15 Best Iceland Car Rental Tips (2023)

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Last update: April 12th, 2023 at 09:39 am

Car Rental Iceland – Top Tips

Affiliate Disclosure: This Rent a Car Iceland post contains affiliate links. If you click on a link and make a purchase, I may receive a small commission at no cost to you. 


Driving in Iceland is a unique experience that requires some extra considerations. As long as you have done your research, however, having a rental car in Iceland is also an absolutely wonderful way to see the country on your own time schedule.

In my experience over multiple trips, this has meant doing a deep dive into how to safely drive in Iceland, reading tons of Iceland car rental reviews and paying a lot more attention when making an Iceland rental car reservation.

This northern island nation’s geography and weather are so unique that things like the type of insurance coverage you purchase can really matter. For example, Sand and Ash insurance was not something I had ever heard of before trying to book an Iceland airport rental car (more on this later).

The other big surprise for me was the high cost of renting a car in Iceland (with extra insurance and high demand contributing to this). Through trying to secure a car rental from Keflavik Airport (KEF is Iceland’s international airport), I experienced what is commonly known as sticker shock. Judging by the many travel forum threads I later found with titles like “Rent a Car in Iceland Cheap!!!”– I knew I was not alone.


In this post, I want to help save you money while also making sure that you have the proper insurance for your Iceland rental car. Please read on (or use the following menu) for my best car rental Iceland tips as well as some important information on driving in Iceland.


Although I will go into this topic in a more detailed manner further on, proper insurance is one of the most important things to consider when renting a car in Iceland, and here is why.

We have done numerous Iceland road trips including the Golden Circle Iceland self drive in both the summer and winter, the Westman Islands to see the puffins, and a multi day South Iceland trip to visit the glacier ice caves, staying in some really lovely South Coast Iceland hotels along the way.

Through these adventures, we have discovered why it is so important to pay for some extra insurance on a car rental in Iceland. This could not have been more obvious than on our first trip. While returning our rental car, we sat down next to 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. The agent explained to me that they had numerous damaged cars returned every single day with everything from gravel damage to damage done by animals.

I had also made the mistake of assuming that my credit card’s typically excellent rental car coverage would have been adequate in such a situation. It turns out, however, that many policies (including mine) exclude the country of Iceland. On every subsequent trip to Iceland, I have purchased the premium insurance package for my own peace of mind.



Rent Car Iceland Airport

I have a few thoughts on finding the best Iceland rental car companies. Starting with the most convenient, Hertz Iceland, Budget Iceland, Avis, Sixt and Europcar all have Iceland airport rental car options (in terminal pick up). In terms of pricing for car rentals in Iceland, these places will have the highest rates, but they are also the easiest and quickest.

AutoEurope provides a convenient car rental Keflavik airport platform on which to compare rates between these major Iceland car rentals airport pick-up providers.

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Note: With the AutoEurope booking platfrom, you can expect to be presented with additional insurance options when you pick up your Keflavik airport rental car (ex. sand and ash protection and gravel protection). This typically will cost you an additional $15-$30 USD/day. Please read the upcoming section on insurance in this post (it’s the most important part).


If you are looking for cheaper Iceland car rental Keflavik airport options, including one of my favourites, Lava Car Rentals, you will need to take a shuttle to pick up your vehicle. While this is a little less convenient and can feel even harder after a red-eye international flight, these local companies can significantly cut the cost of a Keflavik or Reykjavik car rental.


Rental Car Iceland Airport

There are several local Iceland car rental companies that do a great job in terms of service and customer satisfaction – in particular, Lava Car Rental. I used them for a 4×4 rental in February 2023 and had just an excellent experience, start to finish. I also found them to be especially fast and efficient upon pick up and drop off – which is so nice on flight days. (We have also had a good experience with Blue Car Rental in the past.)

LAVA CAR RENTAL DISCOUNT CODE ALERT – For a free GPS rental with Lava (1500 ISK/day value), please use the code TARAGPS. Check the box for “GPS” when selecting your additional features and the daily fee will be removed upon checkout.

Neither one of these companies offers the absolute cheapest car rental in Iceland (and I’ll explain later why you should be wary of places advertising this). Their rates, however, tend to be better than most of the international companies, especially when you factor in extras such as added insurance, an extra driver, a GPS etc. You also will know exactly what you are getting (ex. new vs. slightly older vehicle), without any high pressure upselling tactics at the counter, based on the options you have pre-selected.


There are just a couple of things that you should be aware of when doing a KEF airport car rental from a local provider.

  • You will need to take a short shuttle bus to their Iceland rental car office (15 minutes).
  • It is common for rental car Iceland companies to offer both newer and older vehicles of the same model. Due to the nature of the terrain and weather in Iceland, older vehicles can really show their wear and tear. If you are looking for a budget Iceland rental car, an older vehicle may suit you just fine. Either way, just be sure to double check the model year before confirming a booking so you know exactly what to expect.
Best Car Rental Iceland Tips


What if you don’t need a rental car for your whole trip? While we typically find renting a car from Keflavik Airport with a local company to be the best option for us (we drive a lot), it’s possible that you may only need an Iceland rent-a-car for part of your trip. This could be because you will be spending most of your time in Reykjavik (a very walkable city), or because you plan on doing mostly organized tours with hotel pick-ups.

Parking can also be tricky and pricey in the centre of Reykjavik (where most of the hotels are), so a rental car can be a hassle when not in use. If this is your situation, choosing a Reykjavik car rental for just a day or two to see some local sights or to self drive the Golden Circle may make the most sense.

