Iceland Car Rental Guide: Everything You Need to Know
Contents
- Why You Need a Car
- Car Types and Daily Costs (as of 2026)
- Named Rental Companies
- Insurance: What You Actually Need
- Standard CDW (Collision Damage Waiver)
- SCDW (Super Collision Damage Waiver / Gravel Protection)
- SAAP (Sand and Ash Protection)
- F-Roads: Rules and Requirements
- Age Restrictions
- What to Do If You Damage the Car
- Fuel Costs and Practical Tips
A rental car is the most practical way to see Iceland independently. Public transport covers Reykjavík well but reaches very few of the sites that make Iceland worth visiting — the South Coast waterfalls, the Jökulsárlón glacier lagoon, the Snæfellsnes Peninsula, and the Westfjords are all essentially inaccessible without a vehicle.
Why You Need a Car
The Ring Road (Route 1) circles the entire island — 1,332 km. Driving it takes a minimum of seven days at a comfortable pace, longer if you explore side roads. Even short day trips from Reykjavík — the Golden Circle, the South Coast — are much more flexible by car than by tour bus.
For highland F-roads and remote regions like the Westfjords, a 4WD vehicle is the only practical option.
Car Types and Daily Costs (as of 2026)
| Car type | Best for | Approximate cost/day |
|---|---|---|
| Small compact (2WD) | Reykjavík, Ring Road, paved roads | ISK 8,000–12,000 |
| Mid-size 4WD SUV | Ring Road + unpaved gravel roads | ISK 18,000–25,000 |
| Large 4WD SUV | F-roads, larger groups | ISK 25,000–35,000 |
| Campervan (2WD) | Ring Road camping | ISK 25,000–45,000 |
| Campervan (4WD) | F-roads + camping | ISK 40,000–65,000 |
Prices vary significantly by season. Summer (June–August) rates are higher than winter. Booking in advance — especially for 4WD vehicles in summer — is advisable.
Named Rental Companies
Hertz Iceland (hertz.is): International brand, multiple pick-up locations including Keflavík Airport and Reykjavík. Reliable fleet, standard international rental terms. Good option if you have a Hertz rewards membership.
Budget Iceland (budget.is): Competitive pricing on compact and mid-size vehicles. Keflavík Airport and Reykjavík locations. Popular with younger travellers and budget-conscious visitors.
Lotus Car Rental (lotuscarrental.is): Icelandic-owned company with a well-maintained fleet of 4WD and highland-capable vehicles. Known for transparent insurance policies and responsive customer service. A good choice if F-road access is a priority.
Blue Car Rental (bluecarrental.is): One of Iceland’s largest independent rental companies. Competitive on price, wide vehicle selection from small compacts to highland-capable Super Jeeps. Located at Keflavík Airport and in Reykjavík.
SADcars (sadcars.com): Low-cost option with older vehicles. Prices are noticeably cheaper than the above companies, but vehicles have higher mileage. Adequate for Ring Road driving; less suitable for highland routes.
Insurance: What You Actually Need
Standard CDW (Collision Damage Waiver)
Reduces your liability for damage to the car. Typically included in base price or offered as a mandatory add-on. Check the excess (deductible) — it can be ISK 150,000–350,000 on a standard policy, which you pay upfront if you damage the car.
SCDW (Super Collision Damage Waiver / Gravel Protection)
Reduces or eliminates your excess for damage caused by gravel. On Icelandic roads — including the Ring Road — gravel thrown by other vehicles is a common cause of windscreen chips and paint chips. This cover is strongly recommended for any trip that goes beyond Reykjavík. Cost typically ISK 1,500–3,000/day.
SAAP (Sand and Ash Protection)
Covers damage caused by sandstorms and volcanic ash. The South Coast between Vík and Skaftafell has frequent sandstorm conditions. Without SAAP, paint damage from a sandstorm is your financial liability. Cost typically ISK 500–1,500/day.
In practice: For a standard Ring Road or South Coast trip, take CDW + SCDW + SAAP. The combined daily cost is usually ISK 2,000–4,500 extra, which is cheap compared to the potential excess you’d pay without it.
F-Roads: Rules and Requirements
F-roads are designated highland roads marked with an “F” prefix (F35, F26, etc.). They are:
- Only open approximately June through September — dates vary by year and road
- 4WD mandatory — driving an F-road in a 2WD vehicle voids your insurance and is illegal
- Often involve river crossings — always assess depth and current before crossing; many crossings require experience
- Unpaved, rough, and remote — breakdowns can occur far from assistance
Check road status at road.is before driving any F-road. The site updates conditions daily. If a road shows red or is marked closed, do not attempt it.
Age Restrictions
Most companies: minimum age 20–23 years old. Young driver surcharges (typically ISK 2,500–4,000/day) apply to drivers aged 20–24 at most companies. Minimum one-year driving licence experience is a common additional requirement.
Drivers over 75 may face restrictions with some companies — check directly.
What to Do If You Damage the Car
- Document the damage with photos before and after driving
- Report to the rental company as soon as possible — most have 24/7 emergency lines
- File a police report if another vehicle is involved
- Contact your travel insurance provider if you have separate cover
Do not attempt to repair or conceal damage. Rental companies inspect vehicles on return and will charge from the deposit you provided.
Fuel Costs and Practical Tips
Petrol: approximately ISK 290–320 per litre as of 2026. For a compact car covering 1,000 km (a short Ring Road loop), budget approximately ISK 15,000–20,000 in fuel.
Fill up early and often. Petrol stations in rural Iceland can be 80–120 km apart. Some are unmanned (payment by card). Major chains: N1, Orkan, and ÓB. N1 is the most widespread and typically open 24/7 in larger towns.
For driving routes, see our Iceland driving guide for road conditions, speed limits, and winter driving advice.
Frequently Asked Questions
- Do I need a 4WD car to drive in Iceland?
- Not for the Ring Road (Route 1) or standard paved roads. A small 2WD compact is sufficient for Reykjavík, the Ring Road, the Snæfellsnes Peninsula, and most South Coast sites. You need a 4WD vehicle if you plan to drive any F-roads (highland roads). 4WD is also advisable for winter driving in Iceland, where road conditions deteriorate quickly.
- What is the minimum age to rent a car in Iceland?
- Most rental companies in Iceland set the minimum age at 20–23 years old, with young driver surcharges applying to drivers under 25. Some companies require a minimum of one year of driving licence experience on top of the age requirement. Check the specific policy of your chosen company before booking.
- Is insurance mandatory for car rental in Iceland?
- Basic CDW (Collision Damage Waiver) is typically included or offered as standard, but the excess on a standard CDW policy in Iceland can be very high — ISK 200,000 or more. Gravel protection (SCDW) and sand/ash protection (SAAP) are separate add-ons that are strongly recommended. Iceland's roads and weather conditions make damage claims more common than in most European destinations.
- How much does petrol cost in Iceland?
- As of 2026, petrol costs approximately ISK 290–320 per litre. Diesel is similar. Iceland has no toll roads, so fuel is the primary driving cost. Fill up in towns — petrol stations at remote locations charge more and are sometimes not staffed. For Ring Road driving, fill at every opportunity rather than waiting for the next town.