Iceland – Car Rental

What are the rules and requirements for renting a car in Iceland?

Iceland enforces a clear set of regulations around car rental. Familiarising yourself with these requirements before arriving at the pickup desk will spare you unnecessary complications and unexpected expense.

Minimum age

The standard minimum age for hiring a car in Iceland is 20, though even at this threshold you may encounter additional fees or restrictions on the type of insurance available to you. Renting a 4×4, campervan, or SUV typically requires drivers to be at least 23 years old, and certain models may carry a minimum age of 25 depending on the operator. Rentals to drivers as young as 18 exist in limited cases, but they come with elevated charges, a narrower choice of vehicles, and more stringent insurance conditions. Always check the age thresholds that apply to your preferred vehicle category directly with the rental company before confirming your booking.

Licence requirements

A valid driving licence from your country of origin must be presented at the time of collection. If your licence is printed in an alphabet other than Latin, you will additionally need to carry an International Driving Permit. The licence must have been active for at least one year before your visit, calculated from the original issue date. It must also display a photograph of the licence holder, clearly show both the issue date and the expiry date, and provide evidence that it has been held for the required period.

Credit card and payment

A credit card held in the primary renter’s name is required by most Icelandic rental companies to secure the vehicle deposit and cover any potential damage liability. Certain operators may accept debit cards alongside a cash security deposit, but this varies — check the policy when booking. Bear in mind that many companies will not accept digital wallet services such as Apple Pay or Google Pay, virtual cards, or e-wallets, so always verify which payment methods are accepted before you arrive.

Additional drivers

Every person who intends to get behind the wheel must be listed as an additional driver on the rental agreement. The individual whose name appears on the booking must act as the principal driver and be physically present at vehicle collection. Extra drivers can normally be added for a modest daily fee.

Key country-specific rules

Headlights must remain switched on at all times, regardless of the time of day or prevailing weather — this requirement is actively enforced and helps maintain visibility in Iceland’s frequently changeable conditions. Seatbelts are compulsory for all occupants in both front and rear seats. Children under 12 years of age or below 150 cm in height must travel in an appropriate child restraint system. Using a handheld mobile phone while driving is prohibited.

For the most authoritative and up-to-date information, refer to the Icelandic Transport Authority (Samgöngustofa) or the official government services portal at Ísland.is.

Which major car rental companies operate in Iceland, and where can I find them?

Iceland is well served by a mix of international brands and established domestic operators. Most maintain facilities close to Keflavík International Airport (KEF), which handles the bulk of international arrivals, with many also offering services in and around Reykjavík.

International companies

Hertz Iceland has been serving travellers since 1971 and has grown into one of the country’s largest and most trusted rental providers, with locations spread across the island. As a long-standing local franchise of the global Hertz brand, it combines extensive knowledge of Icelandic roads and regulations with the service standards expected of an international operator. Visit hertz.is for reservations and current requirements. Avis, Budget, and Sixt also maintain operations in Iceland and can be booked through their respective global websites.

Local and regional companies

Iceland has a thriving selection of home-grown rental operators that are consistently well regarded by travellers. Lava Car Rental was recognised as Iceland’s Leading Car Rental Company at the World Travel Awards in both 2023 and 2024 and runs its operations from Keflavík Airport, where guests are collected by a dedicated shuttle directly outside the departure hall. Visit lavacarrental.is.

Blue Car Rental is among the most frequently chosen providers for travellers arriving at Keflavík International Airport. Its office sits approximately 300 metres from the airport entrance, and a complimentary shuttle meets arriving passengers in the arrivals hall. All rentals are conducted on a full-to-full fuel basis with unlimited mileage included. Visit bluecarrental.is.

Go Car Rental is a locally owned operator based a short five-minute drive from the Keflavík terminal. Its shuttle departs from outside the arrivals hall at twenty-minute intervals, and passengers can track the shuttle’s real-time location to plan their wait. Visit gocarrental.is.

Further well-regarded local options include Cars Iceland, Iceland Car Rental, and Zero Car. Aggregator platforms such as Northbound and Guide to Iceland let you compare rates and insurance packages across multiple providers simultaneously, which can be particularly valuable when planning an extended stay.

How does car rental pricing work in Iceland, and what should I watch out for?

At first glance, car rental prices in Iceland can look simple, but the total cost you ultimately pay will depend on a range of local charges and optional extras that may differ from what you are accustomed to in other destinations. Studying the terms thoroughly before confirming your booking is strongly advisable.

