Car rental in Iceland

A self-drive tour is truly the best way to experience Iceland. When renting a car, you have the freedom to go wherever you like, at a pace that suits you. Plus you can crank up the tunes without fear of your music taste being judged! Well, except by whoever’s in the car with you.


At Iceland Tours, we offer a wide range of car rental options as part of our self-drive tour packages. Your choice of rental car depends on the time of year, your planned route, and the number of people in your group. And let’s not forget the most important thing: your budget.

When you hire a car through Iceland Tours as part of a tour package, you always get basic liability insurance and collision damage waiver (CDW) as standard.

We also offer a choice between manual (stick-shift) and automatic hire cars. If you’re not used to driving a manual, we recommend you go with an automatic.

Rental car categories with Iceland Tours packages

Here’s an overview of the types of rental vehicle we offer:

Type Z

Toyota Aygo or similar

Configuration: Economy
Transmission: Manual
Passengers: 4
Doors: 3

Type A

Toyota Yaris or similar

Configuration: Compact
Transmission: Manual
Passengers: 4
Doors: 5

Type Y

Toyota Yaris or similar

Configuration: Compact
Transmission: Automatic
Passengers: 4
Doors: 5

Type A2

Suzuki Swift or similar

Configuration: Compact 4×4
Transmission: Manual
Passengers: 4
Doors: 5

Type B

Toyota Auris or similar

Configuration: Compact Wagon
Transmission: Manual
Passengers: 5
Doors: 5

Type B2

Toyota Auris or similar

Configuration: Compact Wagon
Transmission: Automatic
Passengers: 5
Doors: 5

Type E2

Dacia Duster or similar

Configuration: 4×4
Transmission: Manual
Passengers: 5
Doors: 5

Type P

Skoda Octavia Wagon or similar

Configuration: Executive 4×4
Transmission: Automatic
Passengers: 5
Doors: 5

Type R3

Hyundai Tucson Hybrid or similar

Configuration: 4×4
Transmission: Automatic
Passengers: 5
Doors: 5

Type I

Toyota Land Cruiser 4×4 or similar

Configuration: 4×4
Transmission: Automatic
Passengers: 5
Doors: 5

Type Q

Ford Transit 9-seater or similar

Configuration: Van
Transmission: Manual
Passengers: 9
Doors: 5


Please note that the images above are simply for illustration. The specs of your rental vehicle, including color, may vary.

What’s included with your car rental

  • Basic liability insurance coverage
  • Collision damage waiver (CDW)
  • Unlimited mileage
  • Authorization for two drivers (extra fee for additional drivers)
  • Free in-car unlimited Wi-Fi
  • Airport service charge if collecting your car at Keflavík International Airport
  • Icelandic VAT @ 24%

What’s not included with your car rental

  • Fuel
  • Parking charges
  • Parking fines and towing charges
  • Fines for traffic violations
  • Fees for tunnels, toll roads, and ferries
  • Charges due to negligent vehicle damage (e.g. incorrect fuel, alcohol/drug use, off-road driving, etc.)


1. Do I need a rental car in Iceland?

If you prefer not to drive in Iceland, there are options such as multi-day tours from Reykjavík by bus.

That said, we think a road trip is the best way to see the country. Driving gives you the freedom to see what you want, when you want. Why not do the Golden Circle one day, then cruise down the south coast the next?

And even if you’re planning on staying in Reykjavík, having a rental car opens up the possibility of day trips into the Icelandic countryside.

You could also squeeze in a visit to the Blue Lagoon on your way to drop your rental car off at Keflavík International Airport.

2. Am I eligible to rent a car in Iceland?

The minimum age to rent a car in Iceland is 20, and 23 for jeeps and vans. You must have held your driver’s license for at least one year at the time of rental.

If your driver’s license is not in Latin script (for example, Russian or Chinese), you’ll need to apply for an International Driving Permit in your home country before coming to Iceland. You’ll need to show the permit along with your driver’s license when collecting your car.

Good to know: You’ll need a credit card (not a debit card, unfortunately) in the main driver’s name. This is for a security deposit in the case of any damage to the car or other additional fees, such as unpaid parking fines.

American Express, MasterCard, and VISA credit cards are accepted.

3. How do you drive in Iceland?

Driving in Iceland is generally safe at most times of year. That said, things will probably be a bit different than what you’re used to in your home country.

What side of the road does Iceland drive on?

In Iceland, you drive on the right.

What are the speed limits in Iceland?

