Top 15 Tips for Renting a Car in Iceland

The process of renting a car in Iceland can seem daunting at first because there are so many decisions to make. Even after you figure out what kind of vehicle you need, you’ll still need to navigate a raft of choices about insurance and extras.

The good news is that hiring a car is actually pretty straightforward if you follow our top fifteen tips on how to rent a car in Iceland. Get the most out of your trip with this helpful guide!

1. Book your car rental as early as you can

Probably the most important tip we can offer if you’re renting a car in Iceland is to make your reservation as early as possible. Traveler numbers in Iceland are rapidly returning to pre-pandemic levels and that means summers going forward are set to be busier than they were in 2020 and 2021. With all those extra tourists comes an increased demand for rental vehicles.

Book early and you’ll secure the best price. If you leave it to the last minute, you might find yourself with very limited options for cheap car rentals in Iceland. Planning and organizing your trip as early as possible is especially vital if you’d like to visit in peak season between June and August, but less so in the low season.

2. Plan your itinerary first

Before you settle on the rental car that’s right for you, spend some time planning your itinerary. Three of the most important questions to consider are:

• How long do you prefer to spend in the vehicle each day?

• How many people will there be in the car?

• Do you intend to stick to the Ring Road and other such roads, or are you keen to drive on highland and gravel roads?

These factors and more will influence your choice of vehicle, so it’s best to spend a little time thinking about what you’ll be doing in Iceland before you make a firm decision about what’s going to be carrying you around.

For instance, if you’re planning to have more time in the car, you’ll appreciate some additional space. Meanwhile, if you’re driving a lot on gravel, you might benefit from the extra grip a 4x4 provides.

3. Check whether your planned accommodation has free parking

Once you have a rough plan worked out, start fine-tuning where you might stay. You could leave this to chance, particularly outside the peak season, but then you might not find an accommodation that’s in line with your needs and budget.

In any case, whether you reserve upfront or not, you’ll need to consider where to park your rental car.

While many campsites, guesthouses and rural hotels like Hótel Tindastóll, the oldest hotel in Iceland, have their own car park, parking in Reykjavik might not be as simple.

You’ll most likely find public car parking close by, but it might not be cheap and you’ll have to factor that into the cost of your overnight stay. In the capital, you might find a better value accommodation further from the city center.

4. Don’t assume you need to rent from the airport

Often if we plan to hire a car, we assume we’ll just pick it up from the airport when we arrive. Of course, depending on your final destination, that might well be the best option. However, if you’re planning on spending a few days in Reykjavik before traveling further afield, you could consider picking up your rental car when you’re ready to leave the capital instead.

Our downtown office is really convenient and you won’t have the headache of finding a nearby space if you’ve chosen an accommodation that doesn’t have its own car park. Work out whether it’s more cost-effective to take the bus from Keflavik to Reykjavik. Most sights in the capital are easily accessible on foot; if you don’t want to walk, the city buses are reliable and cheap.

5. Do your homework on the car, not just the price

When renting a car in Iceland, it can be all too easy to focus solely on the price. Iceland is an expensive country, so planning your budget is obviously important. But within the budget you’ve set for yourself, think about what else is important.

How much room will you need for your luggage? Are you going to need a four door vehicle or can you make do with two? Will you struggle to squeeze a larger car into a tight parking space? Think about the kind of car you’ve chosen and how that’s going to play out while you’re on the road.

6. Think about upgrading to an automatic

American visitors will want to think carefully about whether they can cope with a stick shift. There’s no shame in admitting you’d be more comfortable with an automatic, this is supposed to be a holiday, after all! What’s the point in adding stress to what’s supposed to be a fun situation?

If the very thought of having to manually change gear sends you into a tailspin, make sure you book far enough ahead to snag yourself an automatic.

But in fact, no matter where you come from, renting an automatic vehicle in Iceland can be a smart decision. Think about it: instead of having to change gears and figure out where you need to go at a junction, all you’d have to take care of is reading the road signs. Removing the need to change gear takes the stress away.

7. Don’t automatically plump for a 4x4

There are a lot of misconceptions about driving in Iceland and probably the one we encounter the most is that you can’t drive around Iceland unless you have a 4x4. That’s not the case, of course. If it was, every single vehicle on Iceland’s roads would need to have all-wheel drive, and you won’t be here long before you work out that’s not the case.

So now you’re probably wondering: should I really rent a 4x4 car in Iceland? Driving a 4WD is definitely helpful if you’re driving when the weather has made roads icy or slick. That’s why they’re so popular for winter trips. You’ll gain a bit more traction on gravel too, which will make you feel more confident if you only drive on tarmac back home.

8. Treat yourself to an extra driver

Particularly if you’re visiting Iceland on a budget, you might be tempted to waive the cost of an additional driver. However, this is one money-saving example you’ll come to regret, especially in summer when long days filled with daylight give you the desire to continue your road trip with some late evening driving.

