Driving in Iceland – Iceland Car Rental Tips

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Best Car Rental Iceland

I am notoriously cheap 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 generally not the case in most other developed (or developing) nations. I also get bogged down by all the additional insurance options, and tend to take a pass on most of them. I use hope as a strategy, putting faith in my credit card travel insurance policy to cover any gaps. (Which quite frankly, in some of the far flung destinations we visit, it often does not.)

My strategy was no different on a trip to Iceland where I was simply flabbergasted by the cost of Keflavik Airport car rentals for a 5 day Iceland stopover. I scoured the web for Iceland cheap car rentals, but became a little discouraged when I read reviews on some of the budget options (the ironically named SAD Cars Iceland comes to mind). I eventually had to pony up and pay a small fortune for a very average car that I hoped would not fall apart on the road.

During our time in Iceland, we did a number of full day trips, including self driving the Golden Circle and traveling to the Westman Islands to see Iceland puffins. Throughout these adventures, we came to terms with why one might need to pay for a few extra insurance options (the ones I always 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 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, as 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.

So, with no further ado,  here are my tips for renting a car in Iceland.

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


Iceland Car Rental Tips


1. Book Your Iceland Car Rental Early

Iceland is currently one of the hottest travel destinations in the world — with their international tourist visits having doubled since 2014. 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.

Pro Tip: AutoEurope allows you to quickly cross reference the rates and offers at different companies, and also offers free cancellation up to 48 hours before your booking start date. See Car Rental in Iceland.

Car Rentals in Iceland


2. Leave Time For Shuttles (Keflavik Airport Car Rentals)

If you plan to rent your car from Keflavik International Airport, and you rent from one of these Iceland car rental companies (see photo below), your car can be found at the airport (no shuttle).

Car Rental Keflavik


If you rent from one of the Iceland airport car rental companies shown in the photo below, including Hertz Iceland, Sixt Car Rental Iceland, Go Iceland Car Rental and SADCars, you will need to take a shuttle to your car. We took a shuttle, and it was not a big deal at all (added 20-30 minutes max). It’s just something you might want to be aware of if you are tight for time.

Car Rental Iceland Reykjavik Airport


3. 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 Protections 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 most Iceland car rental companies offer SAAP (Sand and Ash Protection). This is more likely to be an issue in the South Coast and on the highland F Roads from February to April, when the snow has melted, but the grass has not grown up enough to form a substantial ground cover. In the winter, when the ground is covered in snow, this should not be necessary, as the snow keeps the sand and ash in place. In saying this, it is still possible for damage could 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.


4. 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 $10-15 USD/day. The cost of buying a GPS for Europe runs around $100-$250 USD.

Self Driving Iceland


5. 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


6. Watch for Animals

It is not uncommon for sheep and other animals to wander on to 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).

Iceland Car Rental Tips


7. 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.


8. 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.


9. 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.


Further Information: Learn more about renting a car in Iceland, including Iceland driving tips and FAQs (such as how old you need to be to drive in Iceland), in this handy Guide to Driving in Iceland from AutoEurope.

Car Rentals in Iceland


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Driving in Iceland – Self Driving the Golden Circle, Iceland

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Driving from Oslo to Bergen – Epic Road Trips of Norway

Trollstigen, Norway – Driving the Trolls Road

Travel into the Arctic Circle – The Lofoten Islands, Norway

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