Speed limits are in kilometers per hour (km/h), and distances are also in kilometers (km).

These are the main speed limits on roads in Iceland:

  • Urban areas – 50 km/h (31 mph)
  • Gravel roads – 80 km/h (50 mph)
  • Paved roads – up to 90 km/h (56 mph)

Speed limits might well be lower in certain areas, so always follow the limit on local signs.

Sheep on the road: cute and fluffy hazards

As you drive around Iceland, you can’t help but notice how many sheep there are. They more or less roam free, and won’t always be kept inside fenced-off areas. So you should expect sheep to cross the road in front of you.

If this happens, stop and allow the sheep to pass. If they’re being stubborn and not clearing the road, sound your horn and they’ll soon move out your way.

Traffic signs in Iceland

Iceland also has some road signs you might not have seen before that warn of unique hazards. The most important ones to know are:

Einbreið brú (Single-lane bridge)

Give way (yield) to oncoming vehicles already on the bridge. Wait for other vehicles to pass before entering the bridge.

Malbik endar (Gravel road ahead)

Slow down and drive with care, there’ll be loose gravel and potholes ahead.

Blindhæð (Blind summit)

Oncoming traffic might be obscured by the crest of a hill. Slow down, stick to your side of the road, and drive with caution.

Off-road driving in Iceland

To protect the country’s sensitive natural environment, off-road driving in Iceland is illegal and can carry heavy fines. Help keep Iceland beautiful and stick to gravel and paved roads.

Other tips for driving in Iceland

In Iceland, you must wear a seatbelt by law at all times when in a vehicle.

Also, you must have your headlights on at least low beam (dipped) at all times of day, in all weather conditions.

For more tips, see this guide on how to drive in Iceland.

4. Is driving in Iceland in winter safe?

In the winter months, the weather in Iceland can get a little… challenging. If you’re planning to visit Iceland at this time of year, a larger vehicle with 4-wheel drive is highly recommended.

You should expect icy road surfaces and snow. It’s a good idea to check the road conditions on before you head out for the day.

That said, all of our rental cars are equipped with winter tires at this time of year for extra grip and better handling in wintry conditions.

If there is a major storm, certain roads in Iceland might be closed temporarily. Main trunk roads, such as the Ring Road (Route 1), are cleared regularly though, so you can continue your journey once the storm has passed.

In the unlikely event that extreme weather conditions prevent you from following your itinerary as planned, we’ll contact you and help reorganize your trip. Alternatively, you can contact us.

5. Will I need extra days of car rental?

Our car rental partners rent out vehicles in periods of 24 hours. If you arrive in Iceland at an earlier time of day than you leave at the end of your trip, then you’ll need to pay for an extra 24-hour period.

This is often the case if you’re traveling from North America, as many flights land early in the morning in Iceland.

For example, if you pick up your car at 7:00 a.m., but drop it off at 11:00 a.m. on your last day, then a new 24-hour hour period begins at 7:00 a.m. on your last day.

6. If I add extra days in Reykjavík to my tour, will I need to pay extra for car rental?

When you customize your tour online with extra days in Reykjavík, the total price will not include car rental for those extra days.

If you’re happy to walk and use buses/taxis whilst you’re in town, you might not need your rental car. In that case, you can take the Flybus from the BSÍ bus terminal to the airport when it’s time to head home.

On the other hand, if you’d prefer to have your car even whilst in Reykjavík, let us know and we’ll reconfirm your online booking. The cost for the extra days of car rental will be added to the balance for your trip.

7. How much does an extra day of car rental cost?

The price of extra days depends on the category of car you’ve chosen, the length of your trip, and your travel dates. 

If you want an exact figure before you book, simply get in touch with our customer service team and we’ll work out the total for you.

8. What car rental insurance should I get in Iceland?

When you hire your car through Iceland Tours, you always get basic liability insurance and a collision damage waiver (CDW) included as standard.

Good to know: The collision damage waiver has an excess (deductible) that would need to be paid in the event of an accident. This amount varies depending on the type of rental car and our supplier. You have the option to pay extra to reduce the excess when you collect your car.

You also have the option to take out extra insurance to protect against damage from driving on gravel roads and ash. These extra policies can be bought from the car rental company in Iceland at the desk where you collect your key.

We advise everyone traveling to Iceland to take out personal travel insurance. That way, you’re covered for cancelations, lost or stolen items, medical costs, and costs of getting home if you need medical treatment.