The absolute best way to get around Iceland is by driving. But renting a car can feel overwhelming.
Below is my complete step-by-step guide on how to rent a car in Iceland with my top car rental tips based on my experiences (Summer and Winter):
- Where and when to rent,
- What type or car, 4WD or not,
- How to choose the rental company,
- Need for Insurance,
- pick-up and return tips…
Get ready for an amazing road trip!
Renting a car in Iceland – Overview (Summer / Winter)
Is driving in Iceland worth it? Do you need a car?
Driving is the absolute best way to explore Iceland. It gives you so much freedom to admire the incredible nature all around you.
It will allow you:
- To enjoy some of the hidden gems
- Visit a place early before the crowds, at sunrise or sunset
- Easily cover several places on the same day,
- Be flexible to adapt to the weather…
Is it hard to drive in Iceland?
Driving is actually relatively easy.
Apart from Reykjavik and Akureyri, the towns are very small with one main street.
Out of the capital city, you are driving mostly on well paved roads only surrounded by nature.
The most difficult part is to keep your eyes on the road and looking in every directions!
Essential Iceland car rental tips – from my personal experiences (Summer / shoulder seasons)
If you don’t want to read the entire article with the step-by-step to renting a car in Iceland, here is a short summary and my top recommendations:
- TIMING – Iceland is a popular destination – for choice and good price, book as early as possible
- 2WD / 4WD –
If you plan on driving on F-roads, a 4WD is mandatory.
Otherwise 2WD is sufficient. However, a simple 4WD or SUV allows you to enter any gravel road that looks inspiring without worrying. - INSURANCE – get insurance, with all the gravel and volcanic risks – however check small prints to see if 4WD are allowed on unpaved roads
- Always check the car upon arrival and take pictures of anything you see (don’t forget the roof and under the bumper)
Essential tips for renting a car in Iceland in Winter
- Make sure to rent a car from a reliable agency – check the tire conditions before starting your road trip (a 4WD is a good idea too)
- Don’t choose the smallest car, you need a good engine with enough power
- If you can afford it, I recommend to rent a 4WD – it offers better stability and options in case of snow and ice
- Get insurance, with all the gravel, volcanic risks, ice and wind!
The booking platform I personally use
You will see a lot of mentions of Discovercars.com throughout this article.
This is the platform I personally use (well, since I have discovered them).
As soon as I decide on a destination, I go check their deals and car types. And upon research, they often have the best deals for my needs.
And if you look at review site, this is one of the best customer-rated comparison sites on the market.
Plus, they have a practical coverage option at great price that will cover you in case of damage to the outside of the car.
Check out their current car rental deals in Iceland.
Option 2 – compare cars and prices of local brands on GuidetoIceland.com
#1 to 3 – How to rent a car in Iceland – required elements
Tip 1 – License to rent a car in Iceland
It is always better to have you International Drivers Permit anywhere you travel out of the country. This way you never wonder.
However, know that to be allowed to drive in Iceland, you can use a standard International driver’s license (if staying under 6 months). It means a license that has:
- a licence number,
- a photograph,
- a valid date,
- and is in Latin letters,
A valid US license works.
A valid Canadian license works.
A valid UK license works.
Tip 2 – Extra age requirements / years of driving
Official driving age in Iceland is 16.
However, most car rental companies in Iceland:
- will require you to be 20 or 21
- will require you to have held a license in your home country for a year or more,
- may add charges, if you are under 25,
- may add charges, if you are over a certain age.
It’s best to make sure to read all the fine print.
On the platform Discovercars.com you can enter your age, to see any limitation in rental cars available and any additional fee.
Tip 3 – A credit card that can handle the hold charge (deposit)
Remember that unless you have decided to purchase a full coverage insurance directly with the rental company, you will be asked for your credit card to hold a charge a.k.a. a deposit (on top of the payment). This amount, the “excess charge”, is blocked on your account via your credit card.
As it is on top of the payment, you may be hitting the limit of your credit card daily/weekly or monthly protection limit.
