If you are planning to travel in Iceland and searching for a rental car, this guide is dedicated to sharing some useful information that may come in handy. Driving in the Icelandic countryside is a great way to see the country, and renting a car in Iceland is a fantastic option for those interested in doing so.

Discover more about renting a car and exploring Iceland! We rented a small car, and a campervan and even took day tours after visiting Iceland twice.

This article shares our experience and all our tips on renting a car in Iceland.

Renting a car in Iceland road driving

It is possible to rent a car in Iceland and drive anywhere you wish within the country.

The main rental agencies are the car rentals at Reykjavik Airport called Keflavik and the car rentals in Reykjavik downtown. All of these companies have similar prices and services, but you can usually get a cheaper car rental in Iceland when you book online before you arrive.

We will explain if you should hire a car from the airport or rather hire a car from downtown Reykjavik.

Car rental companies in Iceland offer a wide range of services, from full-sized cars to small cars to campervans and motorhomes too, which you might want to consider.

Car rental in Iceland is easy. With big companies such as Hertz, Avis and Budget, all you need to do is pick the car of your choice, choose a date and time to return it, and then get going.

It’s worth noting that no matter which company you go with there are some things that can help make the process faster, so read on for our tips for renting a car in Iceland! And we will tell you how to get a cheap car rental in Iceland too.

Should you rent a car in Iceland?

We love travelling around the world and using public transport where we can explore. But in Iceland, public transport is limited mostly to the capital city. The issue is, there are only 300,000 people in the whole country of Iceland so literally, a car is your best friend.

As for visitors and tourists, renting a car is recommended to see some of the highlights of Iceland

Of course, if can’t drive or are not confident you can base yourself in Reykjavik and join this day trip to see the highlights of Iceland. We’ve done this tour during our first time in Iceland and highly recommend it.

Alternatively, you can choose a more inclusive multi-day tour of the country. Check out this 7 Day Tour for the best of Iceland.

But renting a car in Iceland will give you the ultimate freedom to explore at your own pace. Most people visiting Iceland choose to drive the ring road (Route 1) because it runs by the island’s beautiful coast connecting natural wonders and attractions. Oh, and it is so incredibly scenic!

Don’t forget you will need to be connected to the internet for your GPS and look up places on the go, so make sure you buy an eSIM for Iceland before you arrive so you’ll have data for your stay here.

Iceland rent a car to see the country waterfalls

Iceland rent a car to have the freedom to see the waterfalls

Where should I book my rental car in Iceland?

It might be overwhelming to look at companies that offer to rent a car in Iceland and try to figure out where to book. 

We personally learned from many years of travelling and renting cars across the world and now only book on the DiscoverCars website. They compare all the main car rental companies such as Avis, Hertz, Europcar and Budget. 

But most likely the best car rental in Iceland would be an unknown local rental car company that is based in Iceland.

Just read the fine print for what is included: mileage, second driver, insurance and have a look at the reviews. Since there are some significant savings to be made, we have booked our car rental offering the best deal and had no problems. We even saved $250 on our car rental and that paid for our visit to the stunning Blue Lagoon and a nice meal out in Reykjavik.

Here is an example of one-week rental prices in Iceland in June 2023 found on the DiscoverCars website:

  • Avis Car Rental: $743 per week
  • Budget Car Rental: $658 per week
  • Europcar Car Rental: $702 per week
  • Routes Car Rental: $432 per week
  • WheeGo Car Rental: $461 per week
  • Firefly Car Rental: $560 per week

You can also filter the results based on what you are looking for: the size of the car, additional driver or automatic transmission. If you are looking for cheap car rental Iceland, you’ll find it here with DiscoverCars.

Why you should hire a car from the airport in Iceland and not from Reykjavik downtown?

Here is another tip that will save you at least $200 when renting a car in Iceland. Do not rent cars from Reykjavik downtown, rent them from the airport. This way you won’t also need to pay for transport, bus or taxi to get downtown and you will save money on the car rental cost too.

You can still explore Reykjavik without a car, ask your hotel if parking is available for free, otherwise, you’ll have to pay for parking on the streets. The downtown of Reykjavik is easily explored on the foot, so leave the car but you will need it to get to the Blue Lagoon.

There is also an option to book this roundtrip bus transfer to the Blue Lagoon from Reykjavik.

rent a car in Reykjavík Iceland

You can pick up a car at the airport or rent a car in Reykjavík Iceland. The downtown of Reykjavik is easily explored on the foot. Iceland rent car Reykjavik is the best option.

Want to save money when renting a car in Iceland? Book early! 

Iceland is one of the hottest destinations right now and the supply of cars is limited during the main season (June-August) and prices will skyrocket. So book your car rental early to get the best deal.

Some companies offer free cancellation up to 48 hours from the car rental due date so if you are unsure, book a car that you can cancel.

Note that most car rentals come with manual transmission so if you can’t drive a manual car, make sure you book a car rental with automatic transmission! It usually costs more, but you don’t want to be driving around roundabouts in Reykjavik with different rules (more about that later) and trying to figure out how to change into seco