Base rates and fuel policy

The full-to-full fuel arrangement is standard practice across the majority of Icelandic rental operators: you pick up the vehicle with a full tank and are expected to return it in the same condition. This suits the long drives that Iceland encourages and is the norm rather than the exception among local providers. Unlike some markets where prepaying for a tank upfront is a common option, returning with less fuel than you collected will almost invariably trigger a refuelling charge at a rate above the pump price. Filling up before handing the car back is always the more economical choice.

Young driver surcharges

If you are under 25, the cost of hiring a car in Iceland will often reflect that fact. Most operators apply a young driver supplement ranging from roughly $10 to $30 per day, though some companies forgo this charge entirely — making it worth shopping around if you fall into this age bracket (as of 2025; verify current surcharge levels directly with your chosen company before booking).

The new Kilometre Fee (2026)

From 1 January 2026, the Icelandic government introduced a “Kilometre Fee” designed to fund road maintenance and infrastructure. Rather than taxing fuel purchases at the point of sale, this levy is calculated on the actual distance a vehicle covers. The government base rate for standard passenger cars is 6.95 ISK per kilometre (approximately €0.05 or $0.05 per km, as of 2026). The fee applies to all vehicles using Icelandic roads irrespective of engine type and is typically collected at the rental desk — either when you pick up the vehicle or when you return it — depending on the terms of your individual agreement. Check the current rate with your rental company and on the official Icelandic government website ahead of your visit.

Insurance add-ons

The base rental price generally covers only the legally required insurance. A variety of optional products exist to cover damage not included in the compulsory package. The most commonly encountered extras include Gravel Protection, Sand and Ash Protection (SAAP), Tyre Protection, and Windscreen Cover. Unlike many other destinations where a basic damage waiver may be sufficient, Iceland’s terrain — with its gravel tracks, volcanic sand flats, and fierce winds — presents genuinely elevated risk of vehicle damage that makes additional cover well worth considering.

Credit card holds (deposits)

Many operators place a sizeable deposit hold on your credit card, which can freeze a significant portion of your available credit for the entire rental period. This differs from markets where debit cards or cash deposits are more routinely accepted. Make certain that your card has enough available credit to accommodate the hold before presenting it at the desk.

One-way rentals

One-way rentals — both for standard cars and vans — are possible within Iceland for an additional charge. If your itinerary involves starting in one location and finishing in another, such as beginning in Reykjavík and ending in Akureyri, confirm the one-way surcharge with your operator at the time of booking, as these fees can vary considerably and may be substantial.

For guidance on fair rental practices and advice on consumer disputes, the Promote Iceland / Visit Iceland tourism authority and the Icelandic Consumer Agency (Neytendastofa) both publish useful information on consumer rights in Iceland.

Do I need an International Driving Permit (IDP) to rent a car in Iceland?

Whether an IDP is necessary depends primarily on the script in which your driving licence is written, rather than the country that issued it.

An International Driving Permit is not required in Iceland provided you hold a valid licence from your home country that includes a licence number, a photograph, and a valid date — and that the licence is printed in Latin characters.

EU and EEA licences are fully valid throughout Iceland. Visitors from countries including the United Kingdom, the United States, Canada, Australia, and New Zealand may use their national licence without obtaining an IDP. If your licence originates from outside these regions, carrying an IDP is advisable to ensure it will be accepted without question at the rental counter.

Holders of a UK photocard driving licence do not require an IDP to drive in Iceland. This position has remained unchanged following Brexit, as Iceland is a member of the European Economic Area (EEA).

Renters whose licences are issued outside Europe or North America will generally be expected to produce an International Driving Permit before they can take the keys to a hire car in Iceland. Iceland recognises the 1949 version of the document. Even where a licence is issued in a country that uses Latin script, some licences are printed in a different alphabet — in such cases an official translation will be required alongside the original document, most commonly in the form of an IDP. Licences that may fall into this category include those written in Arabic, Greek, Cyrillic, Hebrew, Japanese, Korean, or Chinese.

If an IDP is required, it must be obtained before leaving your home country, as it is not possible for foreign motorists to acquire one within Iceland. The applicable convention for Iceland is the 1949 Geneva Convention, and IDPs issued under its terms remain valid for one year, provided your underlying licence does not expire before that point.

