A Complete Guide To Renting A Car In Iceland

Which car rental company is the best in Iceland? Car or camping van? How about car insurance?

So many questions, I know. I also had to do some homework before renting our car, so I know your pain. We rented a car on our trip and visited many places along Iceland’s ring road. We love it!

In this travel guide, I will share tips and useful information to answer all your questions.

Is renting a car in Iceland a good idea?

Traveling by car is the best way to explore Iceland. Here is why.

It’s better than buses.

Believe me. You don’t want to wait for buses to come and pick you up just for a short ride. Buses are pretty rare and run mainly in the summer.

Also, while the bus tours in Iceland are pretty good, surely the experience is not as good as driving on your own.

You don’t have to wait for other travelers on tour, and you can decide how much time you want to spend at each place without being rushed back to the bus.

You can visit more places.

Do you know that some parts of Iceland can only reach by car? Yes, it’s true.

You’ll have so much freedom and flexibility when driving a car. You can stop anywhere (except the off-roads) and enjoy the scenery.

Iceland mountain scenery.

You don’t have to spend money on hotels.

If you’re a budget traveler, pack a sleeping bag and a tent with you on your trip. Camping in Iceland is fun if you’re well-prepared.

You can split the cost.

Although the car rental fee in Iceland is much more expensive than in other countries, it’s not that bad if you can split the cost with other travelers.

If you travel solo to Iceland, you can visit the forums or travel groups and find a few people to rent a car together.

Which car rental company should I choose in Iceland?

Iceland has so many car rental companies, and I was honestly overwhelmed when I first looked at them.

I use Discover Cars to compare the prices and services of different car providers. There are many filter options to choose from, so you can adjust them according to your needs.

Car rental prices

The cheapest cars are usually small hatchbacks or similar ones. For example, the rental price for a mini Hyundai or Kia starts at $80 per day.

For the smallest four-wheel drive (4WD), the fee is from $120 to $200, and the larger 4WD costs between $160 and $400 daily.


  • The rental rate includes unlimited mileage, 24% VAT, and a collision damage waiver (CDW).
  • The company may charge a certain fee if you drop your car at a different location from the pick-up.
  • There’s usually a discount if you rent for more than a week. Also, you can find better daily rates and deals from September to May when there’s a low number of tourists.
renting a car in Iceland.

What is the best car to rent in Iceland?

You should pick a vehicle that suits your travel plan and the time of the year.

For example, it depends on the roads you intend to drive, the number of people, and the space you need.

Time of the year

A larger car is better and safer if you visit Iceland in the winter. A four-wheel drive (4WD) is essential in slippery winter road conditions and deep snow.  

Where you go

If you visit the Southern parts or around Reykjavik and the Ring Road, you won’t need a 4WD.

However, if you plan to visit highlands such as the Northern regions or F-roads, you’ll surely need a 4WD vehicle. 

You should check the mountain roads’ condition and opening before going.

In brief, you can’t drive on F-roads without a 4WD. F-roads are mountain or highland roads that are not regularly maintained. Some F-roads will need a big SUV or even specialized vehicles.

Budget trip

If you travel to Iceland on a budget, hatchback cars would be perfect.

There’s a wide range of budget cars you can choose from, but you should select a medium vehicle to be more comfortable. 

Should I rent a car in the winter?

Renting a car in Iceland in the winter is not a good idea unless you have experience driving in snow and ice.

Also, please note that some roads in Iceland in the winter are closed for days due to snowstorms and harsh environments. 

driving in Iceland guide.

Should I rent a campervan?

A campervan is fantastic to travel in general but renting one or not depends on your budget.

A campervan costs from $110 to $160 per day, but you can save the hotel cost. And it’s much more convenient than a car. 

Should I have a GPS?

GPS is generally good to have, as navigating can be confusing. Most rental car services will have options for opt-in GPS at around $8 per day.

However, you can save the cost by using Google Maps. Don’t forget to download offline Google maps before you go. You also should get a local SIM card and pack extra batteries for your road trip.

Tips for renting a car in Iceland

Check small prints for hidden cost

Before renting a car, you should check the small print to see if there’re extra costs such as insurance, airport pick-up charges, and one-way rental fees.

Book your car. The sooner, the better. 

Don’t wait until the last minute to book your car. In high season, the demand rises, and there are not enough good cars for people to rent. It leads to higher car rental prices.

You’ll have more choices when booking your car early and maybe even a discount. 

car window Iceland.

