Driving & Renting a Car in Iceland: Everything You Need to Know

Hand on steering wheel looking out at the road in front in Iceland

Driving and renting a car in Iceland can seem a bit daunting. The landscape is remote, the winter roads can be intimidating, and it's a foreign country. I don't know about you, but removing the guesswork and being confident in my decisions when it comes to important, expensive ones such as renting a car makes a trip far more enjoyable. We're sharing everything we learned when renting a car in Iceland in hopes that it helps take some of the stress out of your trip to help you put more time into the fun anticipation of visiting the Land of Fire and Ice.

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Driving & Renting a Car in Iceland: Everything You Need to Know

Should you rent a car in Iceland?

Depending on where you're going and what you're planning on doing will determine on whether or not you should rent a car in Iceland. Personally, I love the freedom a rental car gives when traveling. I definitely don't recommend renting a car in every country, but due to the remote nature of Iceland combined with easy (and usually free) street parking, renting a car in Iceland is a breeze.

Iceland has an extensive bus system during peak season with limited routes in the winter months. If you plan to visit during peak season, you can checkout the various bus route maps around Iceland here.

If you're college student, taking the bus is 100% the way to go! On top of renal companies not renting cars to people less than 20 years old, there's a 50% discount for students 18 and over (just provide proof that you're a student).

Best places to rent a car in Iceland

Usually local rental car companies are cheapest to rent through, and it's a great way to support local businesses. Ice Rental 4x4 has a great reputation, and so does Blue Car Rental.

However, as I'm looking at prices writing this article, I'm noticing that the American rental companies are currently cheapest, specifically Alamo. When we rented a car we went through Enterprise and had a wonderful experience. Unlike a lot of travelers, we regularly rent cars in countries to go more off the beaten path, therefore sticking to one company when the price is comparable is our preference. Enterprise was wonderful (as always), so we do recommend them. While I try and support local businesses when possible, dealing with something as expensive and (sometimes) frustrating as rental car companies, it's nice to stick with a name you know and trust.

Not matter what company you decide to rent through, make sure you choose a location at the Keflavik Airport (KEF). Renting at the airport location will save you ~$50 USD on taxi or bus ride to and from Reykjavik.


Cost to rent a car in Iceland

The cost of renting a vehicle varies greatly in Iceland, just as it does anywhere else in the world. Typically the smaller the car, the cheaper the rental. As cars get larger and have more features such as four wheel drive, the prices will go up. Also, don't forget that Europe, like most of the world, primarily uses manual transmissions. If you know how to drive stick, awesome. If not, you can expect to pay about 10-20% more for your entire booking.

I know smaller cars are less comfortable, but if you're not traveling in the winter months and don't need four wheel drive, go for the smallest car you can. Fuel is expensive in Iceland and you'll be glad you saved a few dollars on fuel and the price of the rental car itself.

The average cost of an economy ("mini") car rental in Iceland will range from $80-120/day for a manual transmission. The average cost of the same car with an automatic transmission will be $90-130. A budget SUV rental will range from $120-150/day, plus a bit more for the automatic transmission. Rental cars can get very expensive in Iceland! SUVs specifically can go over $500/day. Pro tip: book ahead!

Note: There are peak season prices (mid May-mid September).

Do I need a 4x4 vehicle in Iceland?

If you're visiting in the winter, I'd recommend a four wheel drive vehicle. If you're visiting in the summer, you really don't need a 4x4. Most rental car companies have stipulations on which types of roads you are allowed to take your rental car on. Basically, rental cars aren't allowed on roads that would need four wheel drive. If you're interested in traveling across rougher terrain, you need to talk with your rental car company before you head out.

Is it possible to rent an off-road overland capable vehicle in Iceland?

Absolutely! In fact, this is something we plan to do on our next trip to Iceland so we can explore those rougher roads. Isak rentals offers several vintage and newer Land Rover Defenders. They also have some really cool Toyota Land cruisers available! No matter which option you choose, you're sure to get off the beaten path well equipped and in style.

Want to see Iceland with a pro? Consider booking one of their 4x4 tours from Reykjavik.

Where can I get a campervan rental?

