Iceland Car Rental Guide: Choosing the Right Vehicle for the Land of Fire and Ice

You’re planning a trip to the land of fire and ice: Iceland. For a country the size of Ohio, there’s a seemingly endless array of things to see and do, especially for outdoor enthusiasts. Some are satisfied with simply seeing the capital city, Reykjavík, taking bus tours, or visiting one of the world’s most unique knifemakers.

But to really experience all the country has to offer, you need to venture out farther. And to see that, you’ll need an Iceland car rental.

There is a dizzying array of rigs to rent in Iceland. Depending on where you want to go, what you want to see, and how many people are with you, it can be hard to decide what vehicle to choose. Here, I’ll outline what it’s like to rent a car in Iceland and offer guidance from firsthand experience to help make your visit to this iconic island as smooth as possible.

Iceland Roads

First, what are Iceland’s roads like?

Driving around Reykjavík is pretty much like driving around any other city. The rest of the country, however, can be quite different.

The Ring Road

Route 1, aka the Ring Road, runs 821 miles (1,322 km) around the entire country’s perimeter and is its major highway. I’ve circumnavigated Iceland twice on it, going counterclockwise both times.

The Ring Road is a mostly paved two-lane highway, but it’s narrow compared to North American standards and usually lacks shoulders. The maximum speed is just 90 km/h or about 56 mph, meaning you’ll often need to pass slower traffic, including bicyclists, buses, semis, sheep, and slow-going sightseers.

There are also a multitude of one-lane bridges, gusty winds, and regular inclement weather. The Ring Road demands a healthy heap of respect.

Iceland’s peak travel season is June through August, and snow isn’t common then. But for much of the year, the island’s byways can be snow-covered, slippery, and sometimes impassable. This includes the Ring Road.

Dirt, Gravel, and Mountain ‘F-Roads’

Venture off The Ring Road, and you’ll undoubtedly encounter some of the hundreds of miles of dirt and gravel roads — some of which can be rough. However, many of these routes lead to Iceland’s most incredible features, including magnificent waterfalls, scenic fjords, volcanic features, and more. Keep this in mind when selecting a rental car.

Iceland is also famous for its F-roads. The “F” comes from the word “Fjalla” which translates into “mountain.” Usually open in the summer, the mountainous, remote F-roads can offer some of the most incredible views and driving adventures.

Note: Not all rental car companies permit their vehicles to travel on them. More on that in a bit.

Renting a Car in Iceland: Considerations

Now that you know a bit about Icelandic roads, you’ll need to ask yourselves some questions before renting.

4WD vs. 2WD

If you’re just going to buzz around Reykjavík or plan to stick to The Ring Road and the attractions near it, a two-wheel-drive car will suffice.

Planning to venture off the beaten path, perhaps down long stretches of gravel to the Westfjords or on F-roads on the Snæfellsnes Peninsula? Consider something with all-wheel drive or four-wheel drive. If you visit in winter, you may also want AWD anywhere you go in Iceland.

Want to explore the remote highlands in the country’s center? Some specialty rental agencies will rent you 4x4s with big off-road tires — with equally big price tags — for some more extreme off-road adventures. Just remember to always stick to designated routes. Leaving designated routes can lead to huge fines.

Planning what you want to see will help dictate where you want to go. This will help you rent a vehicle with the appropriate capabilities for your desired travels.

How Many People?

Get an appropriately sized vehicle for your trip. If traveling with three or four people and their luggage (or camping gear), renting a subcompact hatchback isn’t a good choice. Conversely, if you’re a solo traveler or have just two people, you probably don’t need a large vehicle and can save cash with something smaller.

Consider how much luggage or camping gear you’ll have. Both times, my wife and I traveled through Iceland, and we camped for one to two weeks. We had backpacks, duffels, and other items that took up space. Conversely, if you only have a couple of carry-on bags, you may not need the extra cargo capacity.

Iceland Rental Car Options

Iceland has a diverse range of rental rigs, from a tiny Kia Picanto subcompact hatchback to a massive balloon-tire-equipped Land Rover Defender 110 SUV. Also, EVs and hybrids are popular in Iceland and can be rented.

Some Icelandic rentals come with manual transmissions. Pay attention when selecting your rental rig, especially if you’re not OK shifting your own gears.

Many vehicles can be rented with rooftop tents in Iceland. From the Lilliputian Suzuki Jimny to full-size pickups, this is a common rental accessory for cars in Iceland. It gives you an instant tent when you arrive at camp, and is usually cheaper than renting a campervan.

Lastly, not all of Iceland’s rental cars are only a couple of years old, as they are here in the U.S. Many can be several years old, especially the 4WD models.

