10 Best Iceland Car Rental Tips

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Best Car Rental Iceland Tips

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Best Iceland Car Rental Tips

Driving in Iceland is a unique experience that requires some extra consideration.

In my experience, that has meant paying a lot more attention when making an Iceland rental car reservation. The unusual geography and weather of this northern nation means that the most basic insurance for a car rental in Iceland simply may not suffice.

Through trying to secure a Keflavik car rental on our first trip (KEF is Iceland’s international airport), I experienced what is commonly known as sticker shock. Judging by the many travel forums dedicated to finding a cheap Iceland rental car – I was not alone.

Not only was the cost of getting a rental car in Iceland airport a shock, sorting through Iceland car rental insurance options was also challenging.

AutoEurope – Save up to 30% on Car Rentals 

For example, sand and ash protection and gravel protection insurance were not options I had heard of before booking Iceland. Naturally, insurance add-ons contribute to the high cost of renting a car in Iceland.

In this post, I share my best car rental Iceland tips as well as the need-to-know for 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 cars, Iceland rental cars, or insurance. 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

Rental Car Iceland Insurance – It Matters

We have taken a number of driving trips within Iceland. We have done the Golden Circle Iceland self drive in both the summer and winter, we have ventured to the Westman Islands to see puffins during nesting season, and we have done a multi-day adventure through southern Iceland in the winter to visit the glacier ice caves.

Through these adventures, we have discovered why it is so important to pay for some extra Iceland rental car insurance. This could not have been more obvious than on our first trip. While returning our rental car, we 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 detour came to mind, when a truck barreled by us, spraying gravel all over our vehicle. Thankfully, by some miracle, our car did not sustain any damage. I did take this opportunity however, to pepper the agent with questions. I wanted to be able to warn others about potential pitfalls when renting cars in Iceland.

Finding the Best Iceland Car Rental Companies

Iceland Car Rental – International Companies

I have a few thoughts on finding the best Iceland rental car companies. 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 premium for this, but you are getting some added convenience and time savings.

With other Iceland car rental companies, you will need to take a shuttle to pick up your vehicle. This can involve waiting outside in inclement weather which, speaking from experience, can feel less tolerable after an international flight. That said, it can cut your Reykjavik car rental cost almost in half. AutoEurope provides an easy platform on which to compare rates between these major rental car providers.

Note: With AutoEurope, you can expect to be presented with additional insurance options when you pick up your rental car. Iceland has some unique terrain that calls for extra coverage (sand and ash protection and gravel protection). This typically will cost you an additional $15-$30 USD/day. Please read the section on insurance in this post (it’s the most important part).

AutoEurope – Save up to 30% on Car Rentals 

Cheap Car Rental Iceland – Local Companies

Personally, I am a fan of some of the local companies (Lagoon, Reykjavik Cars, and Blue Car Rental Iceland). These Iceland car rental companies generally offer good service as well as better rates than their international counterparts.

At first glance, the price may not seem better. When you add in insurance and extras (such as a GPS) – that’s when you notice the savings.

Some of these Iceland rental car companies also offer a premium insurance package. This can be good value. That said, there are a couple of things to be aware of when doing a KEF airport car rental with a local provider.

First, you will be required to take a short shuttle to your rental car. This can be less than ideal after a red-eye or if you are visiting Iceland in the winter (inclement weather). Alternatively, all of these companies also offer the option of a Reykjavik city car rental pickup and drop off.

Second, you should clarify your Iceland car rental age. This is usually marked on the website. You want to know if the car you are renting in Iceland is new, or years old. Personally, I don’t care if my rental car is not brand new, but I know it is important to some (in which case you would be better renting through AutoEurope).

AutoEurope – Save up to 30% on Car Rentals 

Best Car Rental Iceland Tips

Important – Read Iceland Car Rental Reviews

Before renting a car in Iceland, please thoroughly read reviews for the car rental company you are considering.

Most Iceland car rental complaints stem from the fact that people are under-insured. 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). Sand and ash protection insurance (SAAP) can also be extremely important (hello erupting volcanos).

Note: I am the type of person who generally believes that extra car insurance is a cash grab. In Iceland however, I suck it up and buy the premium, full-coverage insurance package.

10 Iceland Car Rental Tips

Book Your Iceland Car Rental Early

Sky high hotel and car rental rates in Iceland are the norm. This is especially true in the high season of May to October. Get your rental car Iceland reservation as soon as you have your plans fixed. Due to supply issues, the 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 a car rental at Iceland airport terminal, rent 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, 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.

