What to Expect When You Hire a Car in Iceland

The best way to get around Iceland is to hire a car and drive yourself. This gives you the freedom to explore where ever you want in your own time, to get away from the crowds, and take your time driving the ring road. There are however a number of considerations you need to think about before booking the car to make sure you are safe and within the insurance boundaries and terms of the contract. Hiring and driving a rental car in Iceland is a little more difficult than driving in other countries.

Which hire car is best for a road trip in Iceland?

  • If you are visiting in the winter months then 4×4 is the safest option if you have winter driving experience. If you don’t have experience consider a private tour with a local driver
  • If you intend to stay on the Ring Road or main roads around towns and villages during the summer months then a standard 2WD ‘normal’ car is all you need
  • If you want to go on ANY ‘F-Road’ then it is a legal requirement that you have a vehicle with 4×4
  • F-roads with shallow to medium river crossings will require a 4×4 with reasonable clearance
  • F-roads with deep or fast-flowing river crossings will require a more robust vehicle such as a super-jeep and the rental of these is limited

What car do I need in Iceland?

To help with your decisions here are the things you need to think about while organising a hire car for a road trip around Iceland.

Remember to consider

  • Roads you will be driving (check they are allowed on the F-Roads you want to drive when you book if this is your intention)
  • Weather conditions can change in a moment so you need to be happy driving and have a vehicle suitable for the conditions
  • The time of year will alter the amount of daylight and the road conditions. Are you happy driving at dusk and in the dark or using snow tyres and chains?
  • The level of comfort you want will alter the price you pay. Basic will obviously be cheaper so you need to decide the balance between size and specifications
  • The number of people needs to dictate the car size as well as cost especially if you will be in the car for longer periods. Nothing will make a journey less than enjoyable when you are squashed in with your companions for hours on end
  • The amount of luggage needs to be considered. If you have lots of luggage consider a slightly larger vehicle or a roof box

The websites Northbound.is and Guide to Iceland are great places to start your research and book with links and prices to a range of local companies. Always book direct with the company not through third-party directories.

As with anywhere in the world, you get what you pay for so the cheapest price may not be the best. You also need to see whether insurance is included or added to the advertised price.

Car hire for a few days in Reykjavík

If you are arriving in Reykjavík for a short city break and a quick look around the Reykjanes Peninsula or the Golden Circle then the smallest hire car at the cheapest rates is all that you need. The price of hiring a car, especially if there are two or more people is sometimes cheaper than airport transfers and booked tours with the added bonus of more flexibility.
This type of car is also suitable for gravel roads, but not ideal for longer periods of time.

RECOMMENDED CAR: VW Golf or Polo, Kia Rio or Suzuki Swift. Don’t forget to include luggage when looking at sizes

PRICES: Anywhere between £30 and £50 per day depending on specs and company

Car hire for exploring the Ring Road and longer day trips in Iceland

Getting away from Reykjavík is almost a given when visiting Iceland. Once you leave the Golden Circle, the roads become more variable. While these are still possible with a 2WD car, it is always nice to have a little more space and engine power especially if you are covering longer distances each day. A normal family car is ideal for the ring road along the south coast and the Snæfellsnes Peninsula. It is also a great option if you are visiting in the winter and will be driving the main roads, but do make sure you check the weather conditions regularly each day.

SUGGESTED CAR: Any ‘normal’ car is suitable for this type of driving. The hardest decision will be manual or automatic. Manual cars are usually about 10% cheaper to hire.

PRICES: £50 to £80 per day plus insurance

Best rental car for driving the F-Roads in Iceland

This is when it becomes a little more complex and a bit different from the normal car rental. By law, driving any ‘F’ road in Iceland requires the vehicle to have 4WD. This means that if you have any intention of heading away from the main roads you will need to hire the right vehicle. If you want comfort on the gravel roads as well as the ring road then it is definitely worth considering a 4WD from the start.
Many of the F-roads are no worse than the gravel roads, just a little bumpier with potholes and smaller rivers that form after heavy rain, but you should not be complacent as conditions can change rapidly.
If you are planning to drive on f-roads check when booking that the car is actually allowed on the roads.

SUGGESTED CAR: When searching for any of the SUVs and all-wheel-drive vehicles that say ‘allowed on f-roads’ are suitable

PRICES: £60 to £100 each day depending on specification plus insurance

Cars suitable for F-Roads and river crossings in Iceland plus gravel main roads in winter

Whilst 4WD vehicles are suitable for F-roads, some roads have river crossings that require a higher clearance than normal. These roads are mainly in the Highlands region and include the F905 and F910. Whilst most cars could cope with the f-roads, the rivers are deep and fast flowing so a vehicle that can manage this is essential.

SUGGESTED CAR: As a minimum a Dacia Duster although the more clearance and larger vehicles are far better. With the Duster, you really do need to know the conditions before setting off and accept that some f-roads are still too much for the vehicle.

