Car hire in Iceland: tips, info and where to find cheap rental cars

Written by Sam Van den Haute aka CheckOutSam

Iceland is a destination that is on the bucket list of many travelers. Many people dream of seeing the northern lights on this fairytale island. Add to that the imposing glaciers, geysers and volcanic landscapes and you have a dream destination. Despite cheap flights to Iceland, a road trip through this beautiful island can be quite pricey. Still, I really recommend you hire a car in Iceland, because it will be one of the best holidays you've ever had.

Sam Van den Haute CheckoutSam

Hi, I'm Sam, the blogger behind CheckOutSam!

Sam Van den Haute has been a full-time world traveler for ten years and has therefore gained a lot of travel and lifestyle inspiration on all continents. Do you still have questions after reading this blog? Ask them in the comments section or send me a message at [email protected] and I'll be happy to help you wherever I can!

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cheap rental car iceland

Renting a car in Iceland: cost

Iceland is not a cheap country and you can also expect a hefty price tag if you’re planning to rent a car. Therefore, always compare different car rental companies, because the prices can differ a lot.
I also recommend to book your car online, because if you have to arrange a rental car on the spot then you will really have to pay a ridiculous amount of money!
I almost always find the cheapest rates on RentCars.

Below are some price examples (via RentCars):

  • Renting a small car (only possible in the summer months!) for one week: €181 or €25.86 per day.
  • Renting a SUV / Jeep for one week: €409 or €58.43 per day.

car hire iceland small car

Small cars in Iceland.

SUV’s in Iceland.

Why do you need a rental car in Iceland?

As you already know, Iceland is an island. This means that you can’t just jump into your own car and drive there. You can of course have your car transferred by ferry, but this takes a lot of time and much more money. Unless you are on a spectacular tour through (Northern) Europe, it is best to rent a car in Iceland itself.
As far as public transport is concerned, buses run regularly from June to mid-September to most places on the so-called ring road (the “highway” around the island – here you will also find the famous ‘Golden Circle‘), but there is so much more to discover than just this touristic road.
Outside this season, busses run on a daily or weekly basis or not at all.

You can also fly to different places on the island, for example from Reykjavik in the west to Egilsstaðir in the east, but then you actually miss a whole bunch of amazing sights along the way.
Moreover, without (your own) transport you also have less chance to see the magical northern lights! The aurora borealis isn’t called the difficult lady for nothing… This spectacular light show is very difficult to predict and if it can be seen, then you better drive to her as fast as possible!

From the capital you can book excursions, but the cost of these are often quite high. Of course, to see certain sights you have to book excursions. You can’t watch whales (or puffins) without being on a boat…

I think the advantages of renting a car in Iceland outweigh the disadvantages (the price). After all, you can explore the island at your own pace, you can completely do your own thing and you can stop for photos whenever you want. Oh, and one more thing: Iceland is one of the nicest (and safest!) countries to drive in!

iceland car hire aurora borealis

If you want to see the northern lights, I also recommend renting a car. After all, the aurora is very unpredictable.

Which destinations can I see more easily with a rental car in Iceland?

As mentioned earlier, a lot of travelers go to Iceland to see the northern lights. This is, however, very difficult to predict and having your own transport gives you a lot more freedom to chase the light. Keep in mind that there is no public transportation at night, so you really must rely on a rental car if you don’t want to book an excursion.

In addition, this enchanting island contains a lot of hidden gems. Lovers of seals have probably already heard of Jökulsárlón, the magnificent glacial lake where you can spot seals and be amazed by the beautiful blue frozen landscape.
If you want to see these beautiful animals in their natural habitat, then you have to go to the west of the island. In Húsey you can see them very well and up close. However, this place is very remote and can therefore only be reached by car.

