What to Expect When Getting a Car Rental, Iceland: A Guide

car rental iceland

Did you know you could drive around the entire country of Iceland in just 17 hours?

Believe it or not, it’s true. You can circle Iceland’s coast in just 825 miles (or 1325 kilometers)!

The “Ring Road” trip is a popular drive for tourists who want to experience Iceland and everything it has to offer. 

But, of course, why would you drive non-stop for 17 hours when there are so many wonderful places to stop and visit! 

Getting a car rental in Iceland is a popular choice for holidaymakers to experience the magic of Iceland. When renting a car, it’s important to know what to expect to avoid surprises that can wreak havoc with your travel plans. 

Looking to rent a car in Iceland? Check out this comprehensive guide for all you need to know when it comes to getting a car rental in Iceland. 

Why Rent a Car in Iceland?

As you start your Iceland vacation research, you will first need to decide what kind of holiday you want. Do you prefer the comfort of an all-inclusive vacation or the freedom that comes with a self-drive tour? 

If the latter appeals to you the most, you’ll be excited to hear that there are many benefits to renting a car in Iceland. Let’s take a look at some of the best reasons why. 

It Beats Public Transport

Relying on transport can be a nightmare wherever you are, especially in Iceland. Buses are rare and run mainly during the summer season. This can be a major problem if your trip is booked between October and April

You Can Explore More Places

There are parts of Iceland you can only explore by car, especially if you are renting a 4wd vehicle. In the Westfjords, all vehicles are permitted, but the conditions can get a little rugged. Renting a 4wd like a Toyota Land Cruiser can give you that extra peace of mind as you travel off-road. 


If you’re with a tour group, you’re mostly stuck to a strict schedule. This means you can’t stop at that cute town you passed by, or watch that Arctic Fox stalk its prey in the Westfjords. With a rental car, you can do that plus so much more. 

You May Not Need to Spend Money on Hotels

This may not be true for all travelers, but for those going the camping route, you’re guaranteed to save money. With a sleeping bag and a tent, you can just about sleep anywhere. 

More Affordable 

Self-drive tours tend to be less expensive than a traditional tour group since you won’t have a tour guide or an all-inclusive detailed itinerary. With a good travel schedule and a rental car from a trusted company, you can save money but still enjoy the same Icelandic experience, if not better. 

How to Rent a Car in Iceland 

Great news! You’ve decided to rent a car in Iceland! Now, it’s time to learn how to!

It’s important to choose a trusted car rental company like Circle Car Rental. They will give you upfront and honest quotes with no hidden fees. For those on a budget, this is crucial. 

When choosing a vehicle, you need to find one that suits your travel plans and the time of the year you intend to visit. It also depends on what roads you intend to drive on, how many people are with you, and how much space you need. 

It’s also important to note that to rent a car in Iceland, you must be at least 20-years-old and 23-years-old if you’re driving a 4wd. And as always, you will need a valid driver’s license. Iceland recognizes all foreign driver’s licenses as legal.  

What to Look For When Choosing a Car Rental in Iceland

Not all rental cars are alike. When you browse the car rental site, it’s important to know what to look out for. Here are our top considerations. 

Your Rental Car’s Transmission

If you don’t check whether the rental car is automatic or manual, you might be in trouble when it’s time to drive. This is especially true for those who can’t drive a manual. Be sure to verify your rental car’s transmission beforehand. 

4wd Versus 2wd

As a general rule of thumb, if you’re self-driving tour includes driving on F-roads (mountain or highland roads) then you should choose a 4wd. Some rental companies do not allow 2wd vehicles on F-roads. 

But if you’re sticking to the Ring Road, a 2wd is the perfect vehicle. Something like a Hyundai i10 is the perfect compact car to explore Reykjavik City and its surroundings. 

Any Extra Features

Some rental cars have extra features that can be added on at the time of booking. This can include premium insurance, prepaid fuel, extra driver allowance, 4G wifi, GPS, and more. 

Insurance Options 

Most car rental companies offer standard insurance. This includes Collision Damage Waiver (CDW) and Theft Protection (TP) in their prices. If you want more protection, you can upgrade to higher insurance coverage which will include more. 

For example, Circle Car Rental’s Platinum Insurance has CDW and TP insurance, plus: 

  • Super Collision Damage Waiver (SCDW) 
  • Gravel Protection (GP)
  • Sand and Ash Protection (SAAP)
  • Liability Excess is Zero ISK

Insurance terms can be confusing. Choose a rental company that offers simple and transparent insurance packages. That way, there are no surprises down the track. 

We’ll discuss the importance of car insurance later on. 

Fuel Usage 

Make sure your rental car includes unlimited mileage. When renting a car with unlimited mileage, you do not need to pay for mileage. Even if you have your trip planned out to the exact mile, you’ll never know what detours you might decide to take! 

