Guide to Renting a Car in Iceland: All You Need to Know

Imagine cruising along Iceland’s breathtaking coastlines, stopping at hidden waterfalls, and chasing the Northern Lights—on your own schedule. Renting a car in Iceland is more than just transportation; it’s your key to adventure.

Whether you're planning a Ring Road trip, exploring the Golden Circle, or venturing into Iceland’s rugged Highlands, choosing the right rental is crucial. In this guide, we’ll help you find the perfect car and avoid costly mistakes!

Why Rent a Car in Iceland?

Still debating whether to rent a car in Iceland? Picture this: You land at Keflavík Airport, step outside, and the fresh Icelandic air greets you. Without a car, you're limited to bus schedules and crowded tours. But with a rental car, the whole country is yours to explore—chase waterfalls, drive to hidden hot springs, and stop wherever adventure calls. 

And you wouldn’t be alone—according to the Icelandic Tourism Board, over 61% of travellers prefer renting a car. Why? Find out below. 

Reasons Why You Should Rent a Car in Iceland

• Freedom

The top reason our clients love renting a car in Iceland? Doing so gives them a huge amount of freedom when it comes to planning their itineraries. They can choose what to see where to go, and when to go there. They can do everything on their own schedules, without being beholden to a tour guide.

• Accessibility 

Similarly, many tour guides only go to the top spots around Iceland. If you want to see some of the amazing geological features and the tiny fishing towns, for example, you’ll have to travel there yourself, which means a car is necessary. Don’t make the mistake of travelling to Iceland and assuming you’ll just take public transportation everywhere. This is very much a destination where, if you want to go somewhere, you’ll need to get there yourself. 

• Comfort and Safety

Especially recently, travellers are caring more and more about health safety and the ability to social distance from other travellers while in a destination. Renting a car in Iceland allows you to socially distance yourself while still seeing all of the sights. Additionally, the privacy and space that a rental car affords you are much more comfortable than what you’ll find on public transportation options, like buses and taxis. 

• Privacy 

If you’re travelling with close friends or even a partner on a romantic trip, then you’ll appreciate the additional privacy that travelling via a rental car in Iceland allows. 

• Flexible Costs

There are rental car options that fit a wide array of budgets. You can pick a more affordable, budget-friendly economy car if you’re looking to save a little money in your travel budget. If, though, you want a more luxurious experience, you can go with an extra-roomy vehicle that comes with all the bells and whistles. Even if you opt for a mid-range or luxury rental, you’ll often save money compared to guided tours and public transportation. Plus, if you’re travelling with a group, you can split rental and fuel costs—making it even more budget-friendly!

• Saved Time

If you’ve ever taken public transportation before, or taken a tour while travelling, you know that these options are definitely not your fastest. If you only have a limited amount of time in Iceland and you want to see the most you can, a rental car can really cut down on the travel time needed to get between Point A and Point B. 

• More Memories

And, lastly, when you have the flexibility that a rental car provides, you can make more memories during your Iceland trip, more easily. Chase the northern lights during the winter months. Stay up late and see Iceland’s summertime Midnight Sun. Or even camp under the stars, surrounded by Icelandic nature, when you rent a campervan.

🚙 Recap & Comparison: Renting a Car vs. Other Travel Options in Iceland

Travel Option	Cost (approx.)	Flexibility	Best For
🚍 Public Transportation	$55-$110 (50-100€) per trip	🚫 Limited (fixed routes, schedules)	Budget travellers staying in Reykjavik
🚐 Guided Tours	$165-$440 (150-400€) per tour	🚫 No freedom (set itinerary)	Tourists preferring guided experiences
🚗 Rental Car	$55-$165 (50-100€) per day	✅ 100% Flexible	Independent travellers & adventure seekers

Who Should Rent a Car in Iceland?

• First-time visitors - Experience more than just Reykjavik and make the most of your trip.
• Adventure travelers - The Westfjords & Highlands are more accessible by car than tours.
• Couples & families - Enjoy privacy, space, and comfort while travelling together.
• Photographers & nature lovers - Stop at hidden gems and scenic landscapes anytime you want.
• Northern Lights chasers - Drive away from city lights to increase your chances of seeing the auroras.

