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.
Table of Contents
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.
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.
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 foot, so leave the car but you will need it to get to the Blue Lagoon.
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 second gear in the middle of it.
Frequently Asked Questions for Iceland Renting a Car
Do you need to rent a 4×4 car for Iceland?
You actually don’t need to hire a 4×4 to see the best of Iceland. If you are going to drive the most scenic part along Route 1 a standard rental car is all you need.
If you are renting a car in the winter, you will have different conditions to deal with, for example, snow and ice.
So for winter trips to Iceland car rental 4×4 is recommended. Since not all roads are paved and during winter conditions you might need extra help.
Do you need to pay for GSP when renting a car in Iceland?
Honestly, you don’t. But what you might like is to be connected to the internet so you can use your phone and google maps/maps for navigation.
So to stay connected and online while in Iceland, simply purchase an Airalo eSIM card. It’s super easy to do at home and once you get to Iceland you simply switch your cellular data to eSIM Iceland and you are good to go.
Use our promo code: RACHEL5045 to get $3 off your eSIM purchase. And if you need to top up anytime, it’s easily done through the app on your phone so no need to call or visit a phone store.
I recommend downloading the google maps offline map for Iceland on wifi at home as it will save your data when using it.
Also, we don’t travel anywhere without our power bank. Despite having the latest iPhones we often use them a lot for video recording, and navigation, and by the afternoon we’re usually running out of battery.
Rent a car in Iceland without an international driving license
Can foreigners rent cars in Iceland? Yes, absolutely. You won’t need an international driving license to rent a car in Iceland.
Simply bring your license from home and as long as the license can be easily understood, you will be fine. Please note that licenses using a different script/alphabet rather than a Latin script might not be accepted.
How old do I need to be to rent a car in Iceland?
To rent a vehicle in Iceland, the minimum age is 20. There may be some vehicle class restrictions for drivers under 25 or a higher rental fee.
Which insurance do I need for my car rental in Iceland?
Probably the most common question is about car insurance when it comes to car rental.
We have an AMEX credit card that does have included insurance for car rental and we always ensure to use this card for payment to be covered.
There are a few other options to consider with your car rental:
Sand and Ash
Collision/Damage Waiver (CDW)
This is not insurance, but an agreement to waive the costs of damage to your rental car if it is involved in a collision. Often CDW has an ‘excess’ which is the first part of any claim for which the renter will remain liable. So check the fine print of what this amount is, usually around $2000.
Most rental companies included CDW in the rental car cost.
Super Collision/Damage Waiver (CDW)
Pretty much a Collision damage waiver with an extra fee so there is no excess at all if you are involved in a collision. Personally, we never pay this and are prepared to pay the excess should we have an accident.
TPL is protection from the claims of someone else (a third party). It covers any damage that you might cause to another person, vehicle, or property while driving around in your rental car. It also covers the passengers in your car in case they suffer damage or injuries.
In Iceland, Third Party Liability Insurance is a legal requirement and is normally included for free in the cost of the rental.
This is something that is offered in Iceland when renting a car. As not all roads are paved there is a possibility of damage when the gravel flicks off into the undercarriage of the car. However the number of gravel damage incidents is fairly low compared to the number of tourists, so we also opted out of this. But we do ensure that we take it easy on unpaved roads.
Sand and Ash Protection
Another one of the “only in Iceland” options when it comes to renting a car in Iceland. It really is just an extra add-on and the likelihood of your car being damaged by the ash or sand is much lower than you think. Unless you are unlucky and the volcano erupts as it did in 2010.
Should I rent a campervan or a car in Iceland?
Yes! We did this the second time we visited Iceland and it was so much fun. It’s perfect if you are on a budget as you can rent a campervan and travel as you wish and save money on accommodation.
But if you prefer the comfort of a hotel and an attached bathroom, then renting a car in Iceland will give you the freedom to explore the country and overnight in hotels and guesthouses.