Cancellation Policy 

Of course, COVID-19 is a worry for travelers and might be the reason you need to cancel your trip, including your car rental. Before you sign on the dotted line, make sure you inspect their cancellation policy. 

In most cases, if you cancel more than 48 hours before the rental you can get a full refund. The same goes for changing or modifying your booking. Most rental companies are flexible with changes, even up to the hour before car pick-up. 

Importance of Car Rental Insurance

Most holidayers convince themselves that nothing will go wrong on their trip. Of course, we hope that’s the case. But for some, it doesn’t always turn out so peachy. 

While the main roads are well maintained, the constantly-changing Icelandic weather can offer its own set of driving challenges. Sleet, rain, wind, and frost can cause your vehicle to go off-road if you’re not paying attention. Plus, loose gravel and rocks can shoot out from passing vehicles and hit your windscreen. 

Insurance protects your rental car if it is damaged, vandalized, or stolen. By choosing to include an insurance package with your car rental, you’re giving yourself peace of mind. And although it can seem like an unnecessary extra cost, when you’re on the side of the road with a busted rental car you’ll thank yourself for going the extra mile. 

Save yourself the headache and enjoy your self-driving experience. 

Tips for Driving in Iceland 

If you’re from the United States, driving in Iceland should feel familiar because you drive on the right side of the road and overtake on the left

For others, it might feel a little different. But driving in Iceland isn’t difficult. As long as you know what to expect, it can be a very enjoyable country to drive in. 

Familiarize yourself with these tips before you set out on the open road. 

Watch Out for Wildlife

Iceland is home to many sheep, horses, and birds who like to roam during the warmer months. This is not illegal.

In fact, sheep are allowed to graze wherever they feel. And sometimes this means crossing roads to get to their next meal. 

If you see a sheep attempting to cross the road, please slow down and use extra precaution. Don’t attempt to continue at high speed and try to dodge them. Sheep are particularly erratic and can change their direction without a second thought. 

Keep To the Speed Limit

Just like you would in your own country, you should abide by Iceland’s strict speed limits.

The general speed limit is 19-31 mph (30-50 km/h) in urban areas. On unpaved roads, this increases to 50 mph (80 km/h). And on major highways, you can expect to drive around 56 mph (90 km/h). 

If you do speed, you’ll find out just how expensive a speeding fine is in Iceland. This also includes disrespecting other traffic rules. Expect a large dent in your wallet if you do find yourself in some trouble. 

Fuel up at Every Chance

Gas in Iceland is expensive, but that doesn’t mean you should let your tank get empty. In Iceland, there are many stretches of road without a gas station in sight, let alone another human being. 

Even if you’re not at empty when you pass a gas station be sure to fill up. You don’t know when the next one will come along! 

Take Many Photos (Safely)

Don’t be that person who stops their car in the middle of the road to take a picture. Yes, your favorite Instagrammer’s do it, but that doesn’t mean you should. 

In all seriousness, stopping your car in the middle of the road is dangerous not only to you but to your fellow road warriors. 

If you see a photo opportunity up ahead, check for any traffic and pull over if it is safe to do so. If not, it’s not worth the risk just for the perfect picture. 

In Iceland, there’s always another photo opportunity just around the corner. 

Be Prepared for Abrupt Weather Changes

Sudden changes in the weather are not uncommon for Iceland. In fact, the weather here is notoriously difficult. You can start your drive in the warm sunshine and end it covered in snow. 

If you have a long day’s drive ahead of you, you’re almost sure to experience the four seasons, plus more. Be careful driving and make adjustments when necessary. Strong winds are not uncommon and can be challenging to drive in. 

Our tip? Before you start your day, check the weather and prepare for it to change as soon as you start your engine. 

Choosing the Right Car Rental Company 

With so many rental companies in Iceland, it’s important to choose wisely. There are many things to consider which can seem daunting as companies offer different services, prices, and vehicles. 

Let’s check out the top five things to consider: 

  1. Your car rental needs 
  2. Budget 
  3. Reputation 
  4. Customer care services 
  5. Vehicle selection 

And remember to book sooner, rather than later. The earlier you book, the more affordable the price will be. Plus, you will have a wider option of vehicles to choose from. 

Planning a Trip to Iceland? 

Tourists are drawn to Iceland because of its stunning natural beauty, snow-covered volcanos, and breathtaking mountain ranges

And the best way to immerse yourself in the Nordic experience is by car. And if driving in Iceland isn’t on the top of your bucket list, it should be now! 

Once you’ve decided to visit the land of fire and ice, it’s time to think about choosing a car rental in Iceland. 

For cheap car rental in Iceland, look no further than Circle Car Rental. We offer quality cars at affordable prices. If you like your rental car to come with free cancellation, an airport shuttle, and included insurance, Circle Car Rental is the company for you. 

Get on the road quicker than ever! Check out our selection and book today

Ævintýri bíður! (Adventure awaits!).

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