Once the car is returned without any damage, this amount is unblocked from your card.
I have seen many people at rental companies counters being surprised by this situation and having issue managing it.
So be prepared! Your options are:
- Use a different credit card for the hold charge,
- Contact your bank prior to traveling to change your limits,
- Purchase a full coverage insurance with a 0 excess charge.
#4 & 5 – When and where to hire a car in Iceland
Tip 4 – Best period
Iceland is a very popular destination, especially in Summer.
And tourism as grown fast. There are a lot of car rental companies, but it is still an island. Therefore supply is limited.
So, if you want the choice of your vehicle types and good prices, it is better to rent your car as early as possible.
You won’t find last minute deals in Summer in Iceland. As soon as your date are decided, book the car!
Tip 5 – Where
There are 3 main locations where you can rent your car.
They do not offer the same variety of companies and cars, but you should choose depending of your type of travels to make your Iceland car rental experience the most efficient.
Most car rental companies in Iceland are based in the capital city Reykjavik or at the Keflavik international Airport, and a little in Akureyri:
Car rental at Iceland Airport – Keflavik
- BEST FOR – those who want to start their road trip right away and head into the beautiful Icelandic nature
- PROS – Large choice of companies, no need to drive in town, you can head straight for the ring road
- CONS – Big Machine, one after the other, impersonal
- NOTE – be careful – the International airport is at Keflavik, while the regional airport is at Reykjavik (40min drive away)
- Note – some companies are right in the airport, while others require you to take a free shuttle to get to the rental car areas
Car rental Reykjavik
- BEST FOR – people combining quiet days in the capital cities or organized tours with driving days. You can stay in Reykjavik without a car and rent it only when needed
- PROS – Large selection of companies, No car to park and pay for for the days you don’t need it
- CONS – need to drive and park in the city
- NOTE – some local companies even offer a drop off where you are stying – When I used Route 1 car rental, they came at 8am at my accommodation to give me the car and do all the pick up activities, as well as give me advice. That was great!
Car rental Akureyri
- BEST FOR – People who don’t like driving and are taking an internal flight to Akureyri and start driving from there to explore North Iceland
- PROS – No long day on the road, on clear days you get nice views from the plane
- CONS – not many companies are renting cars from Akureyri, choice is limited
#6 to 12 – What type of car to choose
Tip 6 – Recommendations for size of car / power – does size matters?
I know it depends on how many people are traveling and how much luggage you are traveling with.
But here are a few things to keep in mind when traveling in Iceland:
- A lot of the attractions are along main roads. So, if you are doing the Ring Road, any type of cars are fine, even small
- Again if doing the main attractions, there is no mountain roads, so no need for more power
- There are gravel roads, so a car with higher clearance could be more comfortable
Tip 7 – 2WD or 4WD – Summer discussion
This is the biggest question everyone has.
Let’s go by logic:
- Do you plan on driving on F-roads (Mid- June to September only)?
If yes, a big 4WD truck is mandatory and you need to know how to cross rivers.
If no, go to next question - Do you like taking a road that looks promising off your itinerary?
If yes, take a 4WD so that you have peace of mind that you can go anywhere – but you don’t need a big truck
If no, go to next question - Do you plan on taking long gravel roads which are not F-roads? e.g. Berserkjahraun
If yes, know that most car rental companies do not allow normal cars on gravel roads – you can take a short one to reach the parking of an attractions, but not go on a gravel road adventure – so take a 4WD but you don’t need a big truck
If no, go to next point. - Otherwise to reach most attractions around Iceland, renting a standard car is largely sufficient
Tip 8 – Are F-roads worth it in Iceland?
Based on the decision tree above, your next question might be if F-roads are worth it.
If it is your very first trip to Iceland, I would say that No. Because there is already a lot to see outside of the F-roads without any stress.
It might be best to keep it for a second trip, unless you are already a very frequent off-road driver.