How to Pick the Right Rental

• Subcompact 2WD hatchbacks: The least expensive two-person road tripper — fuel-efficient and versatile. No F-road adventures here.
  • Common examples: Hyundai i10, Kia Picanto, Toyota Aygo, Yaris
• Midsized 2WD vehicles: When you’ll stick to the main roads but need more space than a subcompact. Opt for a wagon for cargo-carrying versatility.
  • Common examples: Dacia Jogger, Hyundai i30, Kia CEED, Toyota Corolla
• Compact AWD crossovers: Often have more ground clearance and traction than 2WDs, especially if venturing onto dirt tracks. Some rental agencies will allow them on F-roads, but check first.
• Small-to-midsized 4x4s: If you’re tackling more difficult terrain, having a true four-wheel-vehicle is a good choice for better off-pavement performance. Only usually good for one to three people.
• Larger 4x4s and pickups: For the ultimate off-pavement adventures, these vehicles carry more people, additional cargo, and can tackle the most difficult terrain. They’re the least fuel-efficient and generally the most expensive to rent.
  • Common examples: Jeep Wrangler, Land Rover Defender, Toyota Land Cruiser, Toyota Hilux
• Campervans: Campervans can provide all-inclusive camping setups. No need to pitch a tent in the elements — you sleep inside. Many have in-van stoves, too. Check how many seats there are if traveling with more than two people. Some are 2WD, some are AWD/4WD.
  • Common examples: Renault Master Camper, VW vans

Fuel Is Very Expensive

Fuel in Iceland is extremely expensive, and more fuel-efficient vehicles will help save costs. As of this writing, gasoline is 315.27 ISK (Icelandic Krona) a liter. That’s $8.55 USD a gallon.

Fueling your rental can be tricky at first due to pumps being in the Icelandic language. Download the Icelandic language pack from Google Translate and have it at the ready.

Iceland generally requires you to use your credit or debit card’s PIN, so be sure you know it.

I recommend finding a vehicle that balances your fuel economy and desire to go where you want. For example, in 2019, my wife and I wanted to explore the island’s F-roads. We rented a 2019 Suzuki Jimny, which had ample ground clearance, four-wheel drive, and decent fuel economy. The tiny off-roader was just right for two people and our camping gear.

In 2023, we went back to Iceland, this time with her cousin, so we rented a larger 2022 Toyota RAV4 with all-wheel drive, as we had more gear. While not as capable as the Jimny, it still offered AWD and fuel efficiency.

Icelandic Rental Car Prices

Rental prices are dependent on when you go and what you rent. Prices will be less expensive in the off-season (winter) and the most at their peak from June to August. The same rental car can be up to 50% less expensive in February compared to July.

According to rental car prices via Guide to Iceland, in peak months, small cars can be around $450 a week to start. Stepping up to a medium car adds about $100 more as a baseline.

Opting for AWD or 4WD will trend toward $600 weekly but can run into the $1,000 per week range. Premium 4WDs, such as a newer Toyota Hilux, Toyota Land Cruiser, or Land Rover Defender, can run well into the range of $3,000-4,000 per week in peak times. These are all before additional insurance and are only examples.

Big balloon-tire-equipped 4x4s are iconic Icelandic rigs, and specialty rental agencies offer those vehicles for hire. Want to rent a Land Rover Super Defender complete with 37-inch tires? You can do that for about $3,749 USD a week in the summer via ISAK 4×4 rental.

How about an arctic-ready Toyota Land Cruiser on 35s? Check out Geysir.is and its Land Cruiser Arctic 4×4. Peak pricing starts at around $2,373 USD a week.

There isn’t a shortage of rental car companies in Iceland; however, some are better than others. Study online ratings and read reviews before booking.

Iceland Rental Car Insurance

If you’ve ever rented a car in North America, you know there are optional insurances to cover collision, roadside assistance, and other issues. When you look at renting in Iceland, you may see these as well as some rather unusual coverages. Do you need them?

For example, many companies offer gravel protection. Again, Iceland is a country with lots of gravel roads, and this insurance often covers the vehicle’s paint and headlights against damage from rocks and stones. This insurance can be about $10 USD a day.

Then there’s sand and ash coverage. This is usually insurance against damage from Iceland’s sandstorms, or if there’s a volcanic eruption, ash storms. Both hazards can damage a vehicle’s paint, plastics, windows, etc. The extra insurance is often around an extra $15 USD a day.

Additionally, while many rental agencies offer standard collision waivers, they regularly have a deductible you’ll have to pay if you are in an accident. Most rental agencies offer increased collision waivers to eliminate the deductible, which can be approximately $15 USD a day extra.

Insurance is always a gamble, but Iceland can be a place of extremes. Both times we rented, we got full coverage so as not to worry about damage, which tacked on around $35 USD extra a day. But the choice is up to you. Regardless, read the fine print so you don’t get charges you didn’t expect.

Can I Take My Car Anywhere?

Due to Iceland’s network of paved highways, unpaved backroads, mountain F-roads, and even tracks with deep water crossings, not all rentals are allowed on all roads.

Most rental car companies don’t permit two-wheel-drive cars on F-roads. Don’t assume your AWD rental is automatically allowed on F-roads, either. When in doubt, ask or look at the fine print. Otherwise, you can be in for steep fines, especially if the car is damaged.

In some remote areas of Iceland, there can be deep water crossings. I highly advise against going through deep water in a rental of any kind, unless you’re with an experienced local guide.

Thrifty Car Rental specifically has a section on crossing unbridged rivers. They don’t recommend it, either. Thrifty states that if you choose to cross any of these rivers, the driver and lessee have complete responsibility for all damage unless purchasing river ford crossing (RFC) protection.

Choose Your Iceland Car Rental Wisely

Iceland is one of my favorite places on earth. Renting the right rig to explore this incredible Nordic island can help you get to some of the most amazing places the country has to offer.

Do your homework, shop around, and read the reviews as well as the fine print. Then, you should be ready to explore the land of fire and ice.