Driving in Iceland – Iceland Car Rental Tips

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Best Car Rental Iceland


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I am notoriously frugal when it comes to renting a car. I seem to have it stuck in my head that a car rental anywhere in the world should cost about $29/day. While this may be possible in major U.S. cities, this is most certainly not the case with an Iceland car rental.

Through the process of trying to reserve a Keflavik Airport car rental for our first trip to Iceland (KEF is Iceland’s international airport), I experienced what is commonly known as sticker shock. Judging by the many travel forums dedicated to the topic of trying to find a cheap rental car in Iceland – I know that I am not alone in my experience.

The other trying part of my Keflavik car rental ordeal was sorting through Iceland car rental insurance options. Sand and ash protection insurance (SAAP), for example, was not something I had ever heard of before planning a trip to Iceland, and not something I had factored in for our Reykjavik car rental (more on this later – volcanoes!).

In this post, I will share with you my best Iceland car rental tips as well as the most important things to know about driving in Iceland . Please use the following menu to find what you need quickly.

Important Disclaimer: I intend for the information on this website to serve as a general overview on matters of interest derived from my experience traveling to Iceland. I am not an expert on the subject of car insurance or car rentals. I attempt to ensure that the content is current and accurate but I do not guarantee its currency and accuracy. For more information, please see our Terms of Use and Privacy Policy



About Driving in Iceland

We have done a number of driving trips in Iceland. We have chosen to self drive the Golden Circle in both the summer and winter (rather than do a tour), we have ventured to the Westman Islands to see puffins during nesting season, and we have done a multi-day adventure through southern Iceland to visit the blue ice caves. Throughout these adventures, we came to terms with why one might need to pay for a few extra insurance options (the ones I typically pass on) and why one should try to choose from only the best car rental companies in Iceland.

This could not have been more obvious than when we returned our first Iceland rental car and sat down next a stunned couple in the office. They had just been informed that they would have to pay $2000 for damage done by gravel to their car. I sat quietly crossing my fingers and awaited our fate. Flashbacks of a gravel road detour came to mind, when a large truck barreled by us, spraying chunks of rock all over our vehicle. By some miracle, our car had not sustained any damage, but I did take this opportunity to pepper the agent with questions, vowing to write a post and warn others of potential pitfalls when renting cars in Iceland.


Which is the Best Iceland Car Rental Company?

I have a few thoughts on finding the best car rental companies in Iceland. Personally, I am a fan of some of the locally based companies (Reykjavik Cars, Blue Car Rental Iceland, and Lagoon Car Rental). I find these companies generally offer good service as well as better rates than the international players. At first glance, the price may not seem better, but when you add in insurance and extras (such as a GPS), that’s when you will notice the savings. Some of these companies also offer a premium insurance package that is good value.

The one drawback to doing a KEF airport car rental with one of these locally based providers, is that you will be required to take a short shuttle to your rental car. This may be something that you want to take into consideration if you are coming in off a red-eye flight (exhausted) or if you are visiting Iceland in the winter (inclement weather). All of these companies also offer the option of a Reykjavik car rental pickup and drop off (you can pick up from their office in the city or have the car dropped at your hotel for an extra fee).

If you would like an Iceland car rental airport pick up option, Hertz Iceland, Budget Iceland, Avis, Sixt and Europcar all have cars right at Keflavik Airport. You are generally going to pay a bit more with these companies, but you are getting some added convenience and time savings. AutoEurope provides an easy platform on which to compare rates between these major rental car providers.


AutoEurope – Save up to 30% on Car Rentals 

Car Rental Keflavik


Important: I encourage you to read reviews for your chosen Iceland car rental company. Most consumer car rental complaints in Iceland stem from the fact that people are under-insured (and body damage repairs in Iceland are exceptionally expensive). Iceland’s unique geography creates some hazards along the roadways (sand, ash and gravel) that most travelers have not faced before.

