The Ultimate Guide to Iceland Rental Cars

Iceland rental cars

Iceland may be one of the most sparsely populated countries globally, but visitor numbers continue to increase each year. Are you ready to visit the land of extreme contrasts?

There are many reasons why tourists are adding Iceland to their bucket lists. One of the biggest is that the small population of the land of fire and ice is balanced out by many sights to explore. But not all of these sights are accessible, which is why Iceland rental cars are so essential. 

Some people avoid renting a car because the research can feel overwhelming. However, renting a car in Iceland offers many benefits and is straightforward with the proper guidance.

This article has you covered. Read on for the ultimate guide to Iceland rental cars.  

Why Hire a Car in Iceland

Do you want to stick to the main tourist route and not care about your schedule? Are you happy to stick to exploring towns?

There are a wealth of Iceland tour options. And there is public transport around Reykjavík, to main towns and attractions. However, you are limited to set schedules and do not have the freedom to explore at your own pace.

Car rental allows you to discover all the hidden gems of Iceland with flexibility and on your own schedule. Picture hidden waterfalls, hot springs, remote beaches, and hikes, all are waiting for you to explore in your rental car. 

Iceland Driving Conditions 

You drive on the right side of the road in Iceland. The popular tourist roads of the Ring Road and Highway 1 are easy to navigate. However, weather conditions can quickly change, especially in winter, so keep updated with road conditions

The F-Roads are mountain roads that help you explore the highlands and other off-the-beaten-path locations. These can be steep and are often gravel. 

F-Roads are closed during the winter months. You will need a 4×4 car to legally and safely drive on the F-Roads. 

Where To Hire a Car in Iceland

The good news is that you can hire a rental vehicle from Iceland airport, as most companies have offices in or close to the airport. The best option is to pick your rental car company in advance to suit your needs. 

For example, Circle Car Rental is three minutes from Keflavik International Airport. There is a free shuttle service to and from the airport, and your car will be ready to go if you have booked in advance.

You can also hire a car in Reykjavík. Check with your chosen rental company where you can drop off your rental car.

Types of Iceland Rental Cars 

There are a variety of different Iceland rental cars available. However, it is helpful to book in advance to guarantee you get the exact vehicle you want. The main rental car options to consider are:

  • Manual and automatic transmission 
  • 4×4 or a more compact car

If you have never driven a manual car before, stick to an automatic car. Sometimes these are slightly more expensive due to demand. However, if you feel comfortable with manual driving, you can pick either option. Whether you need a 4X4 depends on several factors, such as time of year and where you plan to drive.

How To Pick a Rental Car

The excellent news about Iceland rental cars is that there is a choice, but the bad news is you need to decide which car works best for you. Your car rental company can also recommend options based on your needs. Unless you have a desire for a particular brand of car, then focus on these factors to help you decide:

  • Group size
  • Transmission type
  • Budget
  • Travel plans
  • Time of year 

Group size and budget are factors that can rule out some rental cars immediately. If you think you will drive off the Ring Road or Highway 1, you will need a 4×4. If you plan to travel in winter, you can also feel more comfortable having a 4×4 or a bigger rental car to cater to more luggage and power.

Cost of Rental Cars in Iceland

There is no one price for Iceland rental cars. It depends on different factors such as:

  • The car type
  • The rental car company
  • Time of year
  • What is included in the price

Sometimes the cheapest rental car is not the best, as it may not be with a reputable company or include essential factors you need. The same goes for the most expensive car rental option. For example, with Circle Car Rental, we include the following in the car rental price:

  • Unlimited mileage
  • Third-party liability Insurance
  • Personal Accident Insurance (PAI)
  • Collision Damage Waiver Insurance (CDW)
  • Theft Protection (TP)
  • Free transfer to/from International Airport
  • 24% VAT

Always check the fine print for pricing. SUVs tend to be more expensive than two-wheel drives (2WD), but often not by a lot.

Spend time working out your budget and the cost of the rental car per day. Iceland rental cars can offer excellent value for money when you work out the price per day and how much you save by exploring Iceland’s attractions independently. 

Document and Payment Requirements  

You need a valid driver’s license, valid for at least 12 months. The minimum age to rent a car is 20 years old in Iceland. 

Usually, you need a credit card or debit card to pay for Iceland rental cars. Some companies take a deposit. However, Circle Car Rental does not take a deposit; we take an imprint of your card as a guarantee. 

You should also check if you have to pay a minimum rental period, even if you use the car for less time, such as 48 hours. 

Car Rental Insurance in Iceland 

You do not only have to find the right rental car, but you also need to find the right car rental insurance.

Spend some time considering what type of car rental insurance you need in Iceland. Some people choose to upgrade their insurance to include factors such as:

  • Gravel protection
  • Sand and ash protection 
  • Fewer liability costs 

Gravel, sand and ash can cause damage to your rental car. Gravel can be a massive problem if you plan to go on F-Roads, and it is not uncommon to have dents or a damaged windscreen due to gravel. You can need sand and ash protection during specific times of year and weather conditions. 

CDW protects you if there is any damage to the car, but there can be the option to upgrade to super CDW. Super CDW usually reduces the deductible if you do damage your car rental. 

Extra Car Rental Costs To Consider

When working out your car rental budget, also factor in extra costs. Extra car rental costs can include:

  • GPS
  • Studded tires
  • 4G Wifi 
  • Extra driver
  • Prepaid fuel 
  • Child and booster seats
  • Mileage
  • Breakdown coverage

A GPS can be helpful to navigate away from the main tourist routes, but not every Iceland location has a proper postal address, so you have to select a point of interest instead. Wifi is also great for when you are in more remote spots. Studded tires are usually included in your car rental price, but always check if you are travelling in winter. 

If you do not have unlimited mileage included in your car rental price, check how much mileage is if you go over limits. Also, check what the breakdown policy is. Circle Car Rental includes this in the car rental price. 

Driving in Iceland Tips 

Driving in Iceland is an incredible experience. Roads are not busy, with little traffic aside from the city during peak hours and main attractions during peak tourist months. There are stunning vistas wherever you look, so sit back and enjoy the scenery while remembering these tips:

  • Familiarize yourself with Iceland road signs
  • Learn the main driving rules such as headlights always on
  • Stick to speed limits to avoid fines
  • Be aware of automatic tolls and parking tickets
  • Never stop on main roads 
  • Keep an eye out for wildlife on the road
  • Factor in fuel costs 
  • Never drive off-road 
  • Prepare for winter conditions 
  • Pick a good road trip playlist

Your rental company should advise you about the main Iceland driving rules. For example, headlights should always stay on, and it is illegal to stop in the middle of the road for pictures instead of finding the nearest designated spot. Also, be prepared to use roundabouts, which can be a new experience for some tourists. 

Always prepare for changing conditions, especially if you drive in winter. If you plan to go on F-Roads, consider packing extra fuel, clothes, water, and food. 

Pick the Right Rental Car Company 

One of the best ways to find the best Iceland rental cars and have the best experience is to pick the best car rental company. If you want honest pricing, exceptional service, and quality cars, look no further than Circle Car Rental. 

You do not have to worry about hidden fees, mileage restrictions, or breakdown issues with Circle Car Rental. We are here to ensure you have the dream Iceland trip you deserve. Contact us today to learn more.

Share information About Iceland


Book your Car rental in iceland here

Great selection of new rental Cars in iceland

More useful Iceland travel tips