The most beautiful hidden gem must be Gjáin. In the middle of a volcanic landscape you suddenly find an oasis of greenery with all kinds of waterfalls. It immediately feels like you’re in a fairy tale. And of course there are no buses to this magical place…

There are of course many more sights that you can not reach by public transport. Most excursions or tours do travel along part of the island, but they do not stop at many places. Just think of the famous plane wreck, the enchanting waterfalls, some of the most beautiful hikes on the island and so on… If you really want to enjoy the best that this breathtaking country has to offer, you should -in my opinion- choose for car hire in Iceland.

car hire iceland plane wrech

This plane wreck can only be reached by car.

Which car should you hire in Iceland?

Roughly speaking, you have three options if you want to hire a car in Iceland: an “normal” car, an SUV or a camper van.
What car you should rent in Iceland depends on the type of holiday you have in mind.

The general highlights

If you just want to leave from Reykjavik and drive around the island, you have enough with a small car. You will be limited to the motorways and the sights that you can find next to the road. During the winter, driving with a small car is almost 100% impossible. Therefore, having a smaller car is a better idea for the summer season.

The real deal

Besides motorways there are also the so-called F-roads on the island. These roads aren’t asphalted and therefore you can only drive on them with a 4×4. The car rental companies state this explicitly.
Do you want to take these roads anyway and drive them with your normal car? Then keep these two things in mind: first of all, there are a lot of stones on the track that can damage the paint of your car. Secondly, these roads are often in a bad condition, so the chances are real that you get car trouble. Once your car has broken down, you must explain to your car rental company why you didn’t listen to them, and believe me… They won’t be happy!

If you want to enjoy everything that can be seen on this island, I recommend to invest in a jeep. With these bad boys you can of course drive in both the winter and summer season.

The camping enthusiasts

Hotels are (sometimes) rather expensive in this country, so it might be worth paying a little more for a camper van. Although wild camping is legal, campers must always spend the night on designated camping sites. Just like with a smaller car, it’s pretty much impossible to drive these giants during the winter season.

car rental in iceland suv

With an SUV you can also discover the F-roads of the island. And that makes a road trip through Iceland a lot more fun!

Traffic rules in Iceland

Once you have opted for car hire in Iceland, it doesn’t hurt to know which traffic rules apply here. Just like in most of Europe, people drive on the right side of the track. You overtake along the left and keep in mind that drivers coming from the right have priority (unless otherwise stated by signs).

The general speed limit is 30 to 50 km/h in built-up areas, 80 km/h on gravel roads in rural areas and 90 km/h on asphalted highways. It can be tempting to drive faster, but be aware that the police is writing out speeding tickets quite regularly (and everywhere). Fines are either paid on the spot or forwarded to your car rental company. In addition to the fine itself, administrative costs are then added.

Obviously, wearing a seat belt is mandatory at all times, just like the use of a telephone behind the steering wheel is forbidden.

What you also need to know is that your lights should ALWAYS be on, both during the day and at night. Alcohol is particularly expensive, so you are less likely to get drunk when you drive. But if you would like to do this anyway; think twice. You’re not only endangering yourself but others as well. In addition, serious fines and penalties are imposed in this beautiful country.

Be aware that off-road driving is illegal at all times and therefore heavily fined.

Parking rules in Iceland

Sometimes, you of course also have to park your rental car.
The good news is that parking is free in most of the country.
In the center of Reykjavik and Akureyri you have to pay. As a general rule you can assume that if there is a parking meter somewhere, you actually do have to pay.

The capital is divided into four parking zones. In order to know in which zone you are, you have to look at the P-signs that are scattered around you. The closer to Laugavegur (the shopping street), the more expensive. Fortunately, Reykjavik isn’t too big, so you can easily park outside the center and walk five to fifteen minutes to get back in.

It’s also very tempting to park next to, or on, the road during your Icelandic tour when you want to take a picture of the beautiful landscapes. If there is no parking place nearby, just always make sure you’ve left enough space between the road and your ‘parking spot’ and make sure to never park immediately on/after a bend.

iceland landscape road trip

Chances are that you don’t meet anyone along the way. So don’t hesitate to park on the side if you want to take pictures!