How to Choose the Right Rental Car When Visiting Iceland 

But choosing the right rental car for your Iceland trip is important. When picking your Iceland rental car, here are a few things you’ll want to keep in mind. 

Your Itinerary 

Where are you planning to go and what are you planning to do and see while in Iceland? Depending on your answer, you may need to rent a particular type of vehicle.

If you’re planning to travel the Ring Road, a very popular route that takes you around the entire island, with stops along some of the most inhabited areas and at some of the most popular points of interest, you would generally be safe to pick just about any type of vehicle (so long as you're travelling in the summer, spring or fall — but more on that below). We see many travellers renting campervans for Ring Road trips if they want to camp along the route; economy cars if they want to save a bit of money; or 4x4 vehicles, particularly during the winter months.

If you want to visit the Westfjords, all vehicles are still permitted, but we generally recommend renting a 4x4 vehicle for these trips. The Westfjords are, all in all, a little more rugged than other parts of Iceland, so you’ll want to be properly prepared for whatever conditions come your way.

Similarly, if you want to visit the Icelandic Highlands, you’ll need a 4x4 vehicle, as the roads there are particularly treacherous under certain conditions — so much so that they’re not even open during the winter months!  

The Timing of Your Iceland Trip

As mentioned above, you’ll also want to pick certain types of vehicles depending on the time of year you visit Iceland. 

• During summer 

From mid-May through August, you can take all types of cars along the Ring Road route of Iceland and feel pretty confident that you won’t run into any trouble. Campervan, 4x4 vehicle, or economy car — they’ll all work just fine.

If, though, you’re visiting the Westfjords or Highlands during the summer months, you’ll still want to play it safe and rent a 4x4 vehicle. Even during the summer months, the roads in these particular regions can be a little uncertain, and we always advise our customers to put safety first.

• During Iceland winter

From November through March, we recommend our customers choose a 4x4 vehicle no matter where they’re planning to travel in the country. The Icelandic road conditions during the winter months can be icy, snowy, and hazardous, and a 4x4 vehicle is necessary. 

Keep in mind, too, that many areas and roads in Iceland are closed during the winter months. This is extremely common in the Westfjords and is always the case in the Icelandic Highlands, which are closed completely to visitors through the winter. 

• During the shoulder seasons

For April–May and mid-September–October, it’s still advised that you rent a 4x4 vehicle for both the Ring Road and Westfjords. The Highlands are still closed during the spring and fall.

The Type of Traveller You Are

Beyond weather and itinerary, when picking a rental car for a trip to Iceland, you’ll also want to consider what type of traveller you are and who you’re travelling with.

• If you’re a travelling family with children, you’ll likely need a little extra space, so you may want to choose a regular-size economy car or a 4x4 vehicle. These can usually fit about four to five passengers. 
• If you’re a travelling couple or pair of friends, you can save a little extra cash and opt for a small economy car suitable for two travellers, plus luggage. You can also find smaller, more suitable 4x4 vehicles, as well as smaller campervans suitable for two travellers. 
• If you’re a travelling group, you can find larger vehicles such as our Nissan X-Trail or similar.
• Regardless of how many people you’re travelling with, if you’re the adventurous type, you might prefer a campervan, so you can stay overnight, wherever the wind takes you.
• If, however, you’d rather choose comfort over adventure, you might be more interested in renting a luxury vehicle, such as our Toyota Land Cruiser, which offers a range of desirable features, such as heated seats (which you’ll love coming back to after spending a morning or afternoon exploring the chilly Icelandic landscape!).

Whatever type of traveller you are, Lava Car Rental offers a range of vehicles to suit a variety of needs, so everyone can find the perfect fit for their Iceland trip.

