Renting a Car in Iceland – All You Need to Know

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Renting a car on Iceland is one of the best things you can do in this country where. In addition to the main tourist attractions, there are hundreds of places worth checking out.

We travel to this island every year, during our Iceland photo tours, and we always rent a car to have total freedom to visit the best of Iceland at our group’s pace. In addition, we have traveled many times on our own and I can recommend you when it’s worth renting a 4×4 car in Iceland, where to rent it, how to find cheap rental cars in Iceland, and much more.

In short, this guide will show you everything you need to know to rent a car on Iceland, from the best vehicle that you can rent according to your travel style to the best car rental companies in Iceland and opinions, among other things. So you only have to worry about making the most of your trip.

Besides, I recommend you to check our guide on how to drive in Iceland, where you will find some useful tips.

Guide to renting a car in Iceland

Use this index to browse the most complete guide to rent a car in Iceland that covers:

• Best car to rent on Iceland
• Best car rentals on Iceland
• Cheap rental car in Iceland
• Rent a car in Iceland airport
• Rent a car in Reykjavík
• Car rental insurance in Iceland
• License to rent a car in Iceland
• Iceland car rental age
• Tips for hiring a car in Iceland
• Car rental in Iceland review

Best car to rent on Iceland

If you want to rent a car in Iceland to tour the country at your own pace, the first thing you have to know is that you can choose between several types of vehicles. The best option will always be a 4WD car since it lets you drive on any type of terrain. Yet, in some cases, such as if you are only going to tour the Iceland Golden Circle in the summer, you have other cheaper options.

Best car to rent in Iceland

To help you find the best rental car for your trip, I am going to explain the different options and the types of trips they’re suited for.

Manual vs Automatic rental car in Iceland

First of all, you should know that you can find both automatic and manual cars in Iceland. Automatic cars are always a bit more expensive, so if you want to get a cheap rental car in Iceland and you feel comfortable driving manual cars, this will be the best option. In case you prefer an automatic car, you won’t have any problem getting one if you rent with one of the biggest car rental companies in Iceland, which we’ll discuss later.

2wd car, the best car hire on Iceland to drive the Ring Road

If you plan to only visit places directly off of Iceland’s Ring Road or drive exclusively paved roads, renting a sedan or 2WD car is more than capable.

2WD car, the best car to hire in Iceland to drive the Ring Road

This type of vehicle, in addition to being the Iceland rental car chosen by most tourists, will take you wherever you need without any hassle. However, in winter a 4×4 Iceland car rental is best because it’s very likely that you will find ice on the road, which can be dangerous.

If you choose a 2WD, I recommend that you opt for an SUV, because while it isn’t an off-road vehicle, it has better maneuverability on rough terrain in addition to being somewhat more robust than conventional sedans. It’s a great option if you want to rent a vehicle in Iceland to travel the Ring Road or the Golden Circle while occasionally taking a detour to explore a little further.

4×4, the best type of car to rent in Iceland to explore the Highlands

If you want to visit the Highlands of Iceland, you will have to rent a 4×4. In this inland area, you will drive mountain roads, also called F-roads. Most of them are unpaved and to drive these safely in Iceland, rent a car that’s a 4×4. If you plan to explore the Highlands, don’t risk your life or damage a basic rental car that you will have to pay for later. Save money on cars rental in Iceland by investing in the 4×4.

4×4, the best type of car to rent in Iceland to explore the Highlands

Keep in mind that on many occasions, if you visit the Highlands, you will have to ford rivers. To do this you will need a 4×4, although you must know in advance that no insurance will cover you if you have a problem crossing rivers in Iceland. Therefore, whenever you do this, it must be at your own risk. For 4×4 cars in Iceland, a rental may differ from another. In other words, driving a 4×4 doesn’t give you the ability to cross any river in Iceland. If you think your car is not going to be able to ford a river, it is always smarter to turn around and look for alternative routes than to sink the car in the middle of the river or let the current carry you away.

If you travel to the island between October and April, even if you don’t plan to drive an F-road, it is wise to rent a 4×4 in Iceland. If there is snow or ice on the road, it’s much safer if you choose this type of vehicle.

