The Ultimate Guide to Renting a Car In Iceland

In my opinion, renting a car in Iceland is an absolute essential, but there are a lot of questions that arise. Should I get insurance? Where should I rent a car? What car do I need? There are a lot of factors to consider, but the process does not have to be complicated or overwhelming. In this post, I’ll break everything you need to know about renting a car in Iceland, and hopefully you should know exactly what to expect by the end of this post.

Do You Need a Rental Car in Iceland?

The answer is: it depends. It depends on how many days you are in Iceland and what you plan on doing those days. Below I have options for how to explore Iceland, and depending on which option you choose, you will know if you need a rental car.

Day Tours/ Bus Tours

If you have a very short trip to Iceland (such as a trip for less than 5 days), then you may not need a rental car. You can choose to do day trips from Reykjavik with guided tour companies who will pick you up and drop you off within the city. If you chose to do these guided day tours, you will not need a rental car.

If you do not want to go back and forth to Reykjavik every night and want to see more of Iceland through a road-trip, you also have the option of going on a bus tour. These companies will pick you up from Reykjavik and take you on a road-trip for whichever length you have chosen. They will take care of hotel booking, stopping for meals, etc. If you are looking to do minimal planning and still want to see Iceland, this may be the option for you. If you choose this option, then you also do not need a rental car.

Rental Car

If you want to explore Iceland at your own pace, or you are in Iceland for an extended period of time, then you will absolutely need a rental car. Renting a car, although slightly more work on your part, will give you the ability to customize your trip to your liking and help you make the most out of your stay.

Car Rental Types

When you begin your search for rental cars, in Iceland, you’ll quickly realize that there are a lot of options to chose from. Below I have broken down the types of rental cars that are available to rent.

Sedans/Cars

Sedans/Cars are going to be the cheapest option when it comes to renting a vehicle in Iceland. Most cars will be 2WD and will come with both manual and automatic transmission.

Jeeps/SUVs/4x4s

Jeeps, SUVs, and 4WDs are the most popular renting option. These vehicles are great for Iceland weather and terrain, and are more spacious than sedans and cars (this can come in handy when you are spending hours inside the vehicle driving from one attraction to the next on the Ring Road).

RVs and Camper Vans

RVs and camper vans are another great option for Iceland, and arguably, you haven’t fully experienced Iceland if you haven’t tried van life. While this option is a bit more expensive than the other two, it makes up for it because the vehicle also serves as your accommodation during your trip. One thing to note is this option is really only available in the warmer months as campsites start to close in September, so places you can actually park your van or RV for the night becomes limited.

Which Rental Car Type is Right for You?

So which rental car option is right for you? With so many options to chose from, the decision can seem overwhelming, but if you consider the following factors, your answer should be clear.

Time of Year

The first thing to consider is the time of year you are visiting Iceland. If you are visiting Iceland in winter, your options become limited. 2WDs are not at all advisable for driving on roads as you need the additional grip, so you don’t slip off the road. Also, if you are travelling in winter when winds are high, camper vans and RVs are not recommended because their height makes it easy for them to fall over. Also in winter. many campsites close, so finding places to park overnight becomes a hassle. If you are traveling Iceland in winter, you’re only option really is a 4WD.

On the other hand, if you are travelling in summer or during the warmer months, then all options are available to you. If you fall under this category, look at the following things to consider.

Travel Route/ “F” Roads

The next thing to consider is your travel route. If you plan to drive around Iceland and stay on the Ring Road, and other paved roads, then a 4WD is not worth the extra money you are going to pay for it. A 4WD is only needed if you are planning on driving roads marked as “F” roads, but you can still experience so much of Iceland without ever driving on an F road (if you want a sample 10-day itinerary for Iceland that involves no “F” roads, check out my other post here). However, if your trip includes trips on “F” roads, your only option is a 4WD vehicle like a Jeep or SUV.

Manual or Automatic Transmission

Iceland’s car rental come in either manual or automatic transmission. If you can drive both, then great! If you are like me and only know how to drive automatic, then that is another factor you need to consider. Cars/Sedans and 4WD will have both manual and automatic transmission options available, but camper vans and RVs are mostly manual. There are still some automatic ones available, but they will be harder to find are are not available at every rental car company. This is definitely something to consider when choosing a vehicles if a certain type (manual or automatic) is sold out.

Group Size

The last factor, but not any less important, is group size. If you are traveling with a larger group, then you may really benefit from the extra space granted by 4WDs and/or camper vans/RVs. This one really is personal preference and comes down to what you believe is best for you and the company you are travelling with.

Where to Find Rental Cars?

Keflavík

There are many rental car companies that have offices near Keflavík International Airport. Renting at Keflavík may be slightly more expensive because there is an added airport fee. Despite the airport fee, if you have a lot of luggage, or don’t want to take the shuttle to Reykjavík, renting from Keflavík is your best option.

Also, the shuttle to Reykjavík, costs an extra fee. This fee combined with how tired you will be after your flight might make renting in Keflavík a better choice.

Reykjavík

Typically, you will find cheaper rental rates in Reykjavík. You can avoid the additional airport fee that you would have to pay if you picked up a car near Keflavík International Airport. Additionally, if you plan to stay in Reykjavík for a couple days before beginning your road-trip, you can delay getting a rental car and walk for the first couple days (Reykjavík’s city center is very walkable) which can save you some money.

Be sure to chose a location based on what will fit your situation the best.

