Car Rental in Iceland
Updated · BootsnAll
I still think renting a car is the best way to see Iceland. Outside Reykjavik it's the easiest way to get around, and it lets you stop when you want and detour when a side road looks interesting. The countryside is the reason most people come, and it would be a shame to see it only through a tour bus window.
What has changed since I first wrote this page is the cost, and a new tax you'll pay for every kilometer you drive. Here's what to know before you book.
What renting a car costs in 2026
The daily rates I quoted back in 2010 are long gone, and rates now swing a lot with the season, the car class and how early you book. Get quotes from several companies for your exact dates rather than trusting any figure you read online, this page included. A few things apply whichever company you pick.
The kilometer fee
Since 1 January 2026, every vehicle in Iceland pays a kilometer fee, whatever it runs on. For cars and SUVs up to 3.5 tonnes it's 6.95 ISK per km. Rental companies pass it on to you: Hertz Iceland, for example, reports the distance and pays the tax, then charges it as a separate road tax line on top of the rental price, plus a service fee. A full Ring Road loop of about 1,300 km works out to roughly 9,000 ISK in kilometer fees before any detours. Ask each company how it bills this before you compare prices.
Fuel
Petrol was selling for roughly 235 to 270 ISK a liter at most stations in mid-September 2026, and diesel for more, according to the price tracker Gasvaktin. The same company can charge 30 ISK more at one station than at another, so it pays to check the map before you fill up.
Insurance
Basic collision damage waiver is usually included. Hertz, for one, includes CDW, unlimited mileage and VAT, and sells extras such as super CDW, theft, gravel, and sand and ash protection. I said this in 2010 and I'll say it again: take the gravel protection. I heard too many stories of renters stuck with big bills after a gravel road chewed up the car. Check with your credit card or home insurer before you pay twice, since cover from a US auto policy varies.
One thing no policy saves you from: no insurance covers damage from crossing a river.
Who can rent
- Age: at Hertz Iceland, most cars need a driver aged 20 or older, and larger SUVs, vans and luxury cars need 23 to 25. Other companies set their own limits, so check before you book.
- License: a license printed in the Latin alphabet and held for at least 12 months is accepted. If yours isn't in Latin script, bring an International Driving Permit.
- Payment: expect to show a physical credit card in the main driver's name, and only that driver can pick up the car.
Picking the right car
Manual compact cars are still the cheapest, but they're a poor choice in winter, on rough roads, or if you can't drive stick. For summer on the Ring Road and paved side roads, a regular car is fine.
If you want to drive the mountain F-roads into the highlands, you need a 4x4, and the right one. Safetravel points out that not every four-wheel drive is suitable for every F-road. A small SUV might handle one route, while another needs a Land Cruiser or a modified super jeep. Tell the rental company exactly where you plan to go, and check your contract: some rental contracts rule out F-roads entirely.
Most towns along the Ring Road now have fast chargers, so an electric car works if you plan your stops. Take the most care on the long, empty stretch through the northeast between Mývatn and Egilsstaðir, and charge up before you leave Mývatn.
Where to rent
The easiest place is Keflavík airport when you land. Avis, Europcar, Hertz and Sixt have desks inside the terminal. Alamo, Enterprise, National, Lava and Lotus shuttle you to a rental area nearby, and a long list of local firms meets you in the arrivals hall. There are also rental offices in Reykjavik and at the domestic airports, which helps if you only want a car for part of your trip.
I had a great experience with Geysir Car Rental, which is still in business. When we rented from them, it was a five-minute walk from arrivals to their office, and the agent gave us a good map and a list of tips for the areas we were heading to. We had the car picked up from our hostel in Reykjavik because we were staying in the city a few more days and didn't need it. The whole thing was painless.
A one-way rental, picking up in one town and dropping off in another, is usually possible for an extra fee. It's worth it if you fly one direction to Akureyri and drive the other.
Mistakes I see renters make
- Booking the cheapest manual car for a winter trip when you rarely drive stick.
- Skipping the walk-around. Photograph every scratch before you drive off, since staff check for new damage on return.
- Taking a 2WD car onto an F-road. It breaks your rental terms, and you pay for whatever happens.
- Forgetting the kilometer fee when comparing quotes.
- Stopping on the road for photos. Safetravel is blunt about this: pull into a proper stopping area.
Driving in Iceland
Icelanders drive on the right, headlights stay on day and night, and everyone in the car wears a seatbelt. Outside Reykjavik there's very little traffic. The real hazards are wind, loose gravel, blind hills, single-lane bridges and sudden weather. Speed limits are 50 km/h in towns, 80 km/h on gravel and 90 km/h on paved rural roads.
FAQ
Do I need a 4x4 in Iceland?
Only for F-roads, which are open roughly July to mid-September. For the Ring Road in summer, a regular car is fine. In winter a 4x4 with good tires gives you more margin, though it doesn't make an icy road safe.
Can I sleep in a rental car or campervan anywhere?
No. Under Iceland's Nature Conservation Act, overnight stays in campervans and similar vehicles outside campsites or towns need the landowner's permission. Plan on campsites.
Is renting a car cheaper than a tour?
For two or more people covering several days, usually yes, even after fuel and the kilometer fee. For one person on a short trip, day tours or the bus can come out cheaper. Our Iceland budget guide helps you run the numbers.