Rental car insurance

Collision Damage Waiver

Most car rental services include a Collision Damage Waiver, which covers most of the damage to your ve­hi­cle, for ex­am­ple, in case of an ac­ci­dent.

This amount can vary between car rentals and is usually around 2.000 EUR.

Wind­shield In­sur­ance

The in­sur­ance covers dam­ages to all car win­dows, in­clud­ing cost of in­stal­la­tion or re­pair if that is pos­si­ble.

Theft Protection

It’s perfectly safe in Iceland, and the theft rate is really low.

However, if your rental car is stolen, the most you’ll pay towards replacement costs covered by the policy is the theft excess.

What is the Iceland car rental age?

To rent a car in Iceland, you must be at least 20 or 23 years old if you plan to rent a 4WD. Also, you need to have a valid driving license.

If you’re under 25 years old, some rental car companies may charge you a young driver fee. The surcharge is between $5-$10 a day for a maximum of 7 days.

Can I use my national driving license in Iceland? Do I need an International driving license?

You can drive in Iceland with a driving license from most European countries, the US, Canada, Australia, and New Zealand.

However, if your license is not in Roman script, you must get an International Driving Permit before your trip.

You can request your home country’s automobile association for this permit.

Rent cars from the locals in Iceland

There are a few car-sharing platforms in Iceland, such as CarRenters, where you can rent privately owned cars from locals. You can also find cars and campervans for rent via Airbnb.

If you decide to do this, carefully check the costs and small print. I find the prices are not much different from those of car-hire companies, and you may not have the company’s support if things go wrong.

What is it like to drive in Iceland?

I’ve written a complete guide about driving in Iceland. You can check it out to know more.

Also, check out this video below for safety tips!

Are you planning a trip to Iceland?

I have tons of free resources on Iceland travel and how to make the best of your trip. Check out some articles below:

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  1. I am just back from a 3 week trip to Iceland where we rented a car. I wish I had found this post before I traveled to Iceland as it answers all the questions one might have about renting a car. I agree that in summer and as long as you stick mostly to the ring road (we traveled the West Fjords also) you will not need a 4×4. And not all roads are paved.

  2. Blair Villanueva says:

    Whenever we travel overseas, we always prefer renting a car (I got a membership with Avis), and I agree with you, it is much convenient to use than taking public transport. And I don’t have to worry about time, coz we manage it. I’m taking note of your recommendation, coz we definitely need this when we visit Iceland!

  3. Sherianne says:

    I visited during the winter and felt unsure of driving myself so I took day tours. It did start to storm during one of the day trips and it was obvious our driver was having trouble so I can assume I would have been in a panic. I agree, going it alone allows for so much more flexibility and is the best summer option. Good to know a 4 wheel drive is needed for F-roads.

  4. Linda Holland says:

    We would definitely want to rent a car if we visited Iceland so good to read this guide for a few tips. We would definitely opt for a 4 wheel drive to let us explore at will. I did not know that there were roads that you could not drive on without one. As Canadians, we would probably be ok even driving in the winter.

  5. Puloma Banerjee says:

    That was a detailed post on renting a car in Iceland!I didn’t know rental insurance was so expensive in Iceland and definitely renting from locals is a good idea.Best thing would be to go for an international driver’s lice.

  6. Trisha Velarmino says:

    If I do get the chance to visit Iceland, I will follow your advice to enjoy and experience it using a car. Thanks for the pro tips and for putting this information together. With a view and sceneries like these on the photos, renting a car will give that flexibility and convenience indeed.

  7. I totally agree with the fact, that you should get a car if you visit Iceland. If you want to see this beautiful island, and all the natural wonders there, it is the easiest way. Also, going on organised tours is very expensive there. This was a great guide to anyone visiting Iceland.

  8. Happy to know that it is possible to rent a car in Iceland. With the scenic view, a road trip is a great way to enjoy it. Thank you for sharing this. Will surely consider driving on our own should we get a chance to visit.

  9. Medha verma says:

    Love your detailed post and I couldn’t agree more- driving is the best way to explore Iceland. In fact, we rented a campervan too when we were there in 2019 autumn, and it was the best experience of my life. It’s a little pricey of course but like you said, you end up saving the cost of staying in a hotel. Plus the adventure quotient is high!

  10. I like how you mentioned that it is important to consider how long you will use the car. My cousin mentioned to me last night that he is looking for a car for hire for their family gathering next week and asked if I have any idea what is the best option to do. Thanks to this informative article and I’ll be sure to tell him that they can consult a well-known car for hire service as they can answer all their inquiries.

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