages. Make sure the rental company notes all existing damage on the rental agreement.
Note: If you arrive on a red-eye and are picking up your car in the dark, try to get your vehicle into some good lighting for your videos/photos.
3. Emergency Equipment: Check that the rental car comes with essential emergency equipment, such as a spare tire, jack, and warning triangle. In winter, ensure the car has winter tires, which are mandatory from November to April.
4. Roadside Assistance: Ensure your rental includes roadside assistance in case of breakdowns or other issues. It’s also helpful to have the contact details of the rental company’s emergency hotline.
5. License Requirements: If you have a valid driver’s license from Canada, The U.S., The E.U., the U.K. or Australia, you do not need an international driver’s license for Iceland. (Please note, Google or ChatGPT may give you a different answer to this query as there is a whole business built around selling International Driver’s Permits.)
EXPLORING ICELAND BY CAR
Renting a car in Iceland allows you to explore the country at your own pace and reach places that are inaccessible by public transportation. Here are some must-visit destinations and tips for exploring them by car:
1. The Golden Circle: This popular tourist route covers about 300 kilometers and includes three major attractions: Þingvellir National Park, the Geysir Geothermal Area, and Gullfoss waterfall. The roads are well-maintained, making it accessible year-round. The Golden Circle self-drive is an easy day trip from Reykjavik.
See also: Self Driving the Golden Circle, Iceland
2. The Ring Road (Route 1): This 1,332-kilometer route circles the entire country, passing through some of Iceland’s most stunning landscapes. Plan at least 7-10 days to complete the full loop, allowing time for stops at various attractions along the way.
See also: Driving the Ring Road in Iceland
3. The South Coast: Home to iconic sites like Seljalandsfoss and Skógafoss waterfalls, the black sand beaches of Reynisfjara, and the Jökulsárlón Glacier Lagoon. The roads are generally good, but be cautious of sudden changes in weather.
Note: A South Coast road trip could also include a day trip to the island of Heimay in the Westman Islands – home to Iceland’s larges puffin colony.
See also: A Guide to Iceland’s Westman Islands
4. The Westfjords: A more remote and less visited region, offering dramatic fjords, wildlife (including puffins and seals), and picturesque fishing villages. Roads can be challenging, with many gravel sections and steep mountain roads, so a 4×4 vehicle is recommended.
5. The Highlands: Accessible only by 4×4 vehicles, this region includes the interior of Iceland with its vast, rugged landscapes, including Landmannalaugar and Askja. Highland roads (F-roads) are open only in summer, and conditions can be challenging, so plan carefully.
SEASONAL CONSIDERATIONS
SUMMER (JUN – AUG)
1. Long Days and Mild Weather: Summer in Iceland features nearly 24 hours of daylight, making it ideal for long road trips and exploring. The weather is generally mild, but rain can still be frequent.
2. High Tourist Season: Summer is the peak tourist season, so expect higher prices and crowded attractions. Booking accommodations and car rentals well in advance is crucial.
3. Open Highland Roads: Most highland roads (F-roads) are open during the summer, allowing access to remote and rugged areas. A 4×4 is required by law to drive on F-Roads.
FALL (SEPT – OCT)
1. Changing Weather: Autumn brings shorter days and increasingly unpredictable weather. Snowfall can occur in late October, particularly in higher elevations. (We experienced a storm on Sept. 1st that shut down Keflavik Airport for the afternoon.)
2. Fewer Tourists: With fewer tourists, you can enjoy less crowded attractions and potentially lower prices for accommodations and car rentals.
3. Northern Lights: Autumn is a good time to see the Northern Lights, as the nights become longer and darker.
WINTER (NOV – MAR)
1. Harsh Weather: Winter in Iceland can be severe, with heavy snowfall, strong winds, and icy roads. A 4×4 vehicle with winter tires is essential for safe travel.
2. Limited Daylight: Daylight hours are very short, with only a few hours of sunlight each day. Plan your activities accordingly and avoid driving in the dark if possible.
3. Northern Lights: Winter offers the best chance to see the Northern Lights, with long, dark nights providing optimal viewing conditions.
4. Closed Roads: Most highland roads and some coastal roads may be closed due to snow and ice. Check road conditions regularly and have flexible travel plans. (We had all of our activities cancelled one day in February because of road closures, but thankfully, we were able to move them to the following day.)
Just for fun, I wanted to share with you this 30 sec. YouTube video that shows you what it is like driving in Iceland in the winter. (This South Coast adventure was super fun, but understandably, not everyone’s cup of tea.)
SPRING (APR – MAY)
1. Unpredictable Weather: Spring weather can be highly variable, with a mix of snow, rain, and sunshine. Be prepared for changing conditions and pack layers to adjust accordingly.
2. Fewer Tourists: Spring sees fewer tourists compared to summer, providing a more peaceful experience at popular attractions. Prices for accommodations and car rentals may also be lower.
3. Melting Snow: As the snow melts, roads can become muddy and slippery, especially in rural and highland areas. Drive cautiously and check road conditions regularly.
CONCLUSION
Renting a car in Iceland is one of the best ways to explore the country’s breathtaking scenery and unique attractions. By choosing the right rental company, securing adequate insurance, selecting an appropriate vehicle, and being prepared for Iceland’s driving conditions, you can ensure a safe and enjoyable trip.