Tip 9 – 2WD or 4WD – Winter discussion
In Winter I would totally go for a 4WD for peace of mind.
The weather can change abruptly with ice and snowfalls, 4WD gives you more comfort in driving in difficult conditions.
Learn more on my article about Driving in Iceland in Winter.
Tip 10 – Transmission choice
I have driven both manual and automatic in Iceland. I like both options for different reasons.
Note that some companies have a lot more manual transmission cars.
So make sure you pay attention to that detail when choosing a vehicle especially if you are uncomfortable driving shift.
Tip 11 – Gas or diesel?
Gas is called petrol in Iceland.
All gas stations have petrol and diesel.
It is up to your personal preference. Prices do not differ that much.
Tip 12 – Consider vehicles with sleeping options
You can also choose to rent a vehicle that allows you to sleep in it. This way you save money on accommodations on your Iceland Road trip.
However, know that overnight in cars, trailers or campervans is illegal outside of a designated campsite.
You can opt for:
- Mini campers or camper vans where you sleep inside the vehicle
- 4WD with roof tent options for the adventurous – to be able to go anywhere
- Complete Motorhome – more comforts but limits a little where you can go
All my favorite locations are included (with GPS coordinates, map of region and planning info) in both my travel guide eBooks that help you easily plan your Iceland road trip:
Plan your dream trip to Iceland with my guides!
- 8 easy-to-plan maps
- 100+ pre-selected locations
- GPS coordinates
- Useful planning tips
- 130+ large photos
- 2 easy-to-plan maps
- 30 stops, 10 detours
- GPS coordinates
- Useful planning tips
- 70+ large photos
#13 to 19 – Best rental car companies in Iceland – reviews
Tip 13 – Cost of car rental in Iceland
To give you an idea, based on data from Discovercars.com, prices vary mostly between 50 USD and 110 USD.
The more expensive months are July, August, May and February.
The cheapest month are October, November and December (but remember that days are very short and you won’t be able to see much).
It is very easy to compare prices online on platforms.
However, be careful: if you are testing direct websites and trying to compare, it can be very difficult as they hide fees or taxes later in the process.
Tip 14 – Things to consider when choosing your car rental company
Price is of course an important criteria when choosing a car rental company, but there are a few more things your should consider:
- Unlimited or sufficient milage – the price can be attractive but if it has only a few hundred kilometers included, you final invoice might be a big surprise. So make sure there is sufficient milage included or even better, unlimited milage
- Age of the fleet – Normally, rental companies tend to keep modern fleet of vehicles and change their stock frequently. However to keep the prices as low as possible, some of the companies offer older vehicles. Make sure you understand what it entails.
- Customer service – Is there a number to call 24/4?
- Cancellation fees
- Servicing – Make sure they are big enough to carry out servicing anywhere in Iceland and that they can replace your car for you to keep going on your road trip (especially if choosing an older fleet)
- Reviews – of course, best to check out their reviews online, but with a grain of salt as many websites are open to anyone so fake reviews are a classic
- Don’t pay attention to the classic bad reviews – when people did not take any insurance, had an accident and oh surprise, they had to pay for it… well that’s normal
- Pickup – this might not be important for everyone, but some companies do offer to drop the car at your accommodation which can be practical
Tip 15 – Best rated car rental companies in Iceland
Don’t forget that on Tripadvisor or Google for example, anyone can write a review even if they have not used the company.
On the platform Discovercars.com, each rental company has a mark on 10 points. This is an average of the marks given by actual customers.
On the search page, you can select only the best rated ones.
Some of the best rated rental car companies in Iceland are:
- Alamo
- Europcar
- Northern lights
Tip 16 – How to save money – cheap car rental in Portugal
If keeping the cost down is your main concern, you should:
- Book very early
- Return the car where you picked it up
- Book a smaller car
- Pay attention to pick-up and drop-off times – Car hire is typically charged per 24-hour period
- Choose a rental without cancellation or with limited cancellation
- If renting for 6 days, check the price for 7 days – sometimes companies have a discount for 1 week rentals.