Although I delve into this in the next section, I cannot impress on you enough how important it is to buy the extra gravel protection insurance (GP) and, depending on when you are visiting, the sand and ash protection insurance (SAAP). I am the type of person who generally believes that extra car insurance is a cash grab, but in Iceland, I suck it up and buy the premium, full-coverage insurance package.




10 Iceland Car Rental Tips


Book Your Iceland Car Rental Early

Despite signs that their tourism boom is finally slowing, Iceland is still an enormously popular destination. Sky high hotel and car rental rates are the norm, especially in the high season of May to October. Reserve your rental car as soon as you have your plans fixed, as that rate is unlikely to go down. Still want to cover your bases? Make sure your reservation is flexible and can be cancelled if you do happen to find a better rate.

Car Rentals in Iceland



Leave Time For Shuttles

If you want to pick up a Keflavik car rental right at the airport, you can reserve with Budget, Avis, Europcar or Hertz. If you rent from one of the Iceland airport car rental companies shown in the next photo, including Reykjavik Cars, Blue Car Rental, Lagoon Rental and SADCars Iceland (yes…seriously called Sad Cars), you will need to take a shuttle to pick up your rental vehicle. We normally take a shuttle and it’s not a big deal (adding about 20-30 minutes). It’s just something you might want to be aware of if you are tight for time.


Car Rental Iceland Reykjavik Airport



Get the Appropriate Car Insurance for Iceland

In addition to your typical car rental insurance (Collision, Third Party Liability, etc.), there are a couple other rental car insurance options in Iceland that you should consider. This is the most important section of this whole post because underinsuring can go very wrong in this rugged land.

Important Note: If you think your credit card insurance policy will cover your extra car insurance needs in Iceland, I strongly encourage you to contact your provider first for clarification and ask them to send you a copy of the coverage. Iceland is often an exception in travel car insurance policies due to the nature and frequency of damages that can occur. I also encourage you to go through this Tripadvisor thread on Rental Auto Insurance in Iceland as it provides some valuable information.

Here is an overview of some additional insurance options available in Iceland:

Gravel Protection Insurance (GP) – With most policies, this protection includes damage to windscreen, headlights, front bumper, mirrors and the hood of the car when gravel or rocks gets thrown onto the vehicle by another car. According to the company I rented from, their most frequent claims come from paint, body and windshield damage due to driving on gravel roads. This type of damage can cost several thousand dollars to repair for the underinsured (repair rates, like everything else, are much higher in Iceland). This is the one type of insurance that I would strongly recommend.

Sand and Ash Protection Insurance (SAAP) – When the wind blows in Iceland, sand and ash can cause paint damage to vehicles, so Iceland car rental companies offer SAAP (Sand and Ash Protection). This is most likely to be an issue in the South Coast and on the highland F Roads in the spring and fall, when there isn’t any snow coverage or natural ground cover. In saying this, it is still possible for damage to occur at any time of the year depending on the ground conditions.

Theft Protection (TP) – If it makes you feel better to get it, go for it, but considering the fact that Iceland has very low crime rates almost across the board, I personally would pass.



Get the GPS

Honestly, it’s not such a big place, right? It should be super straight forward to get around….but sometimes it isn’t. First of all, from a language perspective, you are dealing with some unusual Icelandic characters and it is easy to make a mistake. Second, you may be faced with several options for the same name, or a very similar name (a fair distance apart) and it can be confusing.

If you rent a GPS, most popular tourist destinations should already be programmed in (check this before driving away). We used a Garmin GPS and it was helpful, but we probably had an extra 2 hours of “a little bit lost” time because of some mistakes we made in programming it ourselves. See also this rather amusing New York Times story about a tourist getting lost in Iceland.

Note: The cost of renting a GPS in Iceland is roughly $10-15 USD/day. If you are going on an extended trip, you may want to weigh this cost against purchasing a GPS outright. We actually share one between households in our extended family (amazingly our trips rarely seem to overlap).