How to Save Money When Booking a Rental Car

Book in Advance

This is true for most places, not just Iceland, but booking in advance can save you so much money. Iceland’s tourism is steadily rising, and aside from getting good deals on your rental car, failing to book early can sometimes mean there is no car available to rent. If you’ve prepaid for tickets and other accommodation, you don’t want to screw up travel plans by finding out their isn’t a vehicle available for you, so be sure to book well ahead of time!

Manual vs Automatic Transmission

Many of the cars in Iceland are manual transmission, and manual transmission vehicles are cheaper to rent than automatic transmission. That means that if you can drive manual, you can actually save quite a bit of money simply by choosing this option.

Rental Car Requirements

To rent a car in Iceland, you need a license. You do not need an international license unless your license does not use Roman English letters. A copy of the license will not be sufficient because you need to present the physical license when you pick up the car.

For the security deposit, you will most likely need to use a credit card, however some rental car companies will let you use a debit card. Be sure to have a credit card on hand, just in case, or check in with the rental car company you choose for their specific requirements.

The age requirement for renting a car in Iceland is typically between 20-23, but that is just for most places. I was the primary driver on my family’s reservation, and they were fine with me renting the car even though at the time of the trip I was 19.

For the additional driver, the age requirement can vary, but is typically 19 years or older. Again, make sure to check with your specific rental car company for their specific restrictions.

Insurance Options

While insurance is an extra expense that you may not want to spend, insurance is definitely recommend for Iceland. Iceland’s weather is so unpredictable, you never know what can happen. This is especially true for the winter months when there is the added probability of skidding on roads, so insurance is a must. Here are some things to think about:

Consider all costs

Since insurance is a must, when picking rental cars, make sure you consider the insurance in the overall price. Some cars, although they have a cheaper base price, work out the be the same as other cars once you add insurance, so make sure you’re keeping insurance in mind from the very beginning.

Read the Fine Print

Make sure you read the fine print and/or ask the rental car company to clearly state what is and isn’t covered by your insurance. Even with premium insurance, things like hitting animal, water crossings and “wind blown doors” (when the wind gets so powerful it can pull the door right off the car) aren’t covered.

Third Party Insurance

Some credit cards, like the Chase Saphire Preferred, offer insurance on vehicles rentals. If you choose to use their insurance, call ahead to the rental car company and see what is covered, so you’re aware. Additionally, something to keep in mind is that in Iceland, if you damage a car, you have to pay the expenses out of pocket and then have your insurance reimburse you. You need to ask yourself is that something you’re comfortable doing.

Things to Know About Driving in Iceland

Right-side driving

Like America, driving is on the right side of the road in Iceland!

Signs

Iceland has its own unique road signage, and coming from America, a lot of the signage was confusing (especially since it was written in Icelandic!). Before your trip, I would recommend learning about the common signs you can encounter, plus what they mean, so you run into no issues. Check out this post by SS car rental for the signs you’ll see: carrentals.com

Iceland Road Laws

Here are things about driving in Iceland that surprised me coming from America:

• headlights need to be on at all times
• no turning right on red
• can only talk on phones with hands free devices  

Protocol for single lane bridges and roundabouts

If there’s one thing that the Ring Road has no shortage of, it’s single-lane bridges and roundabouts. If you are unfamiliar with what to do in situations involving either of those driving scenarios, make sure you learn about them before you go. For single lane bridges, the car closest to the bridge gets priority, but even if you are the car closest to the bridge, slow down just in case. For roundabouts, the inner lane has right of way, so if you are in the outer lane, you must yield to let the inner car exit. Just in case, drive slow, and don’t assume other drivers know these rules!

Premium insurance doesn’t cover everything

Even if you get premium insurance, not everything is covered. Some things not covered by premium insurance include: hitting animals, “wind blown” doors (when the wind gets so powerful it can pull the door right off the car), getting stuck in water due to water crossings (this is only of your vehicle is a 2WD because you are not covered for things you aren’t supposed to do with a 2WD).

Don’t ever drive off-road

It is illegal to drive outside of the marked roads. Iceland’s terrain is very fragile and driving on unmarked terrain can cause damage that will take years to recover from. To avoid fines, harming nature, and your own safety, stay on the marked roads.

Watch out for sheep

There are so many sheep in Iceland and some will wander onto the road. Make sure you are constantly paying attention to your surroundings to avoid hitting any sheep!

Make sure your gas tank is full

If you are near Reykjavík or the Golden Circle, then gas stations will be readily available to you. However, once you leave that area, gas stations can be far apart from each other, so it is important to plan your trips accordingly. Make sure you fill up gas near you accommodation before you set on your travels for that day to make sure you aren’t setting yourself up to be stranded.

Don’t speed

While it is tempting to speed on the Ring Road when there are long stretches of road with no car in sight, don’t! There are speed cameras located throughout the Ring Road that will issue a speeding ticket if you are caught. These fines are expensive and can often be upwards of $1000 so be sure to follow the speed limits posted.

Tips to Make Driving Experience Smoother

Make sure you have a card with a pin

Most gas stations in Iceland require you to have a card with a pin in order to fill up gas, so make sure you know your pin before visiting Iceland! When I went on my trip, we didn’t have a card with a pin, and we were able to bypass the “card and pin” by prepaying for gas inside. While this is an option, you can only do this when the gas station stores are open, so make sure to plan your refills wisely.

Get Google Maps

Many rental car companies will ask if you want to pay extra for GPS. A navigation system is needed in Iceland, no doubt, but Google Maps will do the job just fine. Before you’re trip, make sure you bring a car mount with you and simply attach your phone for a personal GPS device. If you chose to do this option, make sure to bring a charging cord or a power bank so your phone doesn’t run out of charge midday.