Car rental in Iceland – Car Hire Tips for Saving Money and Driving

PUBLISHED ON Jan, 20 2023

UPDATED ON Mar, 19 2024


Iceland is an amazing country situated between North America and Europe. Thanks to its isolated location and being mostly undeveloped, its natural beauty remains untouched even though the country is quite modern.

If you are planning a trip to Iceland do not give up on car rental, because in Iceland there is almost no public transportation!

We have gathered everything you need to know before renting a car in Iceland – from price comparison tips that will save you a lot of money in comparing prices between all the reliable car rental providers in Iceland and a driving guide in Iceland, with useful driver information and important Iceland car rental tips to read before renting a car in Iceland.

Car Rental in Iceland – General Information

If you really want to explore Iceland and the amazing views of the special island you must book a car rental in Iceland – this is the best and cheapest way to travel in Iceland outside major cities such as the capital city Reykjavik (Reykjavik).

Iceland is not a cheap country, but it has enough car rental companies to have good price competition, and a wide selection of rental vehicles that are suitable for driving anywhere in Iceland – including SUVs, SUVs, four-wheel drive, luxury cars and jeeps. It is advisable to take a 4X4 vehicle because Iceland is a destination where a trip is usually combined with a lot of off-road driving.

Many people mistakenly think that you can travel in Iceland as in any other country, by bus or train, but Iceland is a small country with less than half a million inhabitants and the vast majority have a car. Thus, the buses that drive outside the city Reykjavik are for tourists only – that is, guided tours from the tourist centers and hotels – and their prices are so high that it is better to rent a car.

If you travel to Iceland in a group of 2 or more travelers, it will be cheaper to rent a car than taking tourist buses (not to mention the convenience and privacy). Driving in Iceland is very easy and there is not much traffic on the roads.

Finding the Best Car Rental in Iceland

Renting a car in Iceland can be much simpler and cheaper than you thought – the sophisticated price comparison engines for car rental rates are automatically updated with all prices for all major car rental companies in Iceland that are considered reliable and provide customer service in English. Ny using the price comparison engine you can find the cheapest prices for a variety of models. Simply fill out the form, select Iceland in the country field, then select the city in Iceland where you would like to get the rental car – Reykjavik the capital or Husavik, Hopen, Akuriri, Agilstadir, Keflavík or other cities in Iceland. Enter the dates you are interested in booking a car rental in Iceland and click “Search”.

Car Rental Search

Car Rental in Iceland – Important Tips

Book online : The best prices you will find on car rental in Iceland are online, and the longer you book before you arrive in Iceland, the cheaper prices you will get – use the price comparison engine to find the best price for the right car for you.

Book a car rental in Iceland to Keflavik Airport – While this airport is considered as the airport of the capital Reykjavik, it is actually an hour’s drive from the capital, so it is better to rent the car from the airport and save the cost of the bus or taxi from the airport to the hotel in Reykjavik. If you are coming in to Iceland by plane, all you have to do is get your rental car once you arrive and you’ll be ready to go exploring. You can find many car rental firms in the Reykjavik International Airport (named Keflavik Airport).

Do not buy anti-theft insurance –  car thefts in Iceland are very rare and the chances of this happening to you are very low, if there is a country in the world where you can waive theft protection insurance it is Iceland.

Consider the car rental period: In principle, the longer the car rental period, the lower the price per day.

Plan the dates of the trip to Iceland: During July – August prices in Iceland are high but on September 1 the tourist season in Iceland ends and the “quiet season” in terms of tourism lasts until May 31 – during this period car rental prices in Iceland drop significantly – up to 35 euros per day compared to 85 Euros a day during the peak season!

Refueling: When you finish renting a car in Iceland and return the vehicle to the rental company, be sure to fill the fuel tank. In principle, if you do not return the vehicle with a full tank, the rental company will do it itself and charge you rates 3 times higher than the gas station.

Driving in Iceland

The landscapes and road conditions in Iceland are very unusual relative to other destinations in Europe. Driving in Iceland is not difficult for those who are experienced in off-road driving but the views are distracting and in many seasons of the year it is winter driving in a snowy country. Weather conditions can change abruptly, and rain or snow can start to fall unexpectedly, and can cause sudden road closures or rivers overflowing and blocking passage.

If you are not sure that you have enough experience and driving skills to deal with driving in the highlands of Iceland – it is better to give up and stick to a fun trip in the lowlands of Iceland.

Before you travel to Iceland, gather up-to-date information about the area and the current state of the roads and weather. Gather as much information about the area as possible and start by finding out that the area you are traveling to is open – you can search for up-to-date information on the internet or ask the hotel staff in Iceland where you are staying or inquire at South Iceland tourist information centers and North Iceland tourist information centers. It is also advisable to create a planned route and timetable for the trip and send it to someone in your home country who can make sure everything is fine or know where you are supposed to be in case of stormy weather.