- Book with limited milage
However do read the fine print. And get your expectations at the right level.
All can go right but you might not get the same level of service, you might have issues with your cars…
Tip 17 – Car rental scams in Iceland
As in most country, if the price is very very low there must be conditions and tricks behind it.
As in most country, make sure all damages are written on the paper before leaving the carpark.
On their own websites, some companies offer the option to return the vehicle with an empty tank and make the price of rental a little cheaper. They make money out of the fuel left.
I don’t drink coffee 
But I also like other drinks and sweets!
Do you like the free content you find on my blog? All my tips and practical information, without intrusive advertising…
#18 to 20 – Understanding Insurances
Tip 18 – Understand the types of car rental insurances in Iceland
You can pick the insurances you want à la carte or pick a discounted bundle the rental company might offer.
Plus in Iceland, there are specific insurance to consider.
Here is an explanation of the various options that may be offered to you:
- Collision Damages Waiver (CDW) and Super Collision Damages Waiver (SCDW): typical rental car insurance everywhere, to lower what you will have to pay in case of collision. Some companies will cover the whole cost while other will still leave a deductible to pay.
- Gravel Protection (GP): typical rental car insurance to protect from gravel damage to the windshield, headlights, and car body. I normally don’t take that one and I am ready to take the risk but considering the many gravel roads in Iceland, I think this is a great one to have.
- Theft Protection (TP): Protects from theft damage to your rental – Iceland is considered a very safe country but, like everywhere, you still have thieves, locals and tourists. This one, I have no opinion on.
- Sand and Ash Protection (SAAP): This protects from damage causes by sand and ash to the paint of your rental. It happens mostly February to April, when the snow melts and during eruptions or sandstorms when it is windy. Iceland has active volcanoes, so you never know. There was an eruption that started when I was there…
Tip 19 – 4 ways to purchase insurance
- Option no insurance – apart from the mandatory one, you don’t have to take extras. Just know that in case something happen, you can be liable for your entire deposit.
- Option 1 – Use your credit card insurance/ or your own car insurance
Many credit cards have some kind of coverage for rental cars. They all differ.
Similarly, your home car insurance can be covering you as well when renting a car.
You need to read all the fine prints to clearly understand what is covered or not.
But make sure to read to fine print, they often exclude some countries such as Iceland. - Option 2 – Purchase upon booking your rental car
When you book your rental car, you normally have the option to select the insurances you want. The deals are most of the time better than at the counter (I have seen 3 times less, once).
On direct websites, you get the dealer’s insurance but on platforms, you get a special insurance created by the platform.
For example on Discovercars.com, they have their own Full Coverage Waiver Insurance Option
Personally, this is what I used because it is the more straightforward in case of an issue. Personal feeling.
- Option 3 – At car rental
This is the more expensive option, but if you have not done it before, you could purchase it as you are paying. - Option 4 – Travel Insurance
Get a travel insurance that include comprehensive car rental insurance with one of the classic insurance companies.
Tip 20 – Consider taking roadside assistance
Technically, it is not an insurance, but it is offered at the same time.
Conditions of coverage vary but they normally include:
- Loss or damage of car keys
- Keys locked inside the car
- Flat tire
- Rental car not starting
- Car out of fuel
If you are in a country you don’t know, traveling alone and not good at changing tires, this could be a great option.
This is something you can get at the counter when getting the car.
However, if you are someone very organized, I think the cost vs risk is not worth it.
#21 to 23 – Extras
Tip 21 – Do I need GPS?
To navigate, you can consider renting a GPS.
- Option 1 – Bring your own GPS
This is my favorite options. I know well how it works, plus I can pre-enter all my destinations which saves me a lot of time.
On my travel guide eBook you get the GPS coordinates of the carparks of all my favorite locations - Option 2 – Use your phone
If you have a phone, don’t forget that the roaming charges abroad can be very expensive.
However, you can download a map beforehand, when you are connected to wifi, so that you can navigate without spending money.
