Everything You Need to Know About Renting a Car in Iceland

renting a car in iceland

Are you interested in renting a car in Iceland? You have made a great decision. One of the best ways to experience Iceland in all its glory is by taking a road trip. 

Iceland attracts over two million tourists per year, and for a good reason. There is so much to explore, from glaciers and volcanoes to black beaches and geothermal pools. And you can do it all with Iceland’s midnight sun or under the Northern Lights.

However, you need to plan your road trip to make the most of your time in Iceland. The best place to start is learning about car rental in Iceland and how to pick the best car rental service for you. 

We have you covered with this guide. Read on for everything you need to know about renting a car in Iceland.

Reasons for Renting a Car in Iceland

The main reason for renting a car in Iceland is that you get to see so much more. Yes, you can pay for tours or get a tour guide. But if you want the freedom to choose your route and explore on your own schedule, then renting a car is your best option. 

If you want to get out of Reykjavik and urban areas, then public transport links will not cut it. Instead, find a car rental service to have the freedom to explore all of Iceland.

Iceland is one of the most sparsely populated countries globally, with a population of around 340,000, which works out at three inhabitants per square kilometer. The result is you have a lot of open roads with nature for company. Discover hidden gems and deserted sites away from the main tourist route.

How to Rent a Car in Iceland

It is best to contact a car rental company before you arrive in Iceland to discuss your needs and ensure you have a choice of cars.

Cars can get booked up fast, especially during peak months. It also gives you time to work out your Iceland road trip route and what features your car will need. Once you pick your vehicle, select your dates and location for pick-up. 

A car rental company may give you the option of pick up at the airport or Reykjavik city. The most convenient option is renting your car straight from the airport so that you can get started on your trip!

Alternatively, you might want a few days to relax in Reykjavik first and then arrange to pick up the car if you do not plan to drive around the city. Reykjavik is a relatively small city, so most people choose to walk around. 

Some car rental companies such as Circle Rental are located a few minutes from the airport. We provide a free shuttle service to reach our office. 

Car Rental Company Rules 

The minimum car rental age in Iceland can depend on the company and type of car. With Circle Car Rental, a two-wheel-drive (2WD) is 20 years old, and a four-wheel drive (4WD) is 23 years old.

You do not need an international driving license to drive; Iceland accepts your national one. Sometimes you are also asked for one year of driving experience. 

A car rental company will also ask to see a valid credit card to either charge a deposit or imprint the card just in case. If you do not have a credit card, some car rental services will accept debit cards too. 

Also, ask about the minimal rental period for a car, usually 24 to 48 hours. You may need to pay a minimum charge, such as 48 hours. 

Always check a car rental service’s terms and conditions when you rent, as they might have other car rental rules you need to know. For example, whether you can drop your car off out of hours and policies for early drop-off, speed fines, toll, and parking fees. 

rent a car in iceland

Roads in Iceland

There are two types of road in Iceland, which may impact which type of rental car you need. You can either stick to the paved roads or try the F-roads. There are also H-roads, which are local access roads to homes, farms, and other private property. 

Iceland Paved Roads 

Many of the main tourist attractions in Iceland are accessed by driving around the Ring Road or following the Golden Circle route. These roads are paved, asides from some remote areas with gravel.

You do not have to worry about adventurous driving here, just the adventure of all the sights. However, you should still take care, especially in winter.

Iceland F-Roads

F-roads are gravel and dirt roads, which can have difficult driving conditions. They are definitely a more adventurous option, which takes you off the beaten track in Iceland. F-roads go through mountainous areas, and you may get some glacier river crossings too. 

Type of Car Rental 

There are several types of rental cars to consider. It mainly depends on the season, weather, and road type you plan to drive on.

You should also consider your budget, amount of luggage, and group size. It can help determine what model you choose and how comfortable you will be. 

Automatic or Manual Drive?

Always ask the car rental company about automatic cars if you cannot drive manual. There are mainly manual cars in Iceland. However, if you can drive manually, you can pick either option, as you can quickly adjust to an automatic car.  

2WD Rental Cars

2WD vehicles are great for short trips and routes that stick to paved roads in Iceland. For the Golden Circle route, Ring Road, and driving around urban areas, a small or medium 2WD car is appropriate. Check which roads you are legally allowed on and what your insurance covers in a 2WD. 

They are usually the most affordable car rental option available. However, consider a 4WD option in winter to confidently manage on the roads. 

4WD Rental Cars

Without a doubt, you need a 4WD if you want to tackle the F-roads in Iceland. It is also an excellent option for winter driving. There are different options available, such as a Toyota Land Cruiser 4X4 or smaller 4WD options. 