🚙 Recap: Car Selection Guide Based on Season and Itinerary

Destination / Season	Best Rental Car	Why?
🚗 Golden Circle & Ring Road (Summer)	2WD / Economy Car	Paved roads, budget-friendly
❄️ Ring Road (Winter & Shoulder Season)	4WD / 4X4 / SUV	Snow, ice, unpredictable conditions
🏔 Westfjords (Any Season)	4WD / 4X4 / SUV	Gravel roads, steep terrain
🏕 Camping & road trips	Campervan	Combines transport + accommodation
⛰ Highlands (Summer Only)	4WD / 4X4 / Jeep	F-roads require a 4x4 vehicle by law

What to Look for When Reserving Your Iceland Car Rental 

If you think you very nearly have the perfect vehicle picked out, make sure to take just a few other considerations into account before making your final decision. You’ll want to look at…

Age and Residence Requirements 

Depending on your car rental provider, you may find that they enforce particular age or resident requirements. Some may only allow you to rent certain types of cars if you're 25 years of age or older, whereas some might require you to have had your driver's license for a certain amount of time. The last thing you want to happen is to show up in Iceland to pick up your rental car, and then realise you can't because you don’t meet the age or residence requirements! 

At Lava Car Rental, we allow any renter who is 20 years old or older, to rent any class of vehicle. Additionally, Lava Car Rental only require you to have held your driver's license for 1 year.

A Car Suitable for Iceland Driving Conditions 

Not all rental cars are going to be suitable for driving in Iceland during all times of the year. As we mentioned above in discussing how to choose the right car for your trip to Iceland, the timing of the year greatly impacts what car is best (and safest) for your trip. 

When reserving your Iceland car rental, be sure to pick a car that will be suitable for the road conditions during the time of year you're visiting, as well as for the area of the country you’re visiting.

If you’re visiting the Highlands or Westfjords, you’ll need a 4x4 vehicle. Similarly, if you’re visiting during the winter, you’ll need a 4x4 vehicle. 

Authorised Mileage 

Some rental car companies will put limits on how much or far you can drive your rental car before you incur additional fees. However, when you book with Lava Car Rental, you can drive as much as you want during your trip, thanks to authorised, unlimited mileage.

The Rental Car’s Transmission: Automatic vs. Manual Cars in Iceland

Rental cars in Iceland come with both manual and automatic transmissions. You’ll find that when visiting just about anywhere in Europe, a manual transmission is the standard option; however, since that’s not the case everywhere in the world, you may not feel comfortable driving a vehicle with a manual transmission. If that sounds like you, be sure to verify that the car you're renting comes with an automatic transmission.

• Are rental cars in Iceland manual or automatic?

When you rent a car in Iceland, you’ll discover that the majority of the available options are manual vehicles. This is the case in not only Iceland but anywhere that you travel in Europe. Manual cars are just the norm, as opposed to the automatic vehicles that are most popular in North America. However, if you can’t drive a manual vehicle and need an automatic vehicle during your trip to Iceland, rest assured that you can usually find one via your rental car provider, so long as you book far enough in advance.

• Can you rent a car with an automatic transmission in Iceland?

Yes, while manual cars are the most popular vehicles on the road in Iceland, you can still find automatic transmission vehicles at car rentals in Iceland. At Lava Car Rental, we offer a variety of automatic transmission 4x4 vehicles, a few automatic transmission economy vehicles, as well as automatic transmission campervans.

Before finalising your car rental in Iceland, make sure to verify that you’re reserving a vehicle with an automatic transmission. If you’re unsure based on the information on the rental company’s website, contact the company to confirm.

• Are automatic cars more expensive to rent?

Yes, automatic vehicles are slightly more expensive to rent. You can expect to see about a 10% increase in the cost of a manual transmission vehicle. However, if you’re not comfortable driving a manual transmission vehicle, you don't want to risk a car accident just to save some money. Book an automatic rental car for your safety and the safety of your fellow drivers. Just be sure to book quickly! Automatic transmission rental cars are very popular in Iceland and usually book up fast.

• Is it better to drive a manual or automatic car?

It all depends on your comfort level. If you’ve never driven a manual vehicle, the time to try it is not while you’re on vacation. Additionally, automatic cars are generally considered more comfortable to drive and they’re also easier to drive in cities, where changing traffic makes changing gears rapidly a necessity. 

However, if you are fairly comfortable with driving a manual vehicle, you may find some other benefits in renting a manual car, if you’re driving in more remote areas, and especially during certain times of the year. For example, a manual vehicle provides safer driving conditions during the winter months, when the driver can anticipate oncoming slippery or icy road conditions, and adjust the transmission accordingly, on their own.