When selecting a company for a car rental in Reykjavik, it is ideal if you don’t have to walk too far to pick it up. The following companies offer car rentals in Reykjavik, Iceland and have offices that are a 15-20 minute walk from the city centre: Blue, Lagoon, Glacier, Reykjavik Cars, Cars Iceland and National/Enterprise/Alamo. Some of these companies also offer the added service of a hotel pick up and drop off.



If you have decided to do a car rental in Reykjavik, the issue then becomes your transportation to and from Iceland’s Keflavik International Airport. Taxis are very expensive in Iceland, with the 52km, 50-minute trip costing around 20,000 ISK ($150 USD).

Most visitors who are not renting a car at Keflavik airport take the FlyBus – the handy shuttle from Keflavik Airport to Reykjavik city centre with multiple convenient hotel stops. The cost is 4600 ISK adult, 2300 ISK youth 6-15 ($32/$16 USD) each way and the buses typically leave about 30-40 minutes after the arrival of an international flight. Tickets are available in advance online or upon arrival at a booth in the airport.

Airport Transfer Keflavik to Reykjavik

NOTE: The one thing that I do have to mention about the Flybus is that when you arrive on a red-eye international flight, in the middle of winter, exhausted, (and in our case with kids in tow), waiting around in the cold for the Flybus to arrive is a little painful. I remember in that moment thinking that I would have been completely willing to pay double the cost of our tickets for a taxi had I not purchased the bus tickets in advance.



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 so that you can cancel and rebook if you do happen to find a better deal.

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Before you rent a car in Iceland, please thoroughly read reviews for the car rental company that you are considering. Like in any country, some companies serve their customers much better than others.

There are two common Iceland car rental review complaints. The first is when people are disappointed by the age/condition of the car they receive. The model year is usually noted on the car rental platform (and if it is not, be wary), so please pay attention to this important detail.

The second complaint that is really common in car rental Iceland reviews is unexpected charges at drop off when damage has occurred to the vehicle and 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) with Iceland rental cars. Sand and ash protection insurance (SAAP) can also be extremely important (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.


When deciding what kind of vehicle to rent for your Iceland road trip, the time of year is very important. If you are traveling in the summer months and you are just going to be staying on the main roads, then a sedan should be fine.

If, however, you are visiting Iceland in the winter or, in the summer months but plan on driving the F-Roads (unpaved gravel roads), a 4×4 is essential.

In February 2023, we rented a 4×4 to travel the main roads along the South Coast of Iceland. The weather was extreme – with conditions that included sideways rain, hail, ice, snow, and gale-force winds – and this would all happen within the space of one hour! It was exhilarating for sure, but we were certainly glad to be in a 4×4. When we did see a car off the side of the road (many times), it was always a small car…like this one.

Do you need a 4x4 in Iceland

Note: 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.


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 (75K+ USD). It is also not uncommon for policies to exclude trucks and 4x4s from coverage.

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


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 one local company I rented from, their most frequent claims come from body and windshield dings and scratches 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.


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. That said, it is still possible for this kind of damage to occur at any time of the year, depending on the ground conditions.


Iceland had really low property crime rates. While I don’t consider this type of insurance to be essential, it is usually just included when you are purchasing the other types of insurance.

NOTE: Not all car rental companies or car rental platforms (like AutoEurope) allow you to purchase gravel or sand and ash protection ahead of time. This can be done onsite when you pick up your car.


If you want a car rental at Iceland airport terminal, rent with Budget, Avis, Europcar or Hertz. 

If you rent from one of the locally-run Iceland airport car rental companies including Lava Car Rental, Reykjavik Cars, Blue Car Rental, and Lagoon Rental, 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 15-20 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


While it is typical to do a walk around of your rental car with an agent to detail any existing damage, it never hurts to take your own additional photos and videos (especially of any problem areas). Don’t forget the vehicle interior!

If you do find immediate damage that was not noted during the check up, email pictures and videos to the car rental company right away.

When you return your Iceland car rental, also take photos and video. (Especially important if you are returning your vehicle before opening or after closing. 


Although it is a bit of a tedious task, take your time when picking up your rental car. A few extra minutes making sure that any pre-existing vehicle damage is documented and that all your insurance needs are covered can go a long way in saving you headaches later on.


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).

See this rather amusing New York Times story about a tourist getting lost in Iceland.

Note: On our most recent trip, we had both a GPS and hotspot WIFI in our vehicle. In theory, we could have just had the WIFI and used a phone for navigation (there was good coverage on the South Coast where we traveled). We didn’t, however, want to take the chance of having our phones run out of battery (easy when taking lots of photos/videos) or ending up in an area with poor or no coverage. In the end, we were very happy to have both, especially when a storm temporarily left our hotel without power and we still had our hotspot WIFI!

Keflavik Airport Car Rental Iceland


If you find yourself researching cheap car rentals Iceland and budget car rentals Iceland (as I did on my first trip), 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 these TrustPilot reviews for SADcars in Iceland. If nothing else, it’s an amusing read.

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Iceland Car Rental Companies

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).

Car Hire in Reykjavik


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, 70km/h approaching towns, 80 km/h on gravel roads and 90 km/h on paved highways and rural roads.


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.


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.


Make sure your vehicle has ample space around it when you park so as not to put your vehicle at risk of door dings or other damage.


Be sure to check road conditions ahead of time on vedur.is so as to avoid any unnecessary hazards (like the unexpected rough gravel road detour we once took). This will help to minimize your driving risk and potential vehicle damage. See more driving tips in the next section.


Want a couple of quick tips for driving in Iceland? Check out this amusing little video from Inspired by Iceland. Please especially pay attention to the part about yielding on one lane bridges. You will find these bridges all over the place if you are venturing further than Reykjavik and the Golden Circle.


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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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