Renting a Car in Iceland - The Step By Step Guide

Learn the tips and tricks to having an affordable, reliable and enjoyable rental car experience in Iceland. 

Renting a car in Iceland can be a daunting process as the entire experience surrounding it is simply so much more different than what you would normally encounter in other countries. That's why I've compiled this detailed step-by-step guide that will go into, what I believe, is the ideal process for getting the most out of your car rental experience. 


Step 1: Plan Your Trip

"What is the best time to rent a car in Iceland?" Now, that is the question. Despite Hamlet claiming otherwise. Obviously summer has its charm but, as with all things desired, it's gonna cost you. Winter, on the other hand, presents an entirely different market and a whole new product. You'll find less tourists and deliciously low prices for both rental cars and day tours.

Let's summarize the benefits of traveling to Iceland in winter.

  • Far less crowds. 
  • Considerably lower prices for rental cars and day trips.
  • A wondrous winter landscape. 
  • Cheaper flights. 
  • Northern lights.

Of course, there's a downside too, like that horrendous cold. But, that can be countered by dressing in layers and being mindful of the weather. Whether you go for the frozen charm of winter or the green landscapes of summer, it all boils down to which month you actually pick for your trip.


What is the cheapest month to travel to Iceland? 

Average 7-Day 4x4 Booking Price:

January: 58.854 kr

February:  59.739 kr

March:  61.513 kr

April: 63.460 kr

May: 66.493 kr

June:  74.412 kr

July:  95.734 kr

August:  106.906 kr

September: 73.425 kr

October: 52.742 kr

November:  53.059 kr

December:  54.619 kr


Source: - Prices from 30 Icelandic Car Rental Agencies in 2017.


Step 2: Find & Book The Right Rental Car

Where are you going? How many people are traveling in your party? Carrying a lot of luggage? These are some of the questions you'll need to have answered before you actually go and find that ideal car to take you around Iceland.

In winter, I'd always recommend a 4x4, especially through December until March, when there's a good chance that the island will be blanketed with snow. In case you're riding along some remote way in northeast Iceland that hasn't been plowed in a while, you'll be glad you've got 4 large wheels and some ground clearance under you.

In summer, if the plan is to simply ride along the circle road and hit the most popular tourist spots, then any small or medium car will do. But, if the plan is to take the more adventurous route into the highlands and hit those less frequented F-roads, then you'll need a 4x4 vehicle. Just make sure to get the right 4x4 for the roads you intend to drive. For example, F-35 can be driven in any small 4x4, while the  F-26 route through Sprengisandur will require something bigger with more ground clearance such as a Toyota Land Cruiser or Ford Expedition. 

Tip:  Booking your rental car early is always the best option. Prices can go up if demand is high and the cheapest cars always sell out first. 


What car rental should I choose in Iceland?

The safest way to rent a car is to do your due diligence. A good way would be to find a few of the cheapest options and then compare the reviews for those car rentals using the following mediums:

The rule of thumb is to compare the prices and take note of the reviews for the car rental in question. Choose the best-rated car rental, even though it might cost you a little more. You'll get a more enjoyable experience out of it in the end. 


What insurance should I take with my rental car?

I know the optional insurance packages can be an expensive addition to an already not-so-cheap rental car, but I would absolutely consider all the options before confirming the booking. Compare the prices of the cars with and without full insurance for example. Out of two options, maybe that more expensive car will come out cheaper once all the coverage has been added. And don't forget to pay heed to the self-risk amount. Some car rentals might call their insurance a "Super Collision Damage Waiver" while the self-risk on it is no less than what you'd find on any routine CDW. So, what's so super about it?


What should I be aware of before I book my car rental?

First of all, the terms of that specific rental. Sometimes the important bits of the terms are summarized on the booking page, but it's always safest to quickly read over the terms and conditions of the rental. Let me list a few things to be certain of before you book.