Economy, the cheapest car rental on Iceland

If you are looking for a cheap rental car in Iceland, the best thing you can do is choose one that is small. This works well if you don’t carry too much luggage and you are going to travel only paved roads in the summer. Certainly, the best option to save some money in Iceland is rent a car that’s small.

Economy, the cheapest car rental in Iceland

These types of vehicles aren’t suitable for driving on secondary and unpaved roads, but with it, you can complete the Golden Circle or Ring Road without problems as long as the conditions are good. The downside of renting cars in Iceland that are small is that it can be somewhat uncomfortable when traveling with too much luggage or when driving on roads that are not well maintained.

Luxury rental car in Iceland

If you are looking for comfort, you can rent a luxury car in Iceland. These are large and spacious models that fit between five and seven passengers, in addition to luggage. Within the category of luxury cars in Iceland, there are 4×4, Jeep, and SUV.

Although this makes renting cars in Iceland more expensive, you’ll experience more comfort and security no matter when and where you go in Iceland. So if money is not a problem for you, it’s certainly the best option of all.

RVs, an alternative to car rentals in Iceland

If you book early, renting an RV in Iceland will save you a lot of money on your trip since you won’t need to pay for accommodation. Plus, there are quite a few cheap campsites in Iceland. Renting a car in Iceland is cost-effective, but an RV opens up a new world of possibilities. Yes, this type of vehicle is indeed more expensive, but since you won’t have to pay for hotel stays, it can be cheaper in the long run.

RVs, an alternative to car rentals in Iceland

The best thing about renting a campervan in Iceland is that you have absolute freedom. It’s the best way to enjoy the nature of the place and see the country at your own pace.

You’ll be able to drive on the F-roads and tour the Highlands only if it’s a 4×4 campervan. However, with this type of vehicle, I don’t recommend crossing rivers, so look very carefully at the route you want to take. Still, you won’t have any problem getting to Landmannalaugar or other tourist areas of the Highlands since you won’t pass through any river to get there.

I suggest you rent a motorhome or a camper in Iceland if you travel during the summer months. In this case, it is, without a doubt, a great experience. If you visit Iceland in winter or want to move around the Highlands, the best cars Iceland rental is a 4×4 camper.

In addition to renting a campervan in Iceland, another very popular option is to get a 4×4 Jeep with a rooftop tent. It is, undoubtedly, the best option for more adventurous travelers who want to reach the most remote areas of the Highlands but also have a place to stay safe wherever they are.

Best car rentals in Iceland

After looking through these renting a car in Iceland tips, you may know what you want to rent. Now, let’s dig into the best car rental companies in Iceland. Below I am going to tell you about the local companies where we have rented cars during our trips to Iceland, as well as ones that have very good reviews. If you book in advance, you will find plenty of discounts, especially if you are looking for special vehicles, such as 4×4 cars or motorhomes and campers in Iceland.

Best car rentals in Iceland

In Iceland, to rent a car cheap here’s an option that will help you save a lot.

1. Cheap car rental Iceland, the best place to rent cheap cars in Iceland

The company Cheap Car Rental Iceland is one of the best options if you’re looking for affordable rental cars in Iceland.

We have rented 4×4 cars several times there and we have been delighted with their services. In addition to quite competitive prices, they have all kinds of vehicles: cheap cars to drive on paved roads; 4×4 cars, to tour any part of the country; campers and motorhomes so you can go at your own pace; and larger vans that are ideal for groups or for trips where you want to be comfortable.

The only downside is that they don’t have many vehicles, so if you don’t book in advance you may find better deals elsewhere.

2. Iceland blue rental car, very popular car rental company in Iceland

Blue Car Rental is one of the most popular car rental companies in Iceland. Unlike other car rental companies, all their cars are new, so you will enjoy comfort and luxury during your trip. Besides, you can rent any kind of vehicle from this company.

2. Iceland blue rental car, very popular car rental company in Iceland

If you’re going to rent a car for more than a week, every seven days they give you one day for free. This help you save some money if you are going to be on the road for while.

