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By Monika

Renting a Car in Iceland – How to Choose the Right Car for Your Trip.

Renting a car in Iceland is a great idea as it gives you the flexibility to see all the wonderful places that Iceland has to offer on your own schedule, without restrictions. In the summer when the days are very long you can really see a lot!

During Midnight Sun months you can visit the most touristy areas after the crowds go home, as it is bright outside 24/7.

Let me give you some useful tips on how to choose the right rental car for your Iceland trip.

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What is the best car to rent in Iceland? 

That’s always the big question. The simple answer is – it depends on what you’re planning to see and where you’re planning to go. 

The best rental car for you is one that fits your group, your luggage and your travel plan.

Let me try to break it down here:

2WD vs 4WD?

In the summer:

If you’re sticking to the Ring Road and some flat gravel roads (like access roads, not marked as F-roads) you will be fine in a 2WD.

For more information about the roads and driving conditions in Iceland read my guide to driving in Iceland!

We drove to the main tourist destinations, like the Golden Circle, Snæfellsnes Peninsula and the South Coast during our first trip in a small 2WD SUV and were perfectly fine.

However, if the Icelandic Highlands are in your itinerary, even the easier accessible destinations, like Landmannalaugar or Kerlingarfjöll you’ll need a 4×4 vehicle.

An SUV with a higher ground clearance is recommended as it will give you a much smoother ride with less of a chance for potential car damage. The F-rods are unpaved, uneven and often full of potholes.

Not all F-roads are equal either. The ones I mentioned are considered “easier” – they are not too bumpy and have no river crossings. If you consider fording some rivers you need to make sure your rental car is approved for those kinds of adventures.

Read my detailed guide to driving road F35 – a great introduction to the Highlands!

If you take your rental car on an unapproved kind of road in Iceland and get into an accident, you will automatically forfeit all your car insurance coverage for any damages incurred.

Read your rental agreement carefully! Some roads are specifically excluded from your insurance coverage.

In the winter:

Paved and some gravel access roads in Iceland are generally very well-maintained and most, if not all rental cars in Iceland are equipped with studded winter tires.

Renting a 4×4 SUV also increases your safety on the roads, especially if they are covered in ice or snow.

Driving in Iceland in the winter can be challenging, however if you have some experience driving in these conditions in your home country, you should be able to enjoy the beauty of Iceland even in the wintertime. 

For more tips on safe driving in Iceland click here.

Manual vs automatic transmission?

As a general rule, manual transmission cars/camper vans are less expensive to rent.

However, if you’re not familiar with driving a so called “stick shift”, splurge on the automatic car. You’ll be much happier and much less stressed when driving. You want to enjoy your trip and not have to learn to operate your car in the rental company’s parking lot!

Gas vs diesel fuel?

I’m not sure if there are any significant differences in the cost of fuel per trip. Both diesel and gasoline are easily accessible at pretty much all gas stations in Iceland.

My personal favorite rental car company in Iceland? Blue Car Rental for great cars and amazing customer service. Book through this link and get 5% discount applied to your reservation!

WANT MORE DISCOUNTS? Book with Lava Car Rental and enjoy 5% off applied automatically to your booking.

While I personally tend to choose local car rental companies for my car rentals in Iceland, if you’d like to explore more options, try Expedia Car Rental or Discover Cars, where you can browse great deals and offers from many different car rental companies, including well-known, trusted international brands.

What about an electric car?

Most car rental companies in Iceland now also have electric cars available.

Here are some considerations to keep in mind:

Electric cars can only be driven on paved roads, so even though they do come in a 4WD option, they cannot be taken on F-roads in the Highlands.

Research your accommodation options – you’ll need a hotel with a charging station.

They can be rented year-round however a 4X4 is recommended for the winter.

And lastly, as they usually are on the smaller side, consider the space – will everyone and everything fit? More on that in the next section!

Pay attention to cargo space!