You also may want to consider the time of year. Waiting for a Keflavik car rental shuttle in June, is generally much more pleasant than in December.

Car Hire in Reykjavik

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 rental car insurance needs in Iceland, I strongly encourage you to contact your provider first for clarification. Iceland is an “exception” in some policies. Ask to be sent a copy of the policy so you can have it handy.

As an example of some of the exceptions, many policies will not cover vehicles over a certain price point (~$50-75K+ USD). Trucks and 4x4s are also often excluded from coverage.

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 rent from, their most frequent claims come from body and windshield damage from gravel roads. This type of damage can cost several thousand dollars to repair for the underinsured. Repair costs, 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. For this reason, 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.

Please note: Not all car rental companies allow you to purchase gravel or sand and ash protection insurance through their website. This can be done onsite when you pick up your car.

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.

Keflavik Airport Car Rental 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.

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 Companies
Car Hire in Reykjavik

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). In the winter, however, AWD or 4WD is going to offer way better control on icy or snowy roads.

If you plan on driving on F-Roads (mountain roads in the highlands), you will need to rent a 4×4 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. This is not meant to deter you, as obviously many people do rent jeeps and 4x4s 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

Further Reading

12 Responses

  1. Sandra
    | Reply


  2. Sandra
    | Reply

    Thank you for these helpful suggestions. Do you still recommend a GPS even with iPhone/google maps?
    We will be there in May for 5 days and it is supposed to rain every day… I guess that is Iceland lol, but any tips on where hiking might be better in rain (e.g. not as slippery, risky?)
    Any other not to miss suggestions would be great! We are in the Golden Circle area for two days and then Skalakot 2 days.
    Thank you!

  3. Donna Thompson
    | Reply

    Thank you for all the valuable information. I’m planning a 8 day trip in June to Iceland. Do you have any recommends on an itinerary, lodging, restaurants? Also, we are hoping to explore areas that are less touristy. Any information would be greatly appreciated.

  4. ourfamilytravelblog.com
    | Reply

    These are great tips for visiting Iceland. Thanks for the heads up.

  5. […] Car rentals can be pricey and you may be tempted to save money by skipping the insurance. Before you do, check with your credit card or car insurance provider because you probably still need to buy the ash and rocks coverage. Insurance can greatly increase the cost of the rental car, but you may need it. (See other tips for Iceland car rentals.) […]

  6. Leila
    | Reply

    HII Thank you for all this great information! If I’m spending my first 2 nights in Reykjavik am I better off getting a car in the city rather than the airport? I’m just starting my planning so I may come back 🙂 Leila

    • Tara Cannon
      | Reply

      He Leila,
      For us, it has always made sense just to get the car at the airport and keep it for the whole time (including while in Reykjavik). The reason for this is that the cost of the airport transfer (x4 people for us) is more than keeping the car for an extra couple of days. There is the small issue of having to pay for some city parking, but on the flip side, it’s nice to have a car to drive to local pools etc. (that might otherwise required transit).
      If you are traveling on your own or as a couple, it may be cheaper to only rent the car for your time outside of Reykjavik.
      I hope this helps. 🙂 Tara

  7. Chris
    | Reply

    It looks like I’ll be going with Reykjavik Cars after your recommendation / mention of them. I’ve read reviews about AutoEurope being decent and standing up for customers in the case of disputes, but I could not find one single mention on their site of insurance for either gravel or sand and ash (which is so commonplace on other Iceland car rental sites that each type of localised insurance has its own abbreviation, and gravel insurance is often even included in the base price). I guess that means you’d need a 3rd-party insurance for Iceland-specific coverage when booking through AutoEurope.

    • Tara Cannon
      | Reply

      Hi Chris,
      My guess is that AutoEurope includes this as an option add-on once you go to pick up your car (probably for $10 a day). There is simply no way they wouldn’t offer this protection in Iceland. I’m going to reach out to them to find out (and I will post back here when I hear).

    • Tara Cannon
      | Reply

      Hi Chris,
      I can see that this isn’t described very well on the website. From another site, it looks to me that the SuperCDW (but not the plain CDW) includes Sand, Ash and Gravel. Alternatively, you can purchase it separately for around 2300 ISK/day (about $18 USD/day). Although AutoEurope discourages you from buying insurance on site in Iceland (they say it will cost more), I do not believe this to be the case. Assuming you can get a good rate, I would go with AutoEurope (ideally choosing one one of the companies that have car right at the airport so you can avoid a shuttle), and I would purchase insurance when you pick up your car.

  8. 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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