Rentin a car online in Iceland

You obviously have heard of the well-known car rental companies such as Sixt and Alamo, but their name usually also comes with a price.
RentCars almost always gives me the cheapest prices in my search, since they immediately compare multiple car rental agencies.
The minimum age to rent a car in Iceland is twenty years, for insurance and safety reasons. To rent a minibus or jeep you must be at least 23 years old. Your driving license must also be valid for at least one year at the time of renting.

If your car gets damaged while driving on the aforementioned F-roads (even if it is a 4X4), you are not insured. You can only drive on these at your own risk.
Keep in mind that there are lots of pebbles and little stones on the roads, so investing in a gravel insurance can be a good idea. Crossing rivers with your car is particularly dangerous and shouldn’t be done if there are easier ways to get someplace. Don’t forget that damage to the tires also needs to be paid.
To avoid all these issues, it might be a good idea to take insurance. At RentCars you pay €5.50 (partially insured) or €11 (fully insured) per day that you rent your car.

road trip iceland car hire

The most beautiful landscapes are of course located outside Reykjavik.

Hitchhiking in Iceland

You may have heard of people who have chosen the ultimate adventure: hitchhiking in Iceland. If you want to save a lot of money, you can try to drive with other people.
However: is it feasible? Yes and no.
If you travel with two people, the chance are very slim that drivers pick you up. Their car is often already full. In addition, petrol is very expensive on the island and with more passengers you also consume more petrol.

However, if you’re traveling solo through Iceland, the chances are bigger that a merciful driver will pick you up. But do count on enough time, because the chances are very real that you sometimes (or often) have to wait for several hours before someone takes you on board!

Saving money during a trip through Iceland

When you’re calculating how much a trip to Iceland can cost you, it can get quite expensive. The combination of hotels and car hire in Iceland will not be cheap, believe me! If you decide to opt out of this trip, remember that it is really a once in a lifetime experience. Iceland is one of the most enchanting countries in the world and the memories that you will make are absolutely unaffordable. Below I would like to give you some tips to save some money:

  • Don’t drink alcohol at a restaurant. We are used to having a glass of wine or beer while eating, but alcohol is particularly expensive in Iceland, and certainly at restaurants. If you still want to drink a beer in the evening, just go and buy it in the supermarket or a duty-free shop.
  • Buy your food in the supermarket. In the afternoon, you can make your own lunch, of course, but many hotels and hostels also have a kitchen that guests can use. With this tip you certainly save a lot of money. For shopping, 10-11 is the most expensive supermarket. Nettó, Bónus, and Krónan are often 50% cheaper!
  • Don’t buy bottled water! The tap water in Iceland is among the best in the world, so make use of it! Did you know that you can even drink straight from rivers and streams without getting sick? The water is incredibly clean here!

Iceland is a fantastic country that you should definitely visit once in your life. And if you keep in mind some of the tips I gave, the cost of your trip shouldn’t be too extreme. If you choose to rent a car in Iceland you won’t have to book expensive excursions any longer. Enjoy your total freedom in this gorgeous country! I’m sure you’ll want to go back once you’ve visited it!

ice caves iceland things to do

Whether you book a rental car in Iceland or not: it will be a trip of a lifetime!

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In this article you'll find a few affiliate links. When you book something with these travel organizations, I get a small commission. You don't pay anything extra for that. You can thus see it as a way to support this blog if you found the information helpful. I use all of these travel organizations myself, and I will only recommend the ones that I really like.

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Hi, I'm Sam Van den Haute. The last three years I've been traveling the world almost constantly. Heading out for an adventure and visiting the most beautiful places are what I love to do! Let me inspire you with great stories, beautiful pictures and handy tips from my adventures and travels. On my facebook page and instagram account you'll get to see the latest updates and photos to inspire you for your next vacation.
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