3. Lotus Car Rental, one of the best-rated car rental companies on Iceland

I also recommend Lotus Car Rental since it’s one of the top-rated companies to rent a car in Iceland. It’s a family business that will be happy to help you choose which car to rent in Iceland, and if you have any concerns they will give you the one that best suits your needs. Without a doubt, it’s a very good option if you want to rent a vehicle and not worry about a thing. Also, the employees can give you ideas about what to do in Iceland.

4. Iceland Car Rental, another excellent option for rental cars in Iceland

Iceland Car Rental is also an excellent company to rent cars in Iceland, or any other vehicle since they have all kinds. It’s also a top-rated company, so if you choose it, you won’t have any problem.

4. Iceland Car Rental, another excellent option for rental cars in Iceland

You can rent your car on their website very quickly and easily and you won’t have to pay before you pick the car up. If you aren’t sure about what kind of car you need, they will help you choose.

Cheap rental car in Iceland

If you don’t know how to rent a cheap car yet, take a look at DiscoverCars, one of our favorite websites to find the best rental car in Iceland or anywhere else in the world. It’s also one of the top websites to find the best prices, which is useful if you forgot to book in advance.

This is a rental car search engine that makes renting cars in Iceland simple. It finds discounts between 10% and 30% compared to renting directly with the car rental company.

Cheap rental car in Iceland

If you want to rent cheap cars in Iceland avoid hiring extras, such as an additional driver or GPS. These types of extras make the bill quite expensive and, in reality, they aren’t as necessary as they seem. It’s best to have just one driver and instead of GPS use your smartphone. If you’re from Europe, roaming is free in Iceland but if you come from other countries you can use the app Maps.me which works offline. You should download our maps of Iceland too.

Car Rental at Keflavik International Airport

The vast majority of car rental companies in Iceland have offices at or near Keflavík International Airport. So if you want to start your road trip as soon as you land, the best option is renting a car in Iceland airport.

Many of these companies charge a fee if you decide to pick up your car there. Despite this extra fee, I have to say that sometimes it’s cheaper to pick up the car at the airport than to pay for the shuttle to the city. You can check the shuttle price here.

Renting your car at Iceland airport is the most convenient option, especially if you bring a lot of luggage, and also the fastest way to start your road trip.

rental car in Reykjavik, the cheapest place to rent a car in Iceland

If you want to get a cheap car rental in Iceland, booking it in Reykjavik is the best option. Besides avoiding the airport fee, you will find some of the cheapest car rental companies in Iceland there.

Rent a car in Reykjavik, the cheapest place to rent a car in Iceland

Most companies have an office in Reykjavik since there are many tourists and high demand for rental cars. If you plan to spend two or three days in the city before starting your trip around the island, it is very worthwhile to hire a shuttle to the city center and rent your car there before starting your road trip. This will save you a few days of rental car fees.

Look for car rental companies in Reykjavík, Iceland, if you want something cheap or if you have some things you want to do in Reykjavik before starting your road trip to other areas of the island.

Car Rental Insurance in Iceland

Traveling insured is essential, so I recommend that, in addition to buying the best travel insurance, you purchase good coverage for your rental car.

Before buying any additional insurance for your rental car on Iceland, check if your car insurance also covers any incident that you may have with a rental car. I also recommend that you take a good look at what type of coverage your insurance has to see if it’s suitable for your trip to Iceland.

Whenever we visit the island, we buy the best car rental insurance. Below I explain what type of coverage you should include to avoid being unprotected during your trip to Iceland, as well as those extras that I don’t consider necessary or that you can skip.

Super CDW (SCDW) insurance for your rental car in Iceland

The CDW insurance is the basic collision damage waiver and you must have it when driving your car rental in Iceland. Some Iceland rent-a-car companies include it automatically. With this insurance, you pay a deposit of $2,000 to $3,500 to cover possible damages.

Super CDW (SCDW) insurance for your rental car in Iceland

I recommend you add the SCDW or Super CDW, which is an extension of the previous one. It is a bit more expensive, but the deposit will be less, at around $700. In this case, it’s comprehensive insurance, although there are some damages it won’t cover, such as glass or damage caused by gravel, sand, and ash. If you rent a car on Iceland, buy at least the CDW insurance.

Gravel Insurance for your rental car in Iceland

Adding gravel protection coverage to your CDW car insurance is highly recommended, especially if you are going to drive unpaved roads. This insurance covers all the damages that the car may suffer due to the impact of gravel and stones, including the windshield, headlights, and windows.