  • The vehicle's fit for you. Can you only drive an automatic? Make sure the car is automatic. Can the car drive all of the roads you're intent on driving? Can the car fit all of your passengers and luggage? 
  • The coverage. Check what the CDW covers. In most cases, the CDW covers everything except the undercarriage, water damage, tires, gravel damage or sand and ash damage. But this can vary between car rental agencies.
  • The self-risk amount. Even though insurance claims to cover everything, it doesn't mean that you won't be held liable for some amount of money. Most insurances have a self-risk amount, which is the maximum amount you would be held liable for. Get well acquainted with the details of your insurance and avoid any nasty surprises when you arrive.
  • Is there a hold of funds required? Some car rentals require a hold of funds on your credit card for them to trust you with their vehicle. This hold is usually the same as the self-risk amount on the insurances you chose, so make sure you travel with a credit card that has a high limit. This amount can vary from 500 EUR all the way up to 4,000 EUR. 


What about Gravel Protection and Sand and Ash Protection? 

We have two other guides that go into detail about those special insurances:

Do I need Sand and Ash Protection?

Do I need Gravel Protection?


Step 3: Arrive in Iceland & Pick Up The Rental Car

Assuming you have booked the rental car with a pick-up at the Keflavik Airport, you'll be heading to the arrival hall for the first leg of your journey. Whether you have it on e-mail or a printed version, take a quick look at your voucher and see what it says about the pick-up procedure. The agent might be waiting to meet you in the arrival hall with a sign that has your name, or you might need to take the airport shuttle bus over to the car rental area. The bus runs every 15 minutes but, honestly, the car rental area is only like 3 minutes away from the terminal if you walk. See map below. 

Map of Kef Airport Area

If you didn't check the terms beforehand, now's the perfect time. Go over the contract with the agent before you sign it, and make sure it's correct. Especially make sure that the price on the contract matches what your voucher says. We're all human. Mistakes can be made. 

Take full advantage of the agent while you have him with you and ask him everything you wish to know. Ask him to show you around the mechanics and features of the car. He might even have a map of Iceland if you ask for it. 

Go over with the car with a fine-tooth comb. Make sure all pre-existing damage is marked down on the agent's sheet, and take your own photos of the car as well. If you're picking up during the evening or there's limited light for any reason, go straight away to the nearest open car wash or a parking lot with good lighting and take pictures of the car inside and out. The pictures are usually time-stamped so they can be used to make your case if you get accused of damaging the vehicle.

Read more about what to check for when you pick up your rental car


Step 4: Explore Iceland

While you're out there exploring Iceland and everything it has to offer, it's worthwhile to keep these websites bookmarked for regular checks. 

The Weather Report - Get updates on how the weather's looking and even if there's a chance of northern lights activity. 

SafeTravel - A database curated by the Icelandic Search and Rescue Association with tons of useful information and alerts for sudden events that might hinder or endanger your travels. 

GSM Bensin - A live feed that shows the current prices for fuel and where to get it cheapest. - The best source for road conditions and safety.


What to keep in mind while exploring Iceland.

The wind in Iceland can be especially treacherous. Make sure you hold the door of the car firmly when you open it to avoid it flinging open and possibly damaging the hinges. This is the second most common type of damage to rental cars in Iceland, and it can be surprisingly expensive to repair. Park against the wind and hold that door in place.

Keep your eyes peeled for any woolen critters on the road. Some parts of Iceland will have herds of sheep freely roaming around. They often cross roads with no regard to oncoming traffic so be alert when passing through areas with large open fields or grassy mountainsides. 

You're going to encounter a lot of gravel roads in Iceland. Make sure you slow down on the gravel roads to avoid rocks flying up and hitting your car or passing cars. Gravel damage is the #1 type of damage to rental cars in Iceland. You'll find that route 1, the big road that goes around the country, even has a small segment that is unpaved.


Step 5: Return The Rental Car & Catch That Plane

3 hours. Remember that. That's the minimum amount of hours that should stand between the point of you returning the car and the departure of your flight. You never know if the rental office is busy and you'll get delayed there, or there'll be any other issue that may arise due to damages or violations. Make sure you leave enough time before your flight when you drop off the car. 

The fuel policy is usually full to full, so make sure you hit up a fuel station and fill up the tank before dropping off the rental car. If you don't, then they will charge you for the fuel as well as an additional service fee. 


Follow these steps to the letter and you'll have a stress-free return flight home with fond memories to last a lifetime. Safe travels!