Any Extra Features

Certain rental cars come with certain extra features that you may want (or even need) during your Iceland trip. For example, Icelandic law requires that all child passengers ride in a booster seat or child car seat, so you’ll likely want to rent a car that comes with one already installed.

Other extra features that you may want include GPS navigation systems, a portable WiFi router, or a luggage box that sits atop the vehicle. A very popular add-on for many travellers is an additional driver, which allows another person in your party to drive your rental vehicle.

While those renting a car from Lava Car Rental have the option to add on extra “kits” like sleeping or kitchen kits that include everything you’d need to cook or sleep on the go, when you rent a campervan with us, all of that is already included in your rental price. Sleeping kits, kitchen kit, electric cooler, gas stovetop, foldable chairs, and table — you get it all, a perk you won’t find with many other rental companies in Iceland. 

Insurance Options 

When you rent a vehicle on the Lava Car Rental's website, the Third-Party Liability Insurance, the Collision Damage Waiver, the Super Collision Damage Waiver (SCDW) and Theft Protection (TP) and Gravel Protection (GP) are always included. This will protect you in the event of damage to the rental car. However, you do have another option to consider, if you want additional insurance coverage. 

With Lava Car Rental, you can pick an insurance package, which includes a range of protection. We offer insurance for issues such as damage from volcanic ash and sandstorms, damage caused by driving over gravel, and more.

Our Full Protection Package includes all the protection below, with no self-excess:

• TPL: Third-Party Liability Insurance
• CDW: Collision Damage Waiver
• SCDW: Super Collision Damage Waiver
• GP: Gravel Protection
• TP: Theft Protection 
• SAAP: Sand and Ash Protection
• TIP: Tire Protection

Fuel Usage

Every car uses fuel a little differently, and if you want to save cash where fuel is concerned, you’ll want to take a look at how many kilometres per litre of gas your rental car will go. Then, to get an idea of how much you can expect to spend on fuel while in Iceland, you can check out the current prices at some of Iceland’s primary gas and service stations, including Orkan, OB, and N1. Please note that Lava Car Rental offer fuel discount with each car rental. 

Pickup Location, Hours and Conditions

Will a car rental provider’s pickup location, hours and conditions work for your trip itinerary? 

When you rent with Lava Car, you can pick up your rental immediately, right after you land in Iceland at Keflavik Airport, no matter the time, thanks to our self-service pick-up and drop-off option. It allows you to pick up and drop off your car 24/7. 

Deposits

Many car rental providers require you to put down a deposit on a credit card when you pick up your vehicle. Then, if something happens to the vehicle, they keep your deposit. However, Lava Car Rental does not require any such deposit. 

Cancellation and Change Policies

While you might not think you need it now, a cancellation and/or change policy can come in handy just if you do unfortunately need to reschedule or cancel your trip to Iceland. Look into the cancellation and change policies that come with your rental car before you book.

Lava Car Rental allows you to pay a down payment for your booking and the rest after you arrive in the country OR pay the full amount at booking to enjoy a discount on your rental. Our flexible change and cancellation policy allows you to change your booking for free up to 48 hours before your scheduled pick-up. You can also cancel your booking up to 48 hours before the scheduled pick-up and then receive either a full refund.

Payment

You do need to present a credit or debit card when renting a car in Iceland. However, it’s important to note that not every single car rental company in Iceland allows you to rent a car with both types of cards. Many require a credit card and will not accept a debit card. 

Lava Car Rental is one of the few car rental companies in Iceland that allows travellers to rent a vehicle with a debit card only. We accept debit cards both when you book online and when you pick up your rental car. We accept all major debit and credit card brands, including Visa, Mastercard, American Express, Diners Club and Union Pay (and if you have a card that does not fall into one of these categories, just send us an email to ensure your card will be accepted). Prepaid cards are also valid. The only extra requirement is that you need to purchase full protection insurance if you travel with a debit card.

Ratings and Reviews

Before deciding to book with a rental car company for your trip to Iceland, be sure to check out the provider’s ratings and reviews. Broadly, local car rental companies are the highest-rated in Iceland, as compared to international rental car brands. 