It may seem unlikely that a stone will impact your car during the trip, but it happens much often than you think, even on paved roads. While this insurance is recommended, it’s not mandatory. However, if you don’t buy it, you will have to assume the costs of repairing the vehicle.

Sand and Ash Protection (SAAP) Insurance for your car in Iceland

We have never bought this insurance protection against sand and ashes during our trips to Iceland. It covers all damages that the car may suffer in the event of a sand and ash storm. If this type of storm happens while you are driving, the car could be unusable since sand and ash can penetrate the motor and damage it. However, we have never bought it and until now it hasn’t happened to us and we don’t know anyone that has experienced this problem.

In any case, I don‘t recommend driving during a sand and ash storm because, in addition to damaging the car, it can be quite dangerous. If the forecast calls for strong winds, it’s best to park the car in a protected place, such as next to a building that can block the wind, and wait for the storm to pass.

Theft Protection for your car in Iceland

Theft Protection for cars in Iceland is unnecessary. Iceland is a very safe country, one of the safest in the world indeed, and your car isn’t likely to be stolen. So I don’t think this type of coverage is necessary.

Theft insurance for your car in Iceland

Most likely, a car rental company in Iceland will offer you this coverage, but I suggest bypassing it, especially if you are traveling on a budget. Of course, it’s up to you, so if you’ll feel better having it, do it!

License to rent a car on Iceland

If you are going to rent a car in Iceland you will need the US type D permit. With it, you can drive vehicles that don’t exceed 3500 kg, so you will have no problem with any type of vehicle, including motorhomes and campervans. The equivalent to the US Type D in Europe is B and in Canada, it is G.

Besides that, the driver must have held a full driver’s license for at least 12 months.

License to rent a car in Iceland

An International Driving Permit (IDP) is not required if the permit is written using the Latin alphabet. If not, the IDP will have to be requested. This is only a translation of the original driving license, so it is not valid on its own but only with your driving license.

Iceland car rental age

In addition to the Type D driving license, you need to be at least 20 years old to rent a car in Iceland. Some companies put some restrictions depending on the model and may require a minimum age of 23 to rent an SUV or large car in Iceland.

To rent a camper in Iceland, depending on the model, the minimum age varies between 20 and 23 years old. And to rent a motorhome in Iceland you have to be at least 25 years old.

If you are between 20-25 years old, contact the company beforehand to confirm that you can rent that type of vehicle from them. Regardless of your age, you will need to have held a full driving license for more than a year.

Tips for hiring a car in Iceland

When renting a car in Iceland, many questions may arise since it’s a country where the weather and the types of roads can raise some concerns. However, I assure you that if you rent the right car, you won’t have any problem. But to clear up all your questions, you can check out the best tips for renting a car on Iceland here.

1. Don’t wait until the last minute to rent your car in Iceland

Once you know the dates of your trip and the route you are going to take, I suggest booking your rental car in Iceland as soon as possible to ensure the best price and availability. This way, you will be able to compare several companies, easily choose the type of vehicle you want, and get a cheap rental car in Iceland.

1. Don’t wait until the last minute to rent your car in Iceland

2. Take photos of your Iceland rental car

Before starting your route, I suggest you take a few minutes to look carefully at the car and take photos of any damage you find. Small scratches, dents, stains on the upholstery… anything you see, photograph it and notify the rental car company staff so they can take note. Also, email the photos to the company. This way, you will make sure they don’t blame you later for any previous damage and you have to unfairly cover the costs of their repair.

Look at the glass in search of any pitting, making sure the license plate is perfectly placed, and that the tires are in good condition. These are things that are often overlooked and it’s essential to check them.

3. Check the Mileage limits of your rental car in Iceland

Before booking a rental car on Iceland, I suggest carefully reading the company’s mileage policy.

Some companies impose a mileage limit and although at first, it seems that you are getting a cheap rental car in Iceland, if you drive too much, they will charge you an extra fee and it will end up being much more expensive. If you are going to travel the Ring Road, the Golden Circle, or you are going to take a journey through Iceland, I recommend you purchase unlimited miles.