Self Driving Iceland



Beware of the Cheap Car Rental in Iceland

If you find yourself researching cheap car rentals Iceland and budget car rentals Iceland (as I did), be aware that some companies rent much older vehicles at a discount (read the fine print). SAD Cars is one of them (“older, but good solid cars”). While this could work out just fine for you, make sure you have your expectations in check. I also strongly encourage you to read Iceland car rental reviews and forum posts from people who have used specific providers. As an example, see this SAD car rentals review Tripadvisor forum (go to the end of it for recent reviews).

Car Rentals in Iceland



Watch for Animals

It is not uncommon for sheep and other animals to wander onto the road in Iceland, so keep an eye out while driving. You would be hard-pressed to find car insurance that will cover you for damage done by an encounter with an animal. I also read a story about some tourists returning to their car to find a bunch of sheep napping in the shade of the car. Their horns did $3500 USD worth of damage in scratches to the car (See Tripadvisor forum post).

Having once looked out the window of our beautiful farm stay in Napa to find goats on the roof of our car, I know from experience that these things occasionally do happen (and seemingly more frequently in Iceland).


Iceland Car Rental Tips

Which Car Insurance for Iceland



Choose the Appropriate Vehicle

If you are visiting Iceland in the summer, you should not need a special vehicle to self drive the Golden Circle or the Ring Road (both paved – 2WD fine). If you plan on driving on F-Roads (mountain roads in the highlands), you will need to rent a 4 x 4 in Iceland (Note: these roads are only open in the summer).

Off-roading is strictly prohibited in Iceland (fines!) and Icelandic rental car insurance will not cover damage due to river crossings. Google some images of Iceland 4 x 4 and you will see why (doesn’t always go well). This is not meant to deter you, as obviously many people do rent jeeps and 4 x 4s in Iceland and enjoy amazing adventures. Just make sure you take the time to learn where you can and cannot go with them.

A fun read: This is quite an interesting article from the New Yorker about the civilian rescue force in Iceland. These volunteers often find themselves helping out stranded tourists.



Watch the Speed Limit

While you may not see a lot of police cars in Iceland, speed cameras are quite abundant. The speed limit for cars in Iceland is generally 50 km/h in urban areas, 80 km/h on gravel roads and 90 km/h on paved rural roads.



Consider Your Hours of Daylight

I couldn’t help but laugh to myself as I watched Game of Thrones: The Last Watch (the making of the final season of GOT). Apparently, when it was decided that Iceland would be a filming location, nobody considered how few hours of daylight the country gets in the winter.

Embarrassingly, I had a similar experience as I planned a November trip to Iceland (I should have known better as I live in Canada where winter days are also short.) Only at the last minute did I realize that I would have to put some limits on a big day of sightseeing in the south, since the sun wouldn’t even rise until 10am.

While it is not a huge deal, if you are not comfortable driving in winter conditions, you may be even less inclined to do so in the dark. In mid-December you will get to enjoy only a brief four hours of daylight. Of course, you benefit from the opposite effect in summer where you can enjoy over 20 hours of daylight in mid June.



Beware Hidden Fees on Your Iceland Car Rental

If you plan on seeing a lot of Iceland, you will want to make sure that your rental car agreement includes unlimited mileage. Like everything else in Iceland, going over your limit can otherwise prove quite costly.



Tips for Driving in Iceland Video

Want a couple of quick tips for driving in Iceland? Check out this amusing little video from Inspired by Iceland.

Car Rentals in Iceland


2 Responses

  1. Sandra
    | Reply


    I really found your webpage very informative. I was wondering if you have any recommendations for a 3 day self drive tour of Iceland. I’d like to do the Circle and an ice cave and/or glacier. Any recommended routes?

    • Tara Cannon
      | Reply

      Hi Sandra,
      When are you going? The reason I ask is because ice cave season starts in November.

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