Lava Car Rental boasts a 4.6/5 rating on Google and Trustpilot, with more than 6,000 reviews. The company won the Rentalcars.com Award for Customer Favourite Car Rental Company category in Iceland in 2023 and also Iceland's Leading Car Rental Company in 2023 and 2024 by the World Travel Awards. 

🔎 Recap: What to Look for When Reserving Your Iceland Car Rental

Factor	General Rental Companies	Lava Car Rental
Minimum Driver Age	20-25 years old, varies by company	✅ 20 years old, no young driver fees
Vehicle Selection	Economy, SUVs, some 4x4s	✅ Wide range: Economy, 4x4s, campervans
Transmissions Options	Mostly manual, limited automatics	✅ Both automatic & manual are available
Mileage Limitations	Often restricted, extra fees apply	✅ Unlimited mileage included
Insurance Coverage	Basic CDW, often extra fees apply	✅ Essential insurance included (TPL, CDW, SCDW, TP and GP)
Fuel Usage	Gas station's public prices	✅ Fuel Discount with all rentals
Extra Feature	As an add-on.	✅ Campervan rentals include all equipment
Payment Methods	Credit cards only	✅ Debit & credit cards accepted
Deposit Requirement	$550-$3300 (500€-3000€) hold on credit card	✅ No deposit required
Cancellation Policy	Strict, often non-refundable	✅ Free cancellation & change up to 48 hours before pickup
Pick up and Drop off Hours	Fixed office hours	✅ 24/7 self-service

Book your Rental Car Now

Estimated Costs & Budgeting for Car Rental in Iceland

The cost of renting a car in Iceland varies depending on the season, vehicle type, and how early you book. Prices tend to be higher during peak tourist months (June–August) and more affordable in shoulder seasons (April–May, September–October). Below is an average cost breakdown to help you budget for your trip.

Expense	Average Estimated Cost
Economy Car in Summer	$85-$115 (80€-110€) per day
4x4 Vehicle in Summer	$115-$210 (110€-200€) per day
Campervan in Summer	$145-$260 (140-250€) per day
Economy Car in Winter	$55-$85 (50€-80€) per day
4x4 Vehicle in Winter	$70-$125 (65€-120€) per day
Fuel	$2.20-$2.55 (2€-2.30€) per litre

Money-Saving Tips for Renting a Car in Iceland

• Book early – Prices rise closer to travel dates!
• Rent in off-peak months (April-May, Sept-Oct) for lower rates.
• Choose an economy car if staying on paved roads.
• Consider a campervan to save on hotel costs.
• Check for fuel discounts – Lava Car Rental offers savings!

What You Need to Rent a Car in Iceland

There are a few things you’ll need to provide to your rental car company when you rent a car in Iceland.

• You’ll need to provide a driver’s licence from your home country which is (a) written in the Latin alphabet or translated into English and (b) a full driver’s licence (not a learner’s permit or the equivalent). If you’re not sure whether your driver’s licence matches these requirements, check with your local government before your arrival in Iceland. If it does not match these requirements, you may need to apply for an international driver’s licence ahead of your trip. Additionally, all travellers in your party who plan on driving the vehicle will need to provide the same.
• You’ll need to present your rental car company with a valid credit or debit card. Some companies will hold an imprint of the card during your rental period, while others may hold a security deposit; if this will be an issue for you, you’ll want to verify with your rental car company before making your reservation. 
• Lastly, you’ll need to bring your voucher with you when you pick up your rental car. This voucher is typically provided when you complete an online rental car booking. You’ll receive a confirmation email with all of your booking details, including the voucher. You can either present this voucher on your phone or another mobile device, or you can print it out and bring a physical copy with you. Even if you did not book directly with a rental car company, and went through a travel agent instead, you’ll still need to show a similar voucher. 

In addition to all of these requirements, it’s also important to note that Icelandic law only allows drivers to rent vehicles if they’re 20 years old or older and if they’ve held a driver’s licence for a year or longer.

How to Rent a Car in Iceland

To rent a car in Iceland and guarantee your reservation, first, you will need to make a booking online. Contrary to other countries where you can go to the car rental company’s desk and book directly from there, in Iceland you will need to make your reservation online. If you've decided to rent a car with Lava Car Rental, you can easily book it directly on their website. Booking directly ensures that essential insurance is included—something you won’t get on other platforms.