PRICE: £60 to £100 each day depending on specification plus insurance

Larger vehicles for the Highlands and rough F-Roads with deep rivers

Beyond the smaller 4WD vehicles there are options for the more extreme roads, river levels and weather conditions. However, these should not be hired unless you have experience driving in adverse conditions. Crossing a small ford is very different to the river crossings on the F88.

SUGGESTED VEHICLE: A much larger ‘super-jeep’ is essential for these roads and really needs modified air intake, high clearance and a specification to allow the roads they will be used on.

PRICE: Over £100 per day

ALTERNATIVES: IF you want to experience this type of travel but don’t have the experience then there is a range of tours that will include the vehicle and driver.

Best Campervan for Iceland

Finally, the option that you see all over Iceland is the campervan. Total freedom, relatively cheap and provides a lot more options. What is there not to like? Just the small fact that most campervans can’t be taken off the main roads. So whilst you have the freedom you may want to consider the options. Some of the non-F-roads in Westfjords and the roads around Mjóifjörður and Vatnsnes Peninsula have very scary gravel roads with mountain passes to negotiate. While they aren’t F-roads, campervans on this are quite an undertaking and not for the inexperienced driver.

PRICE: £120-£250 per day depending on the season, specification and company

ALTERNATIVES: There aren’t really alternatives to a campervan as you are not allowed to sleep in your car in Iceland

Extras needed when hiring a car in Iceland

As with any car rental, you may want to consider extras that are an additional charge on top of the list price. Some are essential for your safety while others can be sorted in another way.

  • EXTRA DRIVER: We always add a second driver on, even if there is no intention of them driving most of the time. There are just some days when the main drive needs a break. If you have a second driver even an hour off can make all the difference.
  • GPS: Some rentals include this in your price. If it isn’t included it is a cost that can soon add up. Download maps from Google onto your phone and bring a holder with you. The signal isn’t brilliant in some areas so downloaded maps are essential. We went one step further and had a printout of all our routes which we were glad we had on a few occasions.
  • ROOF BOX: If like us you are tent camping around Iceland then a roof box can increase space and make it more comfortable for everyone. We had all the tents and camping equipment on the roof which left the inside of the car free for clothes, food and personal belongings. On days when we weren’t camping, we could just leave it in the roof box. It also meant that wet tents were not in the car!
  • CHILD SEATS: Depending on the age and weight of the children then you will need booster seats. Any child under 13kg will need a booster seat. This again can add up so if you are able to bring your own this will save a huge amount of money over a few days.
  • CAMPING EQUIPMENT, SLEEPING BAGS, TENTS: Again these can be hired from the car rental companies. We priced it up before our month-long trip and the excess baggage payment required by the airline was substantially less than the hire costs. It also meant that we had our own sleeping bags (I’m a bit funny about sleeping bags) and a tent that we knew how to get up and down quickly and easily even in bad conditions

Additional Security Deposit / Pre-Authorised Credit Card

Many of the car rental companies in Iceland will take the details of your credit card and secure up to £2000 against your card. This was a bit of a shock to the system but seems to be common practice. It was released as soon as we returned the car, but do be prepared for this to happen even if you have taken full insurance and paid in advance.

If you return the car damaged or without refuelling then they will automatically take the amount from your card. This is why it is suggested you document all damage and the fuel gauge before drop off with a series of photographs for your own records.

Fuel Options

Most of the hire companies in Iceland operate a full-to-full policy on their rental cars.

You pick up the vehicle full and return it full. Whilst this is the simplest approach, check at pick up where the nearest fuel location to the drop off is (and if it’s open when you are planning to drop off).

For Keflavík Airport, the nearest fuel is a self-service station on the outskirts of Reykjanesbær. This is open 24hours and is the same price as other places around Iceland

Airport Transfers

Check where your hire company is based before booking. Some are located close to the airport terminal building while others are located a short distance away.

Many will offer complimentary transfers from the terminal but do check when booking that this is included in their quote.

If you prefer to be independent then having a company based at the terminal may be a better option for you.

Hire car insurance in Iceland

In many places around the world car insurance is a bit of a scam, but here in Iceland given the road conditions, it is essential to have adequate insurance.

Usually, we look at the options and add up what is needed, but in Iceland, we went for every option offered to be sure we were covered. It just gave us peace of mind that we would not be returning the vehicle after a month to be given a huge bill.

The road conditions in Iceland are harsh and unforgiving, even on the main ring road you can encounter difficult driving, potholes and uneven surfaces. While these are okay to drive on, it is other drivers, livestock on the roads or stone chips that can cause unintentional but expensive damage.

The hire companies in Iceland will inspect every inch of your car before and after hire and mark any defects. Our vehicle was a bit of a skip and had numerous dents and bashes which we photographed when we picked it up so we knew exactly what was there at the start. Not that we didn’t trust the company, but it is a hire habit that we have gotten into.

Whilst it is possible to get insurance from third parties (not the hire companies’ own policy) at a greatly reduced cost, the extremes of driving in Iceland mean that some of the upgrades will not be included and are worth having.

