Essential Iceland Car Rental Tips: Navigating Iceland Safely and Affordably

The best way to explore the island is by making a road trip out of your Icelandic getaway. But there are a few things to consider when renting a car and driving around the Land of Fire and Ice. That’s why we compiled this comprehensive guide filled with essential Iceland car rental tips.

Following our tips and advice will ensure that you rent the right rental for your specific trip itinerary, have some local insight into what it takes to traverse our incredibly contrasting but breathtaking terrain, and ultimately have a memorable trip (for all the right reasons!) So, without further ado, here’s what you need to know:

Why Renting a Car is the Best Way to Explore Iceland

There are many reasons why renting a car in Iceland is the best way to explore the island. We dive into some of the biggest perks below.

Freedom and Flexibility on Iceland’s Scenic Routes

When you have your own transport here on the island, it means that you are truly the captain of your own Icelandic adventure. There’s no one to tell you where to go or what to do, and you’re not reliant on anyone for taking you there.

You also need to keep in mind that public transport on the island will only get you so far, especially during our “off-season” (September to May, except for the period between Christmas and New Year). While you can generally expect plenty of transport options, driving numerous routes multiple times a day in and around our larger and most densely populated cities and towns, the outskirts and our more remote areas are rarely serviced.

Also, we have many hidden gems in these areas that can only be reached with your own transport, and, trust us, you don’t want to miss out on these. If you opt for a campervan rental during our warmer months, you’ll also have the added convenience of essentially traveling with your home.

This is an extremely affordable way of exploring the island since you can simply park in one of our campervan lots or at one of our campsites for an overnight stay. This also makes it super convenient since you don’t have to have any pre-booked accommodation dictating when you need to be where.

Comparing Car Rentals to Tours: Pros and Cons

Of course, another way many choose to explore the island is via guided tours. These can include excursion tours to specific destinations or activities lasting just a few hours, day tours, as well as multi-day holiday packages. Whether a guided tour will work for you ultimately depends on your personal preferences and budget. Here’s what you need to consider when comparing car rentals to tours:

Car Rental	Guided Tour
Complete independence and autonomy over your trip itinerary.	Completely reliant on the tour guide and their outlined trip itinerary.
Complete privacy.	Sharing space with multiple other people.
Access to remote regions and their hidden gems.	Most guided tours focus more on mainstream tourist attractions.
You have more responsibilities, from planning your trip itinerary and making all arrangements to doing the actual driving.	Most responsibilities lie firmly on the shoulders of your tour guide and the tour company, which means you can just sit back and relax.
You’ll solely be held accountable for adhering to local laws and rules of the road, as well as understanding the terrain risks when it comes to insurance.	The tour company and tour guide will be held accountable for any non-compliance, and they will have to sort out any insurance claims and issues if the time comes.
Winter driving can be challenging, especially if you’re not used to our type of weather conditions (lots of snow, ice, and wind).	A guided tour gives you the peace of mind that a local who’s probably been driving these roads since their late teens and is more than capable of taking on our winter conditions is sitting behind the wheel.

What You Need to Know Before Renting a Car in Iceland

Renting a car in Iceland comes with some requirements and a few considerations:

Driver’s License and Age Requirements

You will need a valid driver’s license to rent a car in Iceland. The license needs to be in Roman characters (essentially the English alphabet) so it’s understandable by the rental agent. If your license is not in Roman characters (for example, the Chinese alphabet that uses logographic characters or the Hebrew Alef-Bet that uses symbols), then you will need to have an International Driving Permit.

You will also need to ensure that you’ve had that driver’s license for at least a year before attempting to rent a car in Iceland. Another fly in the ointment when it comes to rental requirements is age. Depending on the rental agent, you will generally need to be at least 20 years old to rent a standard 2-wheel drive vehicle here in Iceland.

However, if you’re looking at renting one of our bigger 4x4s or luxury vehicles, you’ll need to be at least 23 to 25 years old. You’ll also find that renting a vehicle will typically have additional costs if you’re under the age of 25 (due to the increased risk of being a youngster and a newbie driver). Also, please don’t forget to bring your passport or ID with you, along with your driver’s license, for verification purposes.

The Importance of Insurance for Iceland’s Unique Conditions

The Land of Fire and Ice is characterized by contrasting terrain and ever-changing weather conditions, so one of the most important aspects of renting a car in Iceland is to ensure that you’ve got sufficient rental insurance coverage.