The road system in Iceland

Iceland consists of several types of roads, the main road is road number 1  (Hringvegur – “ring road”, the ring road of the island). Most of the road is paved, but parts of it, especially in the east of the country, are still made of dirt. Please note that parts of the main road are also closed during the winter. It is also worth noting that along this road is located 90% of the population of Iceland and along it all the important services for residents and tourists.

Icelandic Highway 1

The sign marking the Icelandic Highway 1

Get ready to drive on unpaved roads

Iceland is the world leader on roads: only about 3,600 kilometers are covered with asphalt. So, you are going to drive on unprotected streets of the island. It should most likely never seem like a huge problem. Keep in mind that the gravel roads are less than 240 km per hour. In Iceland, accidents occur most often when pavement turns to gravel. Avoid it by slowing down on paved sections. Unpaved roads are usually somewhat narrower than their asphalt sisters.

Dirt roads – Most of Iceland’s internal roads are dirt roads, unpaved but leveled roads. Note that these roads are narrow and not completely tightened mainly at the edges.

Every week a map of the open and closed roads for traffic in Iceland is published. It is really not worthwhile to drive on closed roads. Every tourist information station has the map, but it is not always up to date. The best way to catch up is to call 1777 and find out.

Speed ​​Limits in Iceland

The speed limit on highways is 90 km/h, but but on denser roads it is usually 60 km/h. The highways in the rural areas of Iceland are divided into two types – on Gravel roads the speed limit is usually up to 80 km/h and on paved asphalt roads the maximum speed is usually 90 km/h – but pay attention to the signs. Don’t speed – not only that your safety is important but speeding fines are high – very high!

Speeding fines are high (like really high!)

Learn how much it’s worth to speed up this site and get the details. This can give you information about what you can expect based upon speed limits and the speed you travel. Spoilers alert: The maximum fine will be incredibly high. Note: The linked webpage below is in Icelandic, but a translation is available for that language.

Important traffic laws in Iceland

  • In Iceland, drive on the right side of the road and overtake on the left (as in Europe and USA).
  • Alcohol restriction in Iceland – 50 mg for every 100 ml of blood.
  • Do not talk on a cell phone while driving.
  • Seat belts must be fastened at the front and back.
  • Driving on unmarked roads or tracks is prohibited.
  • To the list of Icelandic signs and important driving rules .

Age Requirements for Car Hire in Iceland

There is usually a minimum requirement for age 21, and at least one year license/driving experience. Under the age of 25 you may need to add a fee for a “young driver”.

Driving in Iceland – Driving in the Snow and Crossing Rivers

The special challenges of off-road driving in Iceland that are usually new to most foreign drivers are snow driving and crossing rivers (without a bridge). Always be sure to drive according to road and weather conditions. If it snows the roads become very slippery, it is important to drive slowly and carefully. Always check the weather forecast in the area before you go on a trip.

A unique challenge for off-road driving in Iceland is quite typical of crossing shallow rivers in a vehicle without a bridge. Sometimes it is not an easy task and the recommended crossing method is locking the wheels, shifting to front gear, driving with the direction of the water (and not against) and not changing gears in the middle. It can be dangerous, and if you are not sure you know how to cross the river while driving wait for a local vehicle that will explain to you how to get around (Icelanders are very friendly and will happily help) or choose another route.

Iceland Car Rental Insurance

Any self-respecting car rental company will require the customer to do, as a first step before receiving the keys, car rental insurance. And even if the essence of the insurance is clear, the policies differ from each other in quite a few characteristics. Therefore, you should carefully read the terms of the insurance agreement.

When renting a car in Iceland, having Iceland car rental insurance is of utmost importance. This insurance coverage provides protection and peace of mind during your travels, safeguarding you from potential financial liabilities and unexpected expenses, including gravel protection and sand and ash protection. Gravel Protection is a form of car rental insurance in Iceland that provides coverage for damages resulting from gravel and similar materials impacting the rental vehicle. Given the prevalence of gravel roads throughout the country, this type of insurance can be critical for those planning to rent a car and travel within Iceland. Sand and Ash Protection (SAAP) is a specific type of insurance coverage that protects rental cars from potential damage caused by volcanic ash and sand in Iceland. It was created due to the volcanic eruptions that have left loose ash and fine sand in certain areas of Iceland, such as from the Eyjafjallajökull eruption. As the wind blows, it may cause the ash and sand to whirl up and cause damage to vehicles, especially to their paintwork, windows, lights, plastics, chromes, and wheels.

When talking about car insurance for rental cars, we differentiate between several main types. Collision Damage Waiver Insurance (CDW) will cover any damage caused to the car, whether in theft or accident, and may also include injuries to the occupants’ bodies or belongings. Third party insurance, will be activated in case of an accident involving another party, in order to settle the payments to the other party.