Don’t forget the charger and your phone holder so that it is comfortable! - Option 3 – Take the GPS extra
I don’t recommend it. I think this is a last resort if you don’t have your own or a good phone. I always find it very expensive.
Tip 22 – Additional driver charges
Decide beforehand whether or not you will need more than one driver.
If so, take this into account when comparing rental deals between companies.
Some companies have deals that has a free extra driver.
On the platform Discovercars.com, if there are any, it can be selected on the filters.
Tip 23 – Child safety seats rules in Iceland
To comply with Iceland legislation:
- children under the age of 12 or shorter than 1.35m (4’4″) must use a special seat – various requirement apply depending on size/age
- Children smaller than 150 cm (4’9″) are not allowed to sit in the front seat in front of an activated airbag.
- see child safety rules in Iceland
#24 to 31 – How to pick up and drop of the car to avoid issues
Tip 24 – Check your vehicle at pick-up
For a worry-free exchange with the rental car company, I recommend you do a thorough check of the car before leaving the carpark.
Sometimes it is done with an agent. Sometimes they just give you a form with the state of the car before renting. Sometimes they tell you nothing…
Make sure all dents and scratches are noted, if not, make sure they add it.
Plus, for peace of mind, you can take pictures before leaving (like in every country).
Things to look for:
- Check all the exterior of the car for dent and scratches
- Check the windshield
- Don’t forget to check the roof!!!! It is often forgotten, but they might check it when you return
- Don’t forget under the bumper – with all the gravel roads, it is often damaged!
- And don’t forget the back of the mirrors
- Check the interior for any damage
- Check the state of the tires (Winter tires if traveling in Winter)
- Check the state of the fender (mud wing above the wheels)
- Make sure the spare tire is in place and in good condition
- Check that gas level and milage match the record
Tip 25 – Check the mandatory equipment is in the car
In Iceland, according to the Transport Authority, you must have in your car:
- Warning triangle
And it is recommended to have:
- Reflective vest or jacket
- Spare set of lights
- A fire extinguisher
- A first-aid kit
- Spare wheel
Winter tires are not mandatory, even in Winter. However…
Tip 26 – Tolls
There is only one toll road in Iceland on Route 1 East of Akureyri. It is a tunnel.
Check with the rental company if you are OK to go or if you will have to connect to www.veggjald.is to pay.
Tip 27 – what to do in case of fine or tickets (speed / parking)
You are responsible for any parking tickets or driving fines that you receive during the rental period.
If you are aware of it right away, you can go and pay at the police station or online as indicated.
But know that it can take up to 3 months for a fine to be reported to the car owner (the rental company). In that case, they will send you proof and charge you for it and maybe add an administrative fee for managing the fine.
Tip 28 – What if there is a problem with the car
Don’t lose your rental agreement.
On it, you will find the steps to take if you have a problem with your car.
Most use a breakdown assistance service and the number will be listed on the agreement.
Then you can contact the rental company to see how to car can be replaced.
Tip 29 – Don’t forget to manage your tank
More and more company now have a system where you must bring back the car with the same level of fuel (not full to full tank but same to same).
This is very annoying, but it is easier for them to manage.
Therefore, you need to understand how much the car consumes and how many kilometers / miles you still have to do, if you don’t want to waste money.
Tip 30 – Drop off
For peace of mind, try dropping off the car during opening hours so that the car checks can all be made and validated.
If not possible, take pictures of the car before leaving it.
It is true that you can read horror stories on the Internet about renting cars in every country.
However, keep in mind that the thousands and thousands of people who have no problem don’t write that all went well with their rentals…
So don’t be stressed. If you have taken a reputable company, are respecting the rules, have done a good inspection upon pick-up, it should go very smoothly.
Tip 31 – What if you damaged the car
If your rental car gets damaged, the first thing to do is to contact the car rental agency.
- If your rental has only basic insurance, you will have to cover the damages up to your deductible amount.