We decided to pre-book our insurance with the company and negotiate the daily rate ahead of time so there were no last-minute decisions needed at the collection desk. Some of the reception staff are very pushy with their insurance, but by taking it out in advance you can avoid this issue all together.

Collision Damage Waiver (CDW)

Whilst this isn’t insurance in the true sense of the word, it does provide protection for you as the client. If you have an accident or damage the car then you will only be liable up to a certain amount. This is usually around the £1500 mark, but it can be reduced by taking more comprehensive levels of insurance.

The basic CDW comes with every rental, but for a small fee of about £10 a day, it is possible to include more or reduce the waiver limit.
Upgrades include:

  • Gravel Protection: The gravel roads can result in lots of flying chips and rocks. This protection means that any paint damage caused by road chips is covered
  • Sandstorm and Ash Protection: Once you get into the Highlands you will find that ash gets everywhere. Even bags buried in the bottom of the car were covered. High winds can also whip up the sand and ash and effectively sandblast the paint off the vehicle causing extensive damage
  • Ice Protection: This is mainly needed in the winter months and will cover you if you slide off the road or have an accident in icy conditions.
  • River Crossings: You really need to read the small print for river crossings. They are not covered on the standard CDW and even with the upgrade, most companies do not cover the vehicle if you go above a certain depth.
  • Mileage Limit: Many companies have a limit on the amount of mileage you can cover each day or as an average over the duration of the rental. Check which it is and what the limit is. You may want to ensure that you are not going to go over the maximum distance each day as it soon adds up.

Breakdown cover for a rental car in Iceland

Most people assume that their hire car is not going to break down and so did we until the alternator went 60 miles north of Akeyuri. We didn’t really know where we were so had to go on GPS coordinates for the hire company. After three hours of waiting a flatbed truck came to get us and take us back to Akeyuri for two nights.

After that experience, I would 100% suggest that you check the breakdown policy of the company. Without realising, our company provided the recovery and repair of our vehicle, some do not offer this service. They also refunded the 48 hours that we were stuck without a car from our rental costs including the insurance premium.

Make sure you read the small print for breakdowns and repairs during the rental period.

A sight you really appreciate after 3 hours of waiting in Iceland!

Paperwork for driving in Iceland

Make sure to check what paperwork the hire company is expecting to see when you collect the car. Whilst this is typically only the passport and licence for all drivers there could be specific requirements depending on your age and nationality.

The driving age in Iceland for a rental car is 21 years old and 25 years to rent a 4WD. If you are between 21 and 25 or have not been driving for long you may be charged a “young driver fee”. It is best to check this before collection.

Picking up the car

Allow at least an hour for this process. There seems to be a lot of frantic action when you arrive even if they have everything ready and many people have said that the cars are not ready despite them picking you up from the airport and knowing you are on your way.

When you pick up the car make sure you know what you are expecting. Whilst you might get a lucky surprise and a free upgrade, we have heard of instances where smaller cars have been substituted in order to save costs.

When you book check the specifications of the vehicle you want to make sure that if it isn’t available then the equivalent is just that – did you need 4×4, space for 4 passengers, and large boot space? Check the equivalent provides what you planned on needing for that trip.

Read the contract thoroughly and make sure you understand it, make sure you are clear on numbers that can be called if you need to speak to an agent or if you break down. Double-check the insurance coverage and any extra charges they might try to add.

Whilst examining the car for damage with the agent check for safety equipment and spare tyres and check with the agent that you have all the safety equipment required by law

Make sure that you keep all the documents the agents give you. These contain important information that may be needed if you break down or have an accident. The form that was completed on collection identifying damage will be checked against the vehicle when it is returned so this will help you check that there is no new, unexpected damage.

Returning the car

As with picking up the car make sure you allow time for the agent to examine the car thoroughly and agree there is no new damage to it and that all the equipment has been returned intact.

Take photos just to be on the safe side since it’s not unknown for rental companies to find issues after you have left and simply take an amount from the pre-authorised credit card. Make sure that examination and photos cover the inside of the vehicle as well.

Be aware of the drop-off time for your rental. This is typically the same time as pick-up. Whilst some rental companies will give you a grace period check what this is. We’ve seen examples of only 30 minutes and then they will charge you for another full day of rental.

Is it better to hire a car in Iceland?

Without a doubt, if you are a driver who is comfortable with driving in another country then Iceland in a hire car is definitely the best option. It gives you total freedom and is cost-effective compared to tours.

If you are a cautious driver then Iceland will be okay for you. The roads away from Reykjavík on Ring Road 1 and in towns and villages are empty making for easy driving, however, weather conditions can be a concern.

If you are not happy driving in a range of weather conditions and on gravel roads then Iceland may not be the best place to drive. There are plenty of tours and private tours to allow you to explore at your own pace with a driver.

Whatever you decide, being on the wild and remote roads in Iceland is an experience you will never forget.


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