Always verify the current IDP requirements both with your rental operator and with the relevant licensing authority in your home country before you travel, as these requirements can change.

What types of roads and driving conditions should I be prepared for in Iceland?

Iceland’s road network spans everything from smooth paved highways to remote mountain tracks that demand specialist vehicles. Understanding the different road categories before setting off is essential for your safety and for maintaining the validity of your insurance cover.

The Ring Road and paved routes

Iceland’s most celebrated driving route is the Ring Road (Route 1), which traces a complete circuit of the country. While it is technically possible to complete the loop in around 18 hours of driving, most travellers allow one to two weeks to take in the many attractions along the way. A standard two-wheel drive vehicle is perfectly adequate for the Ring Road and other paved routes.

F-roads and the Highlands

Driving a standard 2WD car on F-roads is prohibited by law in Iceland. These mountain roads are characterised by rough, uneven surfaces, loose gravel, and in some cases river crossings that must be forded — only 4×4 vehicles with sufficient ground clearance are permitted to use them. Venturing onto an F-road in an unsuitable vehicle risks fines, damage that no insurance policy will cover, and the very real possibility of becoming stranded. Taking a rental vehicle that is not authorised for Highland travel onto these routes will invalidate any insurance you have taken out.

If your visit falls within the summer months of June to August and your plans do not include the Highlands or remote backcountry areas, a 4WD vehicle is not necessary. In populated areas the roads are predominantly paved and a 2WD car is entirely sufficient. F-roads generally open in late spring and are closed again in autumn — consult road.is for current road status before departing.

Speed limits

Speed limits are set at 50 km/h within built-up areas, 80 km/h on gravel roads, and 90 km/h on paved roads. Speeding penalties are steep — a relatively minor infraction can cost around $100, while more serious violations may attract fines approaching $400 (as of 2025; verify current penalty levels with the Icelandic Transport Authority).

Traffic rules to be aware of

• Traffic travels on the right-hand side of the road; overtaking is done on the left.
• At roundabouts, vehicles already circulating have priority over those entering.
• Animals and livestock always take precedence on the road; reduce speed whenever you see them nearby. On single-lane bridges, the vehicle that arrives first typically has right of way.
• Driving off marked roads or across open terrain is illegal in Iceland.
• Drink-driving laws are rigorously enforced — the permitted blood alcohol limit is low, and the safest approach is simply not to drive after consuming alcohol.

Seasonal conditions and weather

Icelandic weather is notoriously unpredictable — clear skies can give way to heavy snow within minutes. Keep an eye on vedur.is for weather forecasts and road.is for live road condition updates. The Safetravel app is another practical tool for monitoring hazards during your journey. In the colder months, all hire cars should be fitted with winter tyres as standard, but it is worth confirming this with your rental company before you collect the vehicle.

Wind

Wind in Iceland is a serious force — strong gusts can buffet your car significantly, particularly if you are driving a high-sided van or SUV. In exposed locations, wind can be powerful enough to wrench a car door from your grip with considerable force, causing structural damage. This type of incident is generally excluded from insurance cover, so take care when opening doors whenever conditions are blustery.

What insurance do I need when renting a car in Iceland?

Insurance arrangements are among the most critical considerations when hiring a car in Iceland, and they are considerably more involved than in many other countries. The combination of gravel tracks, volcanic sand, powerful winds, and rapidly shifting weather generates a range of hazards that standard policies may leave unaddressed.

What is mandatory by law

Every rental vehicle in Iceland comes with two forms of protection that Icelandic law requires to be included in the base rental rate at no additional charge: Third-Party Liability Insurance (TPL), which covers injury to other people or damage to their property caused by the hire vehicle, and a Collision Damage Waiver (CDW), which limits your personal financial exposure if the car sustains damage in a collision.

Common optional extras

Beyond the compulsory cover, a range of optional products exist to protect against damage not included in the mandatory package, such as harm to the underside of the vehicle, the windscreen, or damage resulting from weather-related hazards like volcanic ash or sand. The most frequently offered optional products include:

• Super CDW (SCDW): Reduces or eliminates the excess payable under a standard collision claim.
• Gravel Protection (GP): If you could only choose a single optional cover in Iceland, gravel protection would be the most prudent choice — loose gravel is a constant feature of Icelandic roads.
• Sand and Ash Protection (SAAP): Iceland’s southern regions contain extensive sand fields that become particularly hazardous when winds pick up after snow thaws, typically in February, March, and April.
• Tyre and Windscreen Protection: Covers chips, cracks, and punctures resulting from gravel road travel.
• Theft Protection (TP): Although Iceland is a remarkably safe country with very low crime rates, theft protection is worth considering if you are carrying valuables in the vehicle.