Want to rent a campervan instead of a car? This is a great way to combine lodging and a vehicle rental, not to mention camping in Iceland can be a great way to cut costs if you plan ahead. To rent a camper in Iceland you'll need to go to a specific company that focuses on van/camper/RV rentals. You can't rent one of their well equipped vehicles from someone like Enterprise at the airport. Happy Campers is a local Iceland company that offers a variety of van and camper options. Their vans come with basic that you'll need to camp in Iceland and keep you comfortable along the way.

Can foreigners drive in Iceland?

Yes! Foreigners are welcome to drive in Iceland. Many countries do not even need an International Drivers Permit (IDP). We are American citizens with US drivers licenses and our US licenses were valid in Iceland. Driving in Iceland with a US license is legal. Be sure to check whether your country's license will be viewed as valid before leaving. If you need to secure an IDP, be sure to do that in advance.

How old do you have to be to rent a car in Iceland?

20 years old is the age requirement for renting a car in Iceland, with some vehicle restrictions until age 25.

What side of the road do they drive on in Iceland?

Iceland drives on the right side of the road, the same side of the road as the USA.

Are Icelandic drivers good drivers?

Yes, they are. We found Icelandic people to be very alert and courteous on the roads. I will say that getting passed going the speed limit is not uncommon. Remember that these folks have places to be and mountain gawking tourists will get passed. ;)

Do I need to purchase insurance for my rental car?

Generally, we'd recommend purchasing the insurance because you just never know what might happen. We know that feels like throwing away money, and usually it is. It's one of those things you don't need until you need it.

Better than car insurance is having a credit card that comes with primary car insurance for rental cars. If you already have a credit card(s), check to see if your car covers you when renting cars internationally. Do be careful to take note between primary rental car insurance and secondary rental car insurance. Lots of credit cards cover secondary insurance, but it's the primary that's the most important.

Let me just say, we're not those people who push credit cards because we know that credit cards can be a slippery slope for many people. Usually the cost of the credit card annual fee + the risk of overspending can be very dangerous. If you know your limits and feel like taking on another credit card is wise, we'd recommend one of the Chase Sapphire credit cards (either Reserve or Preferred). The coverage differs for the two different cards, but so does the annual fee. For me, the Preferred is enough, but that's 100% your call. Be sure to do your research on the different Chase Sapphire cards car insurances policies before you make a decision.

Tips for driving in Iceland

  1. Plan your fuel stops. While we were never in danger of running out of fuel, we never really chanced it either. Keeping the tank over half full allowed us the freedom to venture off the route as we wanted to without having to worry if we had enough fuel to do so. Iceland is remote, fill up when you can.
  2. Pull over to sight see. We regularly saw tourists stop in the middle of the road to look at a mountain or river or whatever we happened to be near. There are plenty of pull offs in Iceland, use them. Best case scenario you annoy the locals and look like a rude tourist holding up traffic, worst case scenario you cause a wreck. Use the pull offs so everyone wins!
  3. Bring snacks. I don't know about you, but I always bring snacks with us. Usually on our first day in a new country we'll stop by the grocery store to grab a few snacks. If there's something we know we can't go without (like our favorite craft instant coffee!), we'll bring it with us. Iceland gets remote and trust me when I saw that getting hangry in the middle of nowhere does your vacation no good.
  4. Always drive with your headlights on. In Iceland driving with headlights is a requirement for all drivers, all times of day, all types of weather.
  5. Cellphone use while behind the wheel is illegal. Like in most places around the world today, driving while messing with your phone is illegal. Headsets are allowed while behind the wheel, but anything you'll need to pull the car over.
  6. Road signs are in Kilometers, not miles. Just a reminder to our fellow American friends: Iceland (and the rest of the world) uses the metric system. Literally the only countries who won't have roadsigns in kilometers are the USA, Myanmar, and Liberia. Just go ahead and get used to it.

Final thoughts

While we personally really enjoy renting cars and getting lost in new places, we recognize that's not everyone's favorite way to spend time. If you are up for a roadtrip though, there's not better place to get lost in a truly magical landscape. Even for solo travelers, Iceland is a wonderful roadtrip destination since it's considered the safest country in the world.

Checkout our other Iceland travel guides for planning your Iceland adventure.

Want to checkout our roadtrip in Iceland? Here's our travel vlog from driving the entire Ring Road in Iceland.

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Hi! We're Chris and Sara a husband and wife video making, storytelling, travel loving duo with a passion for sharing travel tips, tricks, and inspiration with others.
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