Make sure you read the description of the entire car, including the cargo space, especially if you’re traveling as a larger group. Otherwise, you may end up with luggage in your lap like we did on our first trip. We had some laughs about it as it was only an issue on the first and last day but if we were road-tripping, it would pose a problem.

Requirements for renting a car in Iceland

If you plan to rent a car in Iceland you will need a valid driver’s license from your home country that is written in the Latin alphabet, shows your photograph, your name and the expiration date.

US, Canadian and EU licenses are accepted without the need for an international driving permit.

If your license is from outside of here areas as long as it meets the above requirements, it will also be accepted. If your license is in a different alphabet or does not meet the criteria I just listed, you will need an international driver’s license.

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

You need to be 20 years old and in possession of your driving license for over 1 year. That allows you to rent a standard sedan/compact car.

If you want to rent a large 4×4 SUV (or for some rental providers any SUV) you need to be 23 years old.  

Rental car insurance 

It is highly recommended to take out the full insurance when renting a car in Iceland, even if you’re only planning to drive on the paved main roads. 

Weather in Iceland is very unpredictable, and you never know when you may incur some damage from sand, ash, or high winds. 

If your itinerary includes traveling into the Icelandic Highlands or other remote areas like the Westfjords you should strongly consider a full insurance package, including the collision damage waiver, sand and ash protection, and F-road insurance which covers any damage from your travels on unpaved roads. 

Lotus Car Rental is the only rental car company in Iceland that also offers River Crossing Protection covering all potential water damage to the undercarriage of your vehicle.

You should never drive a hybrid car through a river.

Roadside assistance is also a good thing to have in case you need rescuing from an unexpected situation. Blue Car Rental offers that option.

Lava Car Rental also covers the cost of roadside assistance; however, only if a problem with the rental car causes the situation.

What if you have car rental insurance through your credit card or third-party liability insurance?

It’s ok to use your own car insurance in Iceland as long as you confirm the policy details to make sure you have the coverage you need. 

Just keep in mind that in case you do need to use it, you’ll have to pay for the damages first and then you’ll file a claim for reimbursement.

If you have coverage with a local company, you don’t incur those expenses, or at least not as many depending on the policy you purchased.

I usually take out the full insurance through my rental company. Like I mentioned earlier, my personal favorite is Blue Car Rental because of their great customer service and the quality and selection of their cars. Lava Car Rental is another trustworthy local company.

Additional services and options

Some services will require paying additional fees but are also worth considering.

Renting a Wi-Fi box (or a portable hotspot) with your rental car will ensure uninterrupted cell communication and access to your phone and maps/navigation. It can be a very cost-effective solution especially if you travel as a group and have to connect multiple devices. There are usually no limits on data usage.

Paying for additional drivers is also a good idea. Having a backup driver can save a trip in case the main driver is too tired or for some reason unable to drive.

If your backup driver has had their license for less than the required 12 months, Lotus Car Rental company offers the “Young Extra Driver” option, where for a slightly higher fee they are allowed to drive your rental car if needed.

Child car/booster seats are also available to rent. Always check with your rental car company if the car seat from your home country meets the standards in Iceland before you bring it.

How much does it cost to rent a car in Iceland?

Rental car costs depend on a variety of factors, the type of car being one of them. A small economy car will typically cost a lot less than a larger four-wheel drive SUV.

As I mentioned earlier, while keeping costs low is always a consideration, make sure you choose a rental car that is appropriate for your Iceland road trip.

Car rental prices also vary at different times of the year. They are higher in peak season (summer months) and lower in shoulder seasons.

Start your car rental search early and try booking your car well in advance, to have the best chance of getting the lowest prices and the best deal. 

Many rental companies offer free cancellation as late as 24 hours before your pick-up date, so if your travel plans change you won’t incur any costs. Of course, as always – make sure to read the fine print carefully! 

Rental car pick up locations

That’s an important thing to check when renting a car. 