Some people choose to hire a campervan in Iceland to save money on meals and accommodation. It can be a comfortable way to have a long road trip in Iceland. Campervans can be 2WD or 4WD, so be sure to check if you plan to travel in winter.  

car rental in iceland

Car Rental Insurance

It can be tempting to go for the cheapest car insurance when renting a car, but this is not recommended due to Iceland’s road and weather conditions.

There are a lot of different insurance options to consider, which can be confusing. These are some of the standard terms you will come across.

Collision Damage Waiver (CDW)

The CDW limits how much a rental car company will charge you if you drop the car off with new bodywork damage. Liability excess can vary in price depending on the package you choose. 

Although standard car rental insurance packages include CDW, check the fine print. There are different CDW coverage options. Some premium and platinum packages include a CDW with lower or no liability excess. 

Theft Protection (TP)

Automobile theft is extremely rare in Iceland, but it is no bad thing if the package includes TP. There can be a higher risk in Reykjavik. Always take precautions such as hiding items out of sight, as TP usually does not cover stolen items. 

Gravel Protection (GP)

GP is a good idea if you plan to drive on the F-roads, but also paved roads can cause gravel damage. Gravel can easily chip the car’s bodywork, windows, and headlights. There is usually a liability excess with this coverage.

Sand and Ash Protection (SAAP)

Sand and ash can cause costly damage during storms and volcanic eruptions, which happen year-round. Usually, SAAP is included in premium packages, or you have to pay extra. It can save you a lot of money if your rental car does get this type of damage. 

Car Rental Features

When renting a car in Iceland, think about the features you want and need. A rental car service should provide studded tires for traction on the ice during winter. 

Also, ask about mileage limits, and ideally, get a car with unlimited mileage! Or you will have to map your route and work out how much mileage you need each day.

Also, consider if you need a GPS device. You can use your phone if it has an international service or a local sim. Always make sure you have a portable charger if you plan to use your phone; otherwise, you could get stuck somewhere remote without phone access. 

Driving Rules In Iceland 

The good news is that there is little traffic in Iceland, asides from in Rekayvik during peak times. However, you need to familiarise yourself with Iceland’s driving rules to stay safe and avoid problems. Here are some to get you started. 

Drive on the Right

For many countries, you will be familiar with the driving style. You drive on the right and overtake on the left. The steering will is also in the same format. 

Seatbelts and Headlights On

Your headlights have to stay all the time in Iceland, even during the day. If someone is flashing their lights at you, it is probably because yours are off. Seatbelts are also a legal requirement and save lives. 

Off-Roading and Cellphone Use Are Illegal 

Do not attempt to drive off-road, as it is illegal. And you will have a costly insurance bill if anything happens. Driving with your cellphone is also illegal unless you use it hands-free. 

Speed Limits and Cameras 

The speed limits in Iceland are 50km/h in cities, 90km/h on paved roads and 80km/h on dirt roads. There are some exceptions, such as through tunnels and on throughways, so always keep watch. Speed limits are enforced too, usually with speed cameras, and there are hefty fines if caught. 

Do Not Stop In the Road

Iceland is beautiful, but do not just stop anywhere on the road, as it can cause accidents. Always pull over into designated spots and walk back if you need. However, do slow down and stop at single-lane bridges, where only one car can cross at a time. 

car rental iceland

Road Hazards

The main three road hazards are sudden weather changes, animals, and river crossings. Always follow the Iceland weather forecast, and if you are driving in winter, follow safety recommendations. It helps to pack warm clothing and have food supplies on you just in case. 

Always watch out for livestock too, which roam freely. Keep your eyes on the road to avoid sheep, horses, and even reindeer in parts of Iceland.

Make sure your car can safely do river crossings, and your insurance covers it. If you have never done a river crossing before, take time to research how to do one. 

Gas Stations and Fuel

When figuring out your car rental budget, also consider fuel prices. Gas stations are usually open 24/7, but they are not in remote areas.

A good rule of thumb is to never let your gas fall below half once out of urban areas. Always prepare on longer journeys and have more gas than you think you need. 

Accident and Breakdown 

A car rental service may include emergency breakdown assistance, such as Circle Car rental’s 24/7 service. 112 is the emergency number in Iceland for all services. Search and rescue teams patrol F-roads in Iceland. 

The Best Car Rental in Iceland 

Now you have all the information you need about renting a car in Iceland. You can soon start planning your Iceland road trip route and what to pack. But first, you need to pick a car rental service. 

So what is the top car rental in Iceland? 

Circle Car Rental is a family-run business with honest pricing, a great selection of cars, and the best service on offer. Do not hesitate to contact us to learn how we can help you have an incredible Iceland road trip.  

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