Although your rental vehicle will already have our mandatory insurance coverage (Collision Damage Waiver and Third-Party Liability) included in your rental package, there are a few add-ons that you may want to consider, depending on your trip itinerary:

Super CDW

This is merely an add-on to your standard CDW. During any claim, there will be a percentage of the damage that’s payable by you, called the excess. If you have Super CDW coverage, that excess will be significantly lower.

Gravel Protection

This covers you against any damage caused by gravel or small rocks. However, there is some damage that’s often not covered by this insurance (like your windscreen and tires), so double-check your policy to avoid any unnecessary fights. We highly recommend getting Gravel Protection if you’re planning on traveling our “roads less traveled.”

Sand and Ash Protection

The “ash” part may sound a bit ominous, but in the Land of Fire and Ice, where we’ve had eruptions over thousands of years, lava rock, sediment, and ash are not something strange. Especially not at the moment, with Grindavik and its surrounds dealing with an active volcano spewing out all sorts of things.

But don’t worry, since we’re no strangers to volcanic eruptions, we’re probably more prepared than a US prepper for doomsday, and most of our volcanoes are the type that looks more like a crack in the earth slowly leaking out lava and smoke, than your typical dramatic volcano movie moment.

We recommend getting Sand and Ash Protection if you’re planning on traveling near current or past eruption sites, as well as traveling down our coastlines, where the winds tend to pick up beach sand and practically sandblast the car’s exterior.

Tire Protections

As the name suggests, this insurance covers any damage to your tires. But please note that for most insurance policies, this only includes the actual tire and not the rim, so double-check beforehand to avoid any nasty surprises. Tire Protection is an absolute must for any visitors planning on taking on our unpaved roads, especially the rough-and-tough F-roads in Iceland.

Choosing the right insurance

If you’re unsure which rental insurance you’ll need in regards to your specific trip itinerary, please have a chat with your rental agent, who will be able to advise you. 

It’s also important to note that any insurance policy is not likely to cover a claim based on the following criteria:

• You were speeding.

• You didn’t adhere to a clearly visible road sign.

• You were driving recklessly, with not much regard for others.

• You attempted to cross a river you should not have attempted to cross.

• There’s damage to the undercarriage of the vehicle (often a sign of driving where you shouldn’t, since you clearly needed more vehicle clearance).

• The wind has ripped off your car door or damaged the hinges (this actually happens, especially during our winter season when winds can reach speeds of over 35 kilometers an hour!).

• You attempted to DIY your own roads and routes (unless you're on a specifically marked 4x4 trail, there’s no reason for you to go offroading here in Iceland).

Choosing the Right Vehicle: 2WD vs. 4WD vs. Campervans

Choosing the right or wrong vehicle for your trip through Iceland can make or break your getaway. So, how do you know which vehicle to choose? Well, this depends on a variety of factors. Please refer to our comparison table below to help you make your decision and select the option that suits you and your trip itinerary best:

2-Wheel Drive	4-Wheel Drive	Campervans
Great for day outings and shorter road trips.	Great for longer road trips.	Great for longer road trips.
Ideal to drive in our cities and towns and on our paved and well-maintained roads, such as the Ring Road and the Golden Circle.	Ideal to drive on the outskirts of the city and our unpaved, gravel roads, including our infamous F-roads.	Depending on whether you opt for a 2-wheel drive or a 4x4 campervan, you’ll either be able to explore our “roads less traveled” or be restricted to our well-maintained, paved roads.
2-Wheel drives work best during the warmer months of the year, but will require special winter gear and accessories during the wintertime. Even then, driving can prove challenging.	4-wheel drives can be driven throughout the year here in Iceland, with good grip, high clearance, and an overall ability to tackle various terrain due to their hardened performance. While you’ll still need some winter gear and accessories during the wintertime, this should be the go-to vehicle for the months when road conditions can become tricky to navigate.	Once again, when you can drive your camper comfortably around the island will depend on whether you chose a 2-wheel drive or 4x4. However, most will keep their campervan road trips for the warmer months since the colder months come with all sorts of hurdles, such as limited campsites, heating and insulation concerns, and navigating challenging road conditions.
Most 2-wheel drives are pretty compact, so while it works well for a solo traveler, a couple, or a family with small kids, it can get pretty cramped if you begin to add on a person or two.	4x4 vehicles tend to be larger, so they’re much more suited for bigger families and groups of friends traveling together (just don’t go completely nuts; it’s not a clown car).	Depending on the size of the campervan you opt for, you can either travel solo, as a couple, or as a small family (we don’t recommend vanlife for a group of friends; constantly being in one another’s space like that is probably the quickest way for friendships to end).
It’s easy to maneuver, and you can zip in and out of parking spots and drive narrow roads without any concerns.	A 4x4 is fairly easy to maneuver, despite its larger size. It absolutely dominates and reigns supreme when it comes to maneuvering rough-and-tough roads. However, the larger 4x4s might be tricky to maneuver on our narrower roads.	While our smaller 2-wheel drive and 4x4 campers are almost just as easy to maneuver as any other 2-wheel drive and 4x4 vehicle, the larger 4x4 campervan options, including motorhomes, will be extremely difficult to maneuver in the cities and towns, and most narrow roads, as well as our rough-and-tough roads will simply be out of the question.
Storage and luggage space are pretty limited.	You’ll have slightly more storage and luggage space than with a compact 2-wheel drive, but that still doesn’t mean you can pack everything and the kitchen sink.	A campervan is probably the most lenient when it comes to storage and luggage space since it will also be your home away from home. But that also brings a challenge. You’ll need to pack smart and ensure you don’t pack in such a way that you need to clamber over clothes and luggage in the middle of your living space every day.
With a 2-wheel drive vehicle, you’ll still need to book accommodation here on the island.	With a 4-wheel drive vehicle, you’ll still need to book accommodation here on the island.	Whether a 2-wheel or 4x4 camper, you’ll essentially be traveling with your accommodation. All you need to do is park at one of our designated camper parking lots or campsites.
The most economical and cost-effective option when it comes to fuel consumption. Mostly runs on gas.	A slightly less economic and cost-effective option when it comes to fuel consumption. Mostly runs on diesel.	It’s definitely the least cost-effective option in terms of fuel consumption compared to standard 2-wheel drive or 4x4 vehicles.  However, the extra money spent on gas and fuel quickly pales in comparison to the other savings, such as accommodation and food (many campers have fully functioning kitchens where you can make your own food). Although there are smaller campers that can take gas, most run on diesel.

When to Book Your Car Rental for the Best Deals

It’ll always be a good idea to book your car rental in advance to avoid any disappointment. However, where you can generally get away with booking a rental just a couple of months ahead of time if you’re planning a trip during our off-season, you will need to book a rental 6+ months ahead of time if you’re planning on visiting during our hectic summer peak season (June to August).

Another perk of booking a car rental during our off-season is that you will often find specials and discounted prices. In contrast, prices tend to go up during peak season.

Driving in Iceland: Practical Tips and Advice

If this will be your first time visiting the island, the following tips and advise will be very helpful:

Navigating the F-Roads and the Highlands Safely

Exploring the Highlands of Iceland essentially means traveling on the F-roads in Iceland. The F-roads are our unpaved, rough-and-tough mountain roads that can be extremely uneven and rocky with all sorts of obstacles along the way, including river crossings.

Due to the challenging conditions of these roads, they are only open during the summer months when the weather and road conditions are at their best to take on these adrenaline-pumping paths. You are also only legally allowed to drive these roads with a 4x4.

Because these roads already close from mid-September and only start reopening again from late May, an Icelandic trip itinerary that includes the Highlands will have to wait until our summer season. Just keep in mind that the F-roads will require special attention to your rental insurance coverage, and you’ll have to be extra cautious when driving them.

If you’re unsure of whether you have sufficient insurance coverage or you’re just looking for a few local tips on how to drive the F-roads in Iceland safely, just have a chat with your rental agent, who’ll be happy to help.  

Understanding Iceland’s Speed Limits and Road Rules

Icelanders do not look kindly on rulebreakers, and the same applies to those who do not adhere to Iceland’s speed limits and road rules. By not adhering to our road laws, you not only endanger yourself, but also everyone else on the road with you. Transgressions are dealt with very quickly, and fines can be so hefty that it may require blowing your entire holiday budget to pay them. So, before it gets that far, please take note of the following:

• Speed limits will be clearly visible on road signs along the road, but if, for some reason, you miss it, these should give you a good idea of the road limits we keep here in Iceland:

• Within towns and residential areas – 50 km/h

• On our roads out in the countryside – 90 km/h

• On our unpaved, gravel roads – 80 km/h (but please use your discretion here; if a road is particularly challenging, you’ll need to drive significantly slower). 

• Everyone inside the vehicle needs to have their seatbelts on whenever the car is in motion.

• You should have your headlights on whenever you’re driving (whether day or night).