During the booking process, you will need to indicate your contact details, the pick-up/drop-off time and location and the driver’s information. You will also be able to add extra items and additional insurance. If you are not sure yet about it, don’t worry - you can always add them when you pick up your rental car if you wish to do so.

After you have finalised your booking, you will receive a voucher confirming your Iceland car rental reservation. In the receipt, you will find the booking reference that you will need to present on arrival to collect your rental vehicle.

If you have any questions before, during or after the booking process, you can reach out to Lava Car Rental.

Driving Rules in Iceland

But beyond the requirements for renting a car in Iceland, what are the driving rules in Iceland? Depending on your home country, the road rules in Iceland may be a little different than what you’re used to.

Here in Iceland, we drive on the right side of the road. Everyone in the car must be wearing a seatbelt. Headlights must be on at all times. All mobile phone usage is prohibited while driving. Off-road driving is also prohibited. 

While speed limits vary, the speed limits on urban roads are typically 50 km/h (31 mph); the speed limits on paved roads are typically 90 km/h (56 mph), and the speed limits on gravel roads are typically 80 km/h (50 mph). 

Want to learn about the various road signage you’ll find throughout Iceland? Here’s a quick guide to this and other rules of the road.

Weather & Road Conditions in Iceland 

The weather in Iceland is volatile. It can change very quickly and very drastically. Both before your trip and during, check your regional weather forecast and then adjust your plans accordingly. You don’t want to be caught unawares in some bad Iceland weather.

The road conditions likewise change with the Icelandic weather. Before you drive anywhere, check the road conditions. You can even subscribe to Safe Travel SMS updates during your trip, so you can easily be alerted anytime the weather or road conditions might interrupt your travels. 

Iceland Car Rental Emergency Services

Driving in Iceland offers freedom but comes with challenges like unpredictable weather and gravel roads. If you experience an accident or car damage, follow these steps: 

What to Do in Case of an Accident

1. Ensure Safety – Stop, turn on hazard lights, and check for injuries. Call 112 for emergencies.
2. Document the Scene – Take photos/videos of damage, road conditions, and surroundings.
3. Notify Police if Necessary – Call 112 if there's significant damage or a dispute.
4. Fill Out an Accident Report – Use the European Accident Statement (found in the car).

For detailed guidance, check out our full guide Dealing with a Car Accident or Damage in Iceland.

What to Do in Case of Car Damage

1. Take Photos & Fill Out an Accident Report
2. Call Lava Car Rental at +354 519 4141
3. Check Insurance Coverage – Costs depend on your policy.

• If the car is drivable, continue your trip and report the damage when returning the car.
• If repairs are needed, we’ll direct you to a partner mechanic.
• If the car is undrivable, we’ll provide a replacement vehicle.

Roadside Assistance with Lava Car Rental

Iceland has no official roadside assistance, but Lava Car Rental provides emergency support for undrivable situations (e.g., flat tires).

Call Lava Car Rental at +354 519 4141 and provide your GPS location. A team member will assist or arrange towing.

Towing is only covered if the issue is due to a malfunction of the vehicle. Fees start at 400 ISK/km (min. 45,000 ISK / $318 USD)

📞 Key Emergency Contacts

Situation	Who to Call?	Number
🚨 Car Accident / Emergency	Iceland Emergency Service	112
🔧 Breakdown / Flat Tire	Lava Car Rental Assistance	+354 519 4141
❄️ Road Closures & Weather Updates	Safe Travel Iceland	safetravel.is

For detailed guidance, check out our full guide Dealing with a Car Accident or Damage in Iceland.

Ready to Book Your Iceland Car Rental?

Booking a car rental for your trip to Iceland can be one of the best decisions of your entire visit. Enjoy the flexibility and freedom you need to the island’s best sights on your own schedule — and without breaking your travel budget. When you consider all the right factors, picking the right rental car for seeing Iceland is easy. 

Ready to start your Icelandic adventure? Check out our fleet now and find the perfect rental car for your trip.

Find your Car Rental in Iceland