If you do take this option, we recommend booking.com for the best deals on accommodation in Iceland.
Yes, driving in Iceland might be different from what you are used to. Here are a few important points about driving in Iceland:
Car rental in Iceland – How much is gas/fuel?
Gas/fuel might be expensive depending on where you come from. As of January 2023, the current price of a litre of fuel is 314 ISK (USD 2.32) and 317 ISK (USD 2.34) for Diesel.
So that is about USD 8.464 for a gallon of fuel.
Rent a car in Iceland – Are there gas stations outside the main cities?
There are gas stations around the country and well, the country isn’t that big. Most of the gas stations are open to fill up 24/7 but payment is done via machine and it is self-service.
You simply pump your gas and pay by card, but we recommend doing so while there is staff there during the daytime hours in case your card gets declined, so they can do the transaction manually. If you’re paying by card, note that only a debit card might get accepted.
Our card has been declined once at a smaller gas station so had to use another card and luckily it worked. But it was a bit nerve-wracking knowing we were trying to drive somewhere spectacular for sunset and our gas was too low to get there.
So as a general rule – you see a gas station, fill up! Don’t let your tank get down to empty and then stress about it.
TIP: Ask about free coffee for the main gas station network Olis, most car rental companies will provide you with a discount card.
What is the speed limit in Iceland?
When it comes to speed, always stick to the speed limit when renting a car in Iceland. The fastest speed in Iceland is 90km per hour and that is only on highways. There are speed cameras and the fines are hefty (think $500).
You don’t want to have your trip ruined. Imagine you arrive back home and then speed fines will be charged to the card you have provided for your car rental. It can add up quickly to $1000 so please take care and do not speed.
The speed limits in Iceland:
90 km per hour on highways
80 km per hour on gravel roads
70 km per hour in tunnels
30-50 km/hour in populated areas
Get a quote below for Iceland rent a car cheap with DiscoverCars
Other Tips for Car Rental in Iceland and Driving Around
Weather can change really quickly. It might be sunny and literally, 5 minutes later a storm will roll in. The worst part is most likely the gushes of strong wind that can roll across open spaces, so always keep both hands on the stirring wheel. And always hold the door when getting out of the car.
Car headlights must be switched on at all times, day or night when driving in Iceland so either turn them on or check if your car does this automatically.
In Iceland, traffic on the inner lane of a two-lane roundabout always has priority over traffic on the outer lane. There are a few of these roundabouts in Reykjavik.
You will drive on the right-hand side of the road.
You cannot drive on the F-Roads if you rent a standard car. It’s actually illegal and your car rental company will most likely point them out on the map of Iceland when you rent the car. The F-roads are well signposted and essentially they are unmaintained dirt roads. If you really want to explore the highlands then you must rent a 4×4 car. F-Roads are really only accessible during the summer months as well and you can check F-Roads conditions here.
Don’t randomly pull over on the side of the road for photos, there are designated areas for this.
Always check the road conditions when driving around Iceland. The best website to do so is www.road.is.
Make sure you get Travel Insurance before hitting the road. Trust us, it’s one of those things you don’t want to leave home without. We recommend Heymondo & SafetyWing Travel Insurance.
Click here and get 5% off Heymondo insurance from us!
Travel Tips for Europe
If your plan is to explore more of Europe after you’ve had the best time in Iceland, then you’re in luck! We love this region of the world, and we’ve got some great tips for you. Check out our ULTIMATE Packing List for Europe for starters.
💰 Send Money Anywhere:WISE & Revolut are the best online accounts that let you send money, get paid, and spend money internationally. Both are so easy to use and way cheaper than any bank transfer.
📶 Stay Connected: Airalo eSIM allows you to get connected the moment you land at your destination, and you can avoid those expensive data roaming charges. We LOVE this product! Use promo code NOMAD15 for 15% off ALL eSIMs (new Airalo users only) OR use NOMAD10 for 10% off ALL eSIMs (for existing Airalo users)