• Where you find single-lane bridges, the rule of thumb is that whoever arrives at the bridge first gets to cross first.

• We have free-roaming livestock here in Iceland that range from sheep and reindeer to Puffins and Icelandic Horses. These animals tend to unexpectedly cross the road, especially in our more remote areas. Although we have road signs forewarning visitors in certain parts, you never really know where they could appear, so be sure to stay alert.

• It is illegal to DIY your own off-roading adventure here in Iceland, so please only park in designated parking spots and keep to clearly marked roads and pathways.

Dealing with Gravel Roads and Windstorms

You will find many gravel roads once you exit the cities and towns here in Iceland. Many are extremely well-maintained, such as the off-roads leading you to our famous attractions. Still, you always need to drive carefully since stones and rocks being kicked up by your and other vehicles can easily cause some damage (cue the Gravel Protection).

As we already mentioned, Iceland’s winds are pretty legendary and can cause a lot of damage. So, when the winds pick up, please ensure that you hold on tightly to car doors and always try to park facing the wind (especially at campsites if you’re traveling in a camper or motorhome).

Using Navigation Tools: GPS vs. Mobile Apps

Many rental agents will have GPS devices as an option (whether included in the rental package or as an additional add-on). Some may also prefer simply working off their mobile navigation apps (Google Maps is most accurate here in Iceland).

But here’s the kicker: tech and signals fail, especially in remote areas, so to ensure you don’t end up on your own unofficial Survivor episode, please download a few offline maps and also bring a few old-school hard copy maps with you.

Budgeting for Your Car Rental in Iceland

Budgeting for your car rental in Iceland will heavily depend on your personal needs and requirements, as well as when you’re planning on traveling to the island. Here’s what you need to remember:

• During our busy summer peak season (June to August), people flock to the island, which means demand goes up along with rental prices.

• During our off-season (September to May), you will find less demand and lower prices. However, you need to keep in mind that weather and road conditions can become extremely challenging during the winter months. As a nervous driver or someone not used to driving in such conditions, the cheapest time to rent a car in Iceland may come at a price you’re not willing to pay.

Rental prices  

Rental prices can vary quite dramatically based on the make and model of the vehicle. But as of 2025, these tend to be the averages you’re looking at:

• Small, compact cars = Between $40 and $90 a day.

• Mid-size cars = Between $70 and $140 a day.

• Larger 4x4 or SUV cars = Between $100 and $220 a day.

• Campervans = Between $120 and $250 a day.

*Just keep in mind that the above-mentioned rental prices do not include gas, so budget accordingly.

Unlimited Mileage vs. Mileage Caps: What to Consider

Most rental agents will have unlimited and capped mileage options. At Campervan Reykjavik, you get unlimited mileage in every rental. Rentals with capped mileage tend to be slightly cheaper, but before you get lured in by the cheaper price, you really need to think long and hard about what you envision your trip to the island to be.

For example, if you’ll only be going to the capital for business, or you’ll only be sticking to one city or town for the duration of your time, then a capped mileage option is not a bad idea.

However, if you’re planning on daily excursions or road tripping around the island, you may want to think twice and properly work out how much traveling you’ll be doing each day. Otherwise, you’ll soon be racking up additional expenses that far exceed the price you would’ve paid if you simply went with the unlimited option from the get-go.

Tips for Saving on Fuel Costs in Iceland

To further ensure you get the most bang for your buck, use the following tips and advise to save on gas in Iceland:

• Do your homework; not all gas stations charge the same gas prices in Iceland (not even if it’s the same gas station brand!), so check which gas stations will give you the best price and ask locals which is their go-to.

• Gas stations in remote areas tend to charge more than those in densely populated areas, so always remember to fuel up in the larger cities and towns before heading out to these areas.

• Ask your rental agent if they have any partner agreements with local gas stations. If they do, you’ll probably get a tag that’s attached to your rental car key. By tapping/scanning this tag at those gas station pumps, you’ll receive a special discounted price.

• If you plan on visiting during the warmer months of the year and are planning on going camping (whether traditional camping or in a camper/motorhome), then get yourself the Camping Card. Not only does this card offer mega savings at local campsites, but it also offers discounts on refuels.

• If you have a Costco membership card, the Costco gas station in Reykjavik should be top of your list as a refuel spot. This gas station (and yes, we have only one!) notoriously offers the best prices in all of Iceland.