- If you have purchased a full coverage with the rental company, check with them and it should be covered
- If you have purchased with Discovercars.com, contact them and provide all info (within 28 days of dropping off the car). They with refund you for charges and costs related to the damage, if warranted
- If you are using your own insurance, contact them and provide all info. They with refund you for charges and costs related to the damage, if warranted.
#32 to 36 – Get ready to drive in Iceland
Below is a snapshot with the main things to know.
You can learn more on my article about driving in Iceland.
If you are planning a Winter trip, head to my Iceland in Winter article.
Tip 32 – Understand the rules
- Driving is on the right side
- Seatbelts are compulsory for driver and passengers
- Headlights must be turned on all the time
- Alcohol limit = 0
- National speed limits are – 50km/h in residential areas, 80km/h on gravel roads and 90km/h on major paved roads such as road 1
- Fill up on fuel when you can – some area are sparse in terms of petrol station, so plan ahead.
Tip 33 – Watch videos
To get familiar with the driving you can watch videos of people road tripping in Iceland.
Below is my short video to give you an idea of what it looks like:
Tip 34 – Know the potential dangers
There are 4 main dangers to be aware of when driving in Iceland:
- Wind warnings (boards) – If it is red, don’t go on the road
- Sheep – They can appear in the middle of nowhere
- Morons – People stopping in the middle of the road to take pictures
- The road – it is easy to get distracted by the amazing scenery
ROAD CONDITIONS – always check out the latest status of the roads – Visit this website and click on the different sections of the small map to see the colors of all the roads
Tip 35 – Plan your itinerary
It can be fun to go an adventure.
There is so much to see in Iceland, that you should have a good idea of where you want to stop so as not to run out of time every day.
But if you want to see many locations on your road trip, better to plan ahead to balance your days and book accommodations.
To plan your itinerary, you can check out:
- My general post about planning an Iceland road trip
- My suggested itineraries for 5 days in Iceland
- My suggested for 7 days in Iceland itineraries
- My 4 itineraries to spend 10 days in Iceland
- And my favorite itinerary for 14 days around Iceland
- or get one of my practical eBooks to help you plan your ideal itinerary:
Plan your dream trip to Iceland with my guides!
- 8 easy-to-plan maps
- 100+ pre-selected locations
- GPS coordinates
- Useful planning tips
- 130+ large photos
- 2 easy-to-plan maps
- 30 stops, 10 detours
- GPS coordinates
- Useful planning tips
- 70+ large photos
Where to stay in Iceland?
My favorites:
- Reykjavik, capital city: see best rated accommodations – or my article on where to stay
- Selfoss, between Golden Circle and South Coast: see best rated accommodations
- Vik, near waterfalls and glaciers: see best rated accommodations
- Höfn, gateway to the East fjords: see best rated accommodations
- Egilsstadir, between fjords and North Iceland: see best rated accommodations
- Reykjahlid, for the wonders of Lake Myvatn: see best rated accommodations
- Akureyri, capital of the North: see best rated accommodations
- Grundarfjordur, on the Snaefellsnes Peninsula: see best rated accommodations
Tip 36 – What to do in case of accident
In case there are people hurt or there is a conflict, the emergency number in Iceland is 112.
The best order of actions is:
- contact emergency services
- contact the police
- contact your rental provider
Want to see more of the best Iceland has to offer?
- Tips to plan your Iceland road trip – read article
- Itinerary suggestions – read article
- 45 Most beautiful landscapes in Iceland in pictures – read article
- The best stops on the Ring Road – read article
- The best locations off the beaten path around Iceland – read article
- 21 Most beautiful waterfalls in Iceland – read article
- Top 5 places to see around Myvatn – read article
- 5 best Lava Fields in Iceland – read article
- The 10 best lava caves in Iceland – read article
- The 5 most beautiful black sand beaches in Iceland – read article
- The Golden Circle – read article
- The Snaefellsnes peninsula – read article
And keep track of your own trip!
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Thanks. Looks like great information. Easy to follow.