Keep in mind that even if you are insured, you are still liable to pay a certain amount, known as “excess” or “deductible” in the event that the rental car is damaged. This is the initial amount that the car renter is required to pay out of pocket in the event of damage or accident. The deductibles usually range from $1,000  to $2,500 – a considerable amount!

Fortunately, there is a way to avoid this payment, when needed, by purchasing car hire excess waiver coverage.

There is a way to avoid paying the excess and reduce it to zero. The rental company might offer you to purchase a “deductible cancellation” coverage that can save you a lot of money in case of damage or accident. But is the “deductible” coverage offered by the rental company the most attractive on the market?  The plain answer is – Definitely not!

The experienced among you will be able to attest to the elegant persuasion attempts of the rental company that will warn you of the possible consequences if you want to leave the place without insurance that includes coverage for any damage and also “cancellation of deductibles”. The persuasiveness of a company representative can easily affect you and you are no longer really sure what to buy. These are exactly the concerns that rental companies rely on …

Want to be ready the next time you rent a car? If so, it is important to know that you have the option to purchase insurance that will free you from the deductible, and at a low cost.

CarIsnuRent offer Iceland daily car hire excess insurance policies starting at $9.90/day and annual car hire excess insurance for a low price of $300.00. This can easily reduce the costs of renting a car in Iceland.

The majority of rental car issues involve scratches and dents that happen to the vehicle after it has been obtained by the renter. When renting a car, you will be signing a form listing the scratches and dents that the rental company already knows about. Once you return the vehicle, the damages present will be compared to this list. You must, therefore, check the vehicle thoroughly before signing the form. It is also a good idea to take pictures of the different sides of the car for documentation. Once you drive away with the vehicle, you will be responsible for proving that the damages the company is charging you for were already there before you took out the car.

In addition, while Iceland is undoubtedly beautiful, there are some risks when driving around the country. Gravel roads have lots of small rocks that can hit your rental car’s body or even the windshield, resulting in you being charged for a new paint job or windshield. During strong winds, you can also encounter ice and ash, which can damage the car just like rocks. We offer Car Hire Excess Waiver Insurance for Iceland, which includes both Sand and Ash Protection (SAAP) and Gravel Protection (GP). Just drive slow enough to avoid sending rocks into the sides of the vehicle.

Exploring Iceland by Car

What makes Iceland different from the other touristy spots in Europe is that it is both cultural and progressive. The citizens have stayed close to their roots and speak a language reminiscent of that of the Vikings, yet you can find remarkable architecture and high technology everywhere. This makes Iceland a sensible choice for tourists.

When visiting, tourists usually start their journey from Reykjavik, the nation’s capital. This city is located on the southwestern part of the country, on the southeastern side of Faxafloi (Faxa Bay).

In Reykjavik, you do not have to choose between comfort and nature — you can have both. The city has everything that a modern city has to offer yet pristine nature is just a short distance away.

Most of the residents in Iceland also live in or near Reykjavik, so there are large swaths of land you can explore to enjoy the world’s natural beauty.

Some of the wonderful attractions in Reykjavik are the National Museum of Iceland, the Perlan, as well as Old Town. You can also check out Hallgrimskirkja, a large church towering over the city. That one is hard to miss.

Driving to the southwestern part of the city will take you to the Blue Lagoon, which is known for its bright blue color and is said to have healing properties. Driving to the southeast, meanwhile, will take you to the biggest glacier in Europe, Vatnajokull Glacier.

Because harbors and seas are very much an important part of living in Iceland, there are also a lot of fun water-related activities you can do. Just park your car near the docks and go deep-sea fishing, whale watching or even island hopping. There’s something for everyone — whether you’re into high-adrenaline adventures or just want to relax.

Vacation in Iceland – More Information for the Traveler

Iceland with children – the complete guide for family trips

Recommended hotels in Iceland with children

Have a safe trip.

Leave a Reply

Your email address will not be published. Required fields are marked *

Travel Tips and Guides

Iceland Rental Car Insurance: Do You Need It? How Does it Work?

Gil Farkash

Verified writer Read More

Iceland with Kids - Your Guide to Ultimate Family Holiday

Ekaterina Saprina

Insurance Writer Read More

Traveling in Iceland: A Comprehensive Guide to Safe Driving in Windy Conditions

Gil Farkash

Verified writer Read More

Frequently Asked Questions (FAQ)

Can I buy a plan for just one day?

Yes. Insurance for a single day is available.

Can I buy a plan for part of my rental only?

No. We provide a single journey plan. You are covered from the time you pick up the rental car up to the time you return it or on the last date written on your Certificate of Insurance, whichever comes first.

Can I buy a plan when I pick up my rental car?

No. You should purchase a policy before starting your travel.

Find the answers you’re looking for to the most frequently asked car hire insurance questions as well as other questions relating to our products and services.

Visit the FAQ page