Picking Up and Dropping Off Your Rental Car

The pick-up and drop-off procedures vary. Here’s what you need to know:

The Key Differences Between Keflavik and Reykjavik Pick-ups

The two most popular places to pick up and drop off rentals are Keflavik International Airport and the capital city of Reykjavik. But procedures between these two spots differ. Here’s what to expect: 

At Keflavik International Airport

This will be where most visitors to the island land. Many want to pick up their rental from the get-go and officially start their independent journey here on the island. If that’s you, you need to know that the rental lots are a ways off from the airport.

That’s why you’ll need to catch one of the shuttles to the rental lots found right outside the entrance of the arrivals hall. Once at the rental lot, you’ll need to ensure you’ve got all the necessary documentation (booking confirmation, passport, driver’s license, etc.) so you can get the paperwork out of the way and head out.

At Reykjavik City

Some prefer catching the Flybus, shuttle, or taxi to the capital city first and spend their first couple of days exploring the city (this is easily done on foot and via our public transport, so no rental car is needed). Then, once they’re ready to explore the rest of the island, they simply pick up their rental at one of the rental agencies in the city (the same admin procedures will apply, so remember all your essential documentation).

Inspecting the Vehicle: What to Look for Before Driving Off

The basic gist of it is that you will be charged for any damages to your rental vehicle the moment you drive off that lot. However, you don’t know when the car was last checked for any damages, so to ensure you don’t end up with claims against you that you’re not responsible for (or any claims that get denied by your insurance company), we recommend you check the following before driving off the lot:

• If there are any dents, scratches, or marks on the body of the vehicle (if so, take photos). Also, remember to check the roof as part of the body of the car.

• Check the undercarriage for any damage (if so, take photos).

• Check that you have studded winter tires if you’re traveling between November and April.

• Check that you have a spare tire along with a jack.

• Double-check what type of fuel you’re supposed to use (refueling with gas when you need diesel, or vice versa, can have disastrous consequences).

• Ensure you have all additional extras you may need (for example, an Iceland-approved child seat), so you don’t end up in trouble.

• Double-check your rental agreement to ensure that it corresponds with what you’ve received (make and model of vehicle, additional extras, etc.). 

Returning the Car: Avoiding Additional Charges

If you don’t want to incur any additional costs after dropping the vehicle off, please remember the following:

• You need to return the car with a full tank of gas, so remember to refuel before returning it.

• If you’ve been traveling through our remote regions and on our “rough-and-tough” roads that leave the car looking like a pig that’s rolled around in mud, you'd better go through the car wash first if you don’t want to incur additional cleaning fees.

• Take photos of the car from various angles. These photos, along with the photos you took of the vehicle at pick-up, will help with any damage disputes and insurance claims.

• Strictly adhere to your drop-off time (as specified on the rental paperwork and agreement). If you’re late, you may end up paying for another day.  

Frequently Asked Questions About Car Rentals in Iceland

Below are the answers to some of the most frequently asked questions we get about car rentals in Iceland:

Do I Need a 4x4 Vehicle for Iceland?

Whether you need a 4x4 vehicle for Iceland will all depend on your personal preferences, your trip itinerary, and when you plan on visiting the island. If you’re planning on road-tripping around the island and exploring our more remote regions with their unpaved, gravel roads, we highly recommend you rent a 4x4.

The same goes for our colder months, especially winter, when a 4x4 is best to take on our challenging road conditions. If you’re planning on driving on our F-roads, you will legally be required to drive them with a 4x4.

What Insurance is Essential for Driving in Iceland?

Your rental package will already include Iceland’s mandatory insurance covers (CDW and Third Party Liability). However, depending on your specific trip itinerary and planned routes, you may need additional insurance coverage. Please chat with your rental agent so they can advise you accordingly.

Are There Any Hidden Costs to Watch Out For?

Unless you’re dealing with an unscrupulous rental agent, most costs and fees will be very upfront and transparent and clearly outlined in your rental agreement. These can include costs and fees that you may not have thought about, though, which could include anything from younger drivers paying more, additional charges for having additional main drivers, add-on accessories and gear such as a GPS, when pick-up and drop-off locations differ, and so forth.

Explore Iceland With Confidence: Start Your Road Trip Today

Renting a car in Iceland allows you to have complete control over your Iceland adventure and explore the island with unparalleled freedom. Just follow our guide and remember to choose the right car for your needs, preferences, and trip itinerary, ensure you have sufficient rental insurance, and book early if you’re planning on coming during our peak season. Then you’ll be in for the time of your life driving around the exciting Land of Fire and Ice!