4. Car Rental Fuel Policy in Iceland

For any type of car rental in Iceland and anywhere in the world, I recommend taking a look at the fuel policy since it is one of the most important things in the contract.

4. Car Rental Fuel Policy in Iceland

Of all the options they can give you, the best one is Full/Full. You will pick the car up with a full tank and you must return it full. This way, you can find the gas stations with the best rates and fill it there.

The prepaid option isn’t the cheaper one because you can return the car with an empty tank and it is the rental company’s responsibility to fill it. So, you’ll still be charged for the cost of gas. In this case, the price of fuel will be much higher than if you filled it yourself, so it will be more expensive in the end.

5. Iceland Rental car collision insurance doesn’t cover for animal damage

Regardless of the insurance you choose, none of the policies cover damages that the vehicle may suffer if it hits an animal. In Iceland, it is very common to see domestic animals like horses or sheep crossing the road, and some of them dart out from the most unexpected places. The best thing you can do is drive with caution to avoid a collision.

In our last trip, we almost hit two black sheep that came across our path at night,, so we barely saw them. That’s why I suggest you always keep in mind that there may be an animal about to cross, and drive slowly.

6. There is no insurance for river crossings in Iceland

CDW and SCDW insurance don’t cover water damage after crossing a river. In many areas of the Highlands of Iceland, you will find rivers that you must ford with your vehicle if you want to keep going. Make sure that the river is not too deep or wide to cross and don’t put your life at risk or damage your rental car.

6. There is no insurance for river crossings in Iceland

7. Other tips for driving in Iceland

We have written the ultimate guide to driving in Iceland where you will find a lot of tips to enjoy your road trip. However, there is a specific tip I want to highlight in this article since it can increase the cost of your rental car in Iceland:

The wind is the number one reason travelers lose all or part of their rental car deposit in Iceland. Sometimes from the inside of the vehicle, you don’t realize the true force of the wind, but many times car doors blow open due to the strong gusts outside.

For your safety, I recommend that only the driver open the doors to all passengers. I also suggest counterbalancing so as not to end up with a broken hinge or worse, a hanging car door.

8. Don’t wait until the last minute to return your car in Iceland

This advice is applicable for any trip in which you are going to rent a car. If you are in a hurry, the staff of the rental company will check the condition of the car once you are gone, and if they find any damage, they will deduct it from your deposit.

The best way to make sure they don’t charge for any damages, is to review the vehicle with them and ask them to sign off on the contract that you have returned the car without any damage. Icelanders are incredibly friendly and it has never occurred to us that they would try to charge us for damages that we hadn’t done to the vehicle (unlike in other countries). In fact, on some occasions, they have even turned a blind eye to small damages that we have caused, so I am convinced that you won’t have any problem. Still, prevention is the best policy.

Car rental on Iceland review

We have rented more than 10 cars in Iceland, with different companies, and of different types, so I think my experience can be useful for you.

If you are going on an adventure trip, visiting the Highlands is the way to go and for this, you will have to rent a 4×4 car in Iceland. In our last three trips, we have rented the 4×4 car with Cheap Car Rental Iceland and if you do it in advance (we booked 6 months in advance) it’s the cheapest company you can find. Here you can see reviews of car rental in Iceland with Cheap Car Rental Iceland.

Car rental in Iceland review

However, on our Iceland photo tours in September, we needed basic spacious sedans or SUV cars and we usually found better prices on DiscoverCars. This website has great offers and allows you to pay at car pickup, which is very convenient. In addition, in case you decide to change the type of vehicle at the last moment, you can do it with no hassle.

We have also tried Blue Car Rental before and we stopped using it because the prices were somewhat more expensive (although we had a nice experience with them too). Here you can check reviews of renting cars in Iceland with Blue Car.

We have traveled by campervan in Iceland just once and we rented it through Motorhome Republic since we found quite a good offer and our camper was great.

Iceland Car Rental FAQs

Do you still have any questions regarding car rentals in Iceland? We have compiled some frequently asked questions together with our answers regarding this topic.

And that’s all. I hope this guide helps you choose which car to rent on Iceland and to plan a wonderful trip. If you have any questions or are still not sure about which car to rent in Iceland, leave a comment and I will be happy to help.