Most of us count on the convenience of picking up your rental car as soon as we land in Iceland, right at the Keflavik International Airport.

Some companies do have their offices in the airport area – either inside the terminal, within a few minutes’ walk or a quick shuttle ride. Some however have office locations farther away and provide pick-up and drop-off shuttle service to bring you to your vehicle when you arrive and back to the airport the day of your departure.

It’s good to research this ahead of time to plan your arrival and departure day properly.

You do have the option to pick up and/or drop off your rental car in Reykjavik City Center if your rental company has an office there as well (Blue Car Rental does). Then you just need to arrange a form of public transportation to and from Keflavik airport.

Read more on public transportation to and from the airport in THIS ARTICLE.

If your travel plans include Reykjavik Domestic Airport you have car rental options there as well.

Rental car companies like Hertz, Europcar, Avis and Budget have their offices there and can provide you a vehicle.

Where else can you rent a car in Iceland?

There are domestic airports in Akureyri and Egilsstaðir with car rental companies.

Rental car pick up/drop off times

Please check the office hours of your rental company.

Many offer 24/7 service where you can get your car keys from a lock box any time. Others may want you to physically check in with them before you pick up or drop off your car. That may matter depending on your flight arrival/departure times.

Blue Car Rental, Hertz, Enterprise, Lava Car Rental, Go Car Rental Iceland, Zero and a few other companies have 24/7 availability.

To use the 24/7 service you will have to securely check-in online on the company’s website before your pickup date, use a credit card to pay for the rental car, and then you should be all set to just grab the car keys from a lock box any time. 

Many rental car companies will also give you a discount card/chip to use at gas stations, mostly Olis.

To find out more about gas stations in Iceland read my First Trip to Iceland Travel Tips and Driving in Iceland guides.

Want a fantastic, easy-to-read, high-quality map of Iceland to have as a navigation backup? AND listing gas stations on your route? You need the Iceland Adventure Travel Map thatI personally don’t travel to Iceland without! It’s currently in and out of stock on Amazon but keep checking – it’s worth it!

What about renting a campervan?

That’s a great option if you want even more flexibility without being tied to scheduled accommodation stops and you’re not up for tent camping. Just remember that you can only stay overnight in designated camping areas. Wild camping is not allowed in Iceland.

As far as choosing the right campervan, the same rules apply as to choosing the best rental car. Consider the roads you’ll be driving on and space for both the passengers (both sleeping AND sitting space!) and the luggage.

We have driven around the Ring Road in a campervan during one of our trips and absolutely loved the experience!

Read about it here: Happy Campers Iceland: an Honest Review of Our Campervan Experience.

READ MORE: Camping in Iceland: A Complete Guide and Tips from My Campervan Adventure.

Here are some of the best-reviewed campervan rental companies:

GO Campers Iceland | Happy Campers | KuKu Campers

Always read the fine print of your rental agreement. Some companies exclude certain roads from your allowed routes or may have other conditions you need to be mindful of.

Safety considerations while driving in Iceland

Should always be a priority.

Always check weather conditions and road status, pay attention to any weather warnings and road closures, obey speed limits and only drive on the roads you’re allowed on and are comfortable with.

You can download the apps for the above websites (road.is and en.vedur.is) on your phone so they are easier to access.

SafeTravel.is (website and the app) is also a great resource for checking the conditions not only for driving but also for hiking. It also allows you check in with your location and page emergency services in case you need help.

Iceland’s emergency phone # is 112.

If you need more advice on how to have a great road trip in Iceland, read THIS DETAILED GUIDE.

Otherwise plan your trip, pack your bags and explore!

👉 Don’t forget TRAVEL INSURANCE! I don’t travel without it. Get a quote from my personal #1 choice – Travel Guard – or check more options here!

🛜 Stay connected during your trip with an eSIM like Airalo, Saily or Sim Local!

Use promo code PLANPACK to unlock your 5% discount!

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