But even on Iceland’s well-maintained and relatively empty roads, driving is still tiring. By investing in a second driver, you’ll each get a turn to enjoy the scenery and avoid getting too fatigued. And of course, once you get home, you’ll have shared all the experiences, which makes looking back on the trip much more fun.

9. Don’t assume unlimited kilometers come as standard

When it comes to how to rent a car in Iceland (or anywhere else for that matter), it’s really important to compare the small print rather than just the headline price. Some agencies might offer a restricted mileage deal which might seem cheap at first glance, but by the time you factor in the cost of all those additional kilometers, it could work out to be more expensive.

Even if what you’re quoted looks like the total cost might be similar, you won’t have to keep an eye on the mileage - you can simply go as you please. Cars Iceland includes unlimited mileage as standard, so you can make those spontaneous detours and side trips without risking a nasty surprise when you receive your credit card bill at the end of your trip.

10. Don’t skimp on insurance, especially gravel protection

In our list of tips for renting a car in Iceland, this one often gets overlooked. While it can be tempting to cut back on insurance to save money, that’s not a sensible idea when traveling in the Land of Fire and Ice.

There are many types of car rental insurance in Iceland, and you don't need to get all of them, but some form of protection is essential. Many side roads here are gravel, for instance, and even though the majority of your traveling might be on smooth, paved roads, you could be unlucky enough to find your car’s paintwork gets damaged during a relatively short detour.

In any case, road trips should be about relaxing and having fun, which means you won’t want to spend every day of your holiday worrying about whether you can afford to pay the rental car bill that comes after it. Cars Iceland offers SCDW and GP as standard, so when you are comparing quotes, make sure you’re looking at like for like.

11. Consider renting a GPS

While Iceland’s road signs are clearly marked, you will probably notice that they are more sparsely used than in many other European countries. Miss the first sign and there might not be a reminder one a few hundred meters further on.

Bizarrely enough, some visitors to rural areas might say the roads there are too well signed. When you pull off onto a minor road, each house, farm and landmark is individually marked on the map and it can be a lot to take in.

You could choose to use Google maps on your mobile phone to navigate, but you might not be able to get a signal in remote areas. Also data – and battery – can be swallowed up surprisingly quickly. Instead, you might find you prefer renting a car with a GPS so you don’t get lost in your search for Iceland’s off the beaten track attractions.

12. Don’t plan to spend all day in the car

It’s tempting when you’re at the planning stage to cram as much sightseeing in as possible. But this is a mistake, as you’ll spend your time clock-watching and won’t be able to relax and enjoy what you’ve come to see to the same extent.

Renting a car in Iceland should be a way to enjoy this amazing country in total freedom. If you’re going at a more relaxed pace, there’ll be time to pull over and have a closer look when something unexpected catches your attention.

Far better to thin out what you want to visit so you can do all the sights justice – take a longer hike, maybe, or chat to museum staff about an exhibit that’s piqued your curiosity. You’ll get more fresh air, more down time in Iceland’s excellent cafés and restaurants and generally have a much better trip.

13. Give yourself time to get used to the car

You probably drive your own car at home without a second thought. It’s like a well-worn pair of jeans, comfortable and familiar. But every car is different. When you pick up the keys to your rental, make time to familiarise yourself with the controls, such as how to turn on the headlights, windscreen wipers and indicators, before you set off on your Icelandic adventure.

Remember, things might be a little different to what you’re used to. For example, if you're traveling in winter, you really should know how to start a car in the cold. Or, if you’re British, be aware you’ll be driving on the opposite side of the road than at home. Though your feet will be doing what they’ve always done, your hands won’t be. Therefore, before you hit the Reykjavik rush hour give yourself a little time to stop reaching for the door handle each time you change gears.

14. Don’t follow the herd

The very best travel experiences come when we are spontaneous. Turning off the main road on a whim and finding your own special place is how you make lasting holiday memories. The internet’s full of suggestions for must-see places and driving itineraries, but let these be nothing more than starting points. From there, venture a bit outside the box to craft your own unforgettable experience.

Renting a car in Iceland gives you ultimate freedom and flexibility. If you only take one tip from us, it’s to make sure you exploit that freedom. Make the most of it by calling in at places you can only reach if you’re not tied to guided tour programmes or public transport timetables.

15. Do it!

Hopefully, by now your mind has been put to rest about renting a car in Iceland. But if you’re still wavering and asking “Should I rent a car in Iceland?” then our answer is undoubtedly yes. Long-distance public transport such as scheduled coaches and tourist shuttles can be expensive, especially if you are travelling as a group of friends or a family.

Take it from us: nothing beats the freedom of renting a car in Iceland and being flexible to go where you like, when you like. Why not take a look at our fleet of rental vehicles in Iceland and get your car locked in? You’ll be one step closer to your Icelandic adventure.