Excess and deposits

Many companies include a basic CDW but retain a deductible that can still represent a significant sum. Some providers offer fully inclusive zero-excess packages, while others invite you to upgrade at the desk on the day of collection. If you are considering relying on your credit card’s travel insurance to cover any rental excess, contact your card issuer directly before your trip. Credit card travel insurance policies differ substantially between providers and frequently exclude Iceland-specific risks such as gravel damage, sand and ash damage, or tyre damage — always obtain written confirmation of exactly what is and is not covered before declining the rental company’s own insurance products.

Damage not covered by any insurance

Certain categories of damage are excluded from all insurance policies in Iceland. These include any damage resulting from negligence — attempting to drive through a river being a particularly common example — and damage sustained while driving off-road, which is unlawful. River crossings in particular carry a high level of risk; unless you hold specialist cover, any damage incurred while fording a river will almost certainly fall entirely on you as the renter.

Are there any specific rules for expats or long-term residents renting cars in Iceland?

For those visiting Iceland on a short-term basis, a valid foreign licence satisfying the criteria described above is sufficient to rent and drive a car. The picture changes, however, for people who are relocating to Iceland or establishing longer-term residency in the country.

Licence exchange requirements for residents

Iceland’s membership of the European Economic Area (EEA) means that licences issued by other EEA member states are recognised and can generally be exchanged. Holders of licences issued outside the EEA will typically need to apply for an Icelandic driving licence once they have established residency in the country. Even if you still hold a valid licence from your country of origin, living and working in Iceland on a permanent basis means you are expected to comply with local licensing law. Many jurisdictions require residents to obtain a locally issued licence once employment or residency is confirmed.

For accurate and current guidance on licence exchange procedures for residents, contact the Icelandic Transport Authority (Samgöngustofa) directly, as the requirements and applicable timelines vary depending on your country of origin and the nature of your residency status (as of 2025 — verify current rules before taking any action).

Renting a car as a resident

Long-term residents hiring a vehicle in Iceland are generally subject to the same conditions as short-term visitors, provided they present a licence accepted by the rental company. If you have already exchanged your foreign licence for an Icelandic one, you may present that at the collection desk in the usual way. If you are on a temporary visa and still hold your original foreign licence, the same rules regarding Latin script and the one-year holding period described above apply to you.

Additional drivers registered abroad

Expat households frequently involve drivers holding licences from different countries. Any individual who intends to drive the hire vehicle must be formally registered as an additional driver on the rental agreement, and each listed driver must independently satisfy the age and licence requirements set by the operator. Verify the requirements for each named driver separately when making your booking.

How do I rent a car in Iceland step by step?

1. Check your licence: Confirm your licence is in Latin script, has a photo, shows an issue and expiry date, and that you have held it for at least one year. If your licence uses a non-Latin alphabet, apply for an IDP from your national motoring authority before travelling.
2. Choose your vehicle type: Decide whether you need a standard 2WD car (suitable for the Ring Road and paved routes), a 4×4 SUV (recommended for winter travel or gravel roads), or a Highland-capable 4×4 (required for F-roads). Confirm the vehicle is approved for your planned routes.
3. Compare rental companies: Use a comparison platform such as Northbound or Guide to Iceland, or go directly to company websites. Compare what insurance is included as standard versus what requires an upgrade.
4. Select your insurance: At minimum, ensure you have TPL and CDW. Consider adding Gravel Protection and, if travelling in spring, Sand and Ash Protection. If using credit card cover, confirm in writing that it applies to Iceland and covers the specific risks involved.
5. Confirm payment method: Ensure you have a physical credit card in the main driver’s name with sufficient available credit for the security hold. Check whether the company accepts debit cards if that is what you have.
6. Complete online check-in where available: Many Icelandic rental companies offer online check-in ahead of arrival, which can speed up the pickup process — especially useful for late-night arrivals at Keflavík.
7. Collect your car: Present your driving licence, passport or ID, and credit card at the rental desk. Inspect the vehicle thoroughly before accepting it — photograph any pre-existing damage and ensure it is noted on the rental agreement.
8. Check road conditions before each drive: Use road.is for live road and weather conditions, and vedur.is for weather forecasts throughout your trip.

Frequently asked questions

Can I rent a car in Iceland if I am 20 years old?

To rent a car in Iceland, the minimum age depends on the type of vehicle. For standard cars and smaller vehicles, drivers need to be at least 20 years old. However, if you are planning to rent a larger vehicle or a luxury model, you will need to be at least 23 years of age. Some companies may impose higher minimums for certain models, so always confirm with your chosen operator before booking (as of 2025).

What happens if I have an accident in my rental car in Iceland?

Contact your rental company immediately — most operate a 24/7 emergency line. Document the accident scene thoroughly with photographs. If another vehicle or person is involved, exchange contact details. Report the incident to the Icelandic police if required. Be aware that certain damages — such as those caused by driving off-road, fording rivers, or opening doors in high wind — may not be covered by any insurance policy. Your rental agreement will specify the claims process and any excess that applies.

Can I take my rental car to another country?

All rental cars must remain within Iceland — taking a hire vehicle outside the country is not permitted. As Iceland is an island, this prohibition relates primarily to restrictions on transporting a rental vehicle by ferry or using it in destinations such as the Faroe Islands. If you have any uncertainty about the territorial boundaries of your rental agreement, clarify this with your operator before travelling.

What is the fuel policy for rental cars in Iceland?

The great majority of Icelandic rental operators work on a full-to-full basis: you receive the car with a full tank and are expected to return it in the same condition. Bringing the vehicle back with less fuel than it had at collection will typically result in a refuelling charge applied at a premium rate. Bear in mind that petrol stations are not uniformly open around the clock — many are automated and card-operated, but hours vary. Plan ahead, especially on routes through sparsely populated areas, and avoid allowing the fuel level to run low.

Do I need a 4×4 vehicle in Iceland?

You do not need an SUV to drive in Reykjavík or along the Ring Road, as these roads are paved and well-maintained. However, an SUV or 4×4 vehicle is recommended if you plan to explore gravel roads or travel during winter when conditions can be snowy or icy. For driving in the Icelandic Highlands and on F-roads, a 4×4 vehicle or SUV is required by law, as these areas feature rough terrain and unpaved roads.

Is it legal to drive off-road in Iceland?

Off-road driving is strictly prohibited in Iceland. The country’s fragile natural environment supports very little vegetation, and damage inflicted on it can take many decades to heal. Local residents are known to report offenders without hesitation, and the legal consequences are serious. This is an enforceable legal prohibition rather than a courtesy guideline, and any damage to the hire vehicle sustained during illegal off-road driving is excluded from all insurance cover.

Will my credit card’s travel insurance cover car rental excess in Iceland?

Some credit cards do include rental car excess insurance as a built-in travel benefit, but the scope of cover varies enormously between providers and individual policies. If you intend to rely on credit card coverage rather than purchasing insurance through the rental company, contact your card issuer for the full details before travelling. Pay particular attention to whether Iceland-specific hazards such as gravel damage, sand and ash damage, and tyre damage are included — many standard credit card policies explicitly exclude these categories. Always secure written confirmation from your card provider before declining the rental company’s own products.

How long can I drive in Iceland on a foreign licence before needing to exchange it?

Visitors may drive on a valid foreign licence for the duration of a short-term stay without any obligation to exchange it. For those who become permanent residents, Iceland’s licence exchange rules come into effect — holders of licences from EEA member states can generally continue using their existing licence or have it exchanged, while those from non-EEA countries will typically be required to obtain an Icelandic licence once residency is established. Many jurisdictions require that a local licence be obtained once employment or formal residency is confirmed. For the most current and applicable requirements, contact the Icelandic Transport Authority (Samgöngustofa) directly (as of 2025 — verify current rules before acting).

Are there toll roads in Iceland?

Toll roads are rare in Iceland. The principal toll facility is the Hvalfjarðargöng tunnel (Hvalfjörður Tunnel), which offers a time-saving shortcut to the north of Reykjavík. Some rental companies include tunnel costs within the rental terms or supply an electronic payment device — confirm the arrangement with your operator. The Kilometre Fee introduced in January 2026 is a separate government road usage charge levied on all vehicles regardless of engine type and is distinct from any tunnel toll; it is typically settled at the rental desk. Check the current rate and the method of collection with your rental company before your trip.