Iceland – Buying or Importing a Car

How do I buy a new car in Iceland as a foreigner?

Purchasing a brand-new car through an Icelandic dealership is a relatively uncomplicated process once the necessary paperwork is in order. The foundational requirement is the kennitala — Iceland’s national identification number. This number is indispensable: without it, you cannot register a vehicle, obtain insurance, or complete most transactions associated with car ownership in Iceland. This applies equally to foreign nationals who have established residence in the country.

To obtain a kennitala as a foreigner, you must apply through Registers Iceland (Þjóðskrá Íslands), presenting your passport alongside proof of your local address. The procedure is not complex, but it can take several days to complete, so it is wise to initiate this well in advance. Once the kennitala is in hand, you will also require a valid driving licence and confirmation of a local address. Opening a local bank account is strongly advisable, both for making payments and for setting up insurance arrangements.

New vehicles offer manufacturer warranties and the latest technology, but these advantages come at a price premium. While many dealerships provide financing options, these tend to be more accessible after you have spent some time in Iceland and built up a credit history. For those who have arrived recently, paying by cash or international bank transfer is likely the more practical approach. Always clarify financing eligibility directly with the dealership and your bank before assuming this route is available.

When you buy from a dealership, the dealer will typically handle all registration formalities, with fees and charges folded into the vehicle price. Your main remaining task is to contact an insurance provider. For a new car, the registration process normally concludes within around two days. Before signing anything, request a written, itemised breakdown of every cost included in the quoted price.

For up-to-date regulatory guidance on vehicle purchases and registration, consult the Ísland.is vehicle purchases page and the Icelandic Transport Authority (Samgöngustofa).

How do I buy a used car in Iceland?

Iceland has a well-established second-hand vehicle market, and purchasing privately or from a used-car dealer is a popular choice for newcomers. Second-hand vehicles are more budget-friendly and can make sound financial sense if you have only recently relocated. The kennitala requirement is identical — you must hold this number before you can register a vehicle in your name or arrange insurance cover.

Before committing to a purchase, conduct thorough checks. Confirm that the seller either owns the vehicle or holds the authority to sell it, gather information on previous ownership, request details of any known damage or repairs, have the car independently inspected at an approved inspection station, and establish whether any liens or mortgages are registered against it. The official vehicle register is available through the Ísland.is vehicle register search, where you can verify registration history and current ownership details.

Buyers and sellers typically draw up a purchase agreement and waiver — frequently contained within a single document. This acts as a record of the transaction and does not need to be submitted to the Icelandic Transport Authority or any other public body. That said, the change of ownership must still be reported through official channels.

Notifying the ownership transfer is the seller’s responsibility, and it should be done without delay. Until the Icelandic Transport Authority has received and processed this notification, the seller remains liable for vehicle taxes, insurance obligations, potential damage claims, and parking penalties. As a buyer, it is in your clear interest to press the seller to complete this step promptly. Electronic notifications are automatically processed and the vehicle register updated accordingly, while paper submissions may take up to seven days.

Advertised prices for used cars in Iceland are generally treated as an opening position. Negotiation is standard practice, and sellers typically anticipate some degree of haggling. A reduction of around 5–10% from the asking price is not unusual, so do not hesitate to make a lower offer.

Can I import a vehicle into Iceland, and how does the process work?

Any vehicle brought into Iceland must pass through customs clearance. This obligation covers both new and used vehicles; separate provisions govern temporary vehicle importation. As a member of the European Economic Area (EEA), Iceland aligns its vehicle standards closely with EU requirements, and all vehicles authorised within the EEA are permitted entry. Vehicles with a registered history of significant damage are not eligible for importation.

Vehicles originating from outside the EEA face an added requirement. If the vehicle comes from a non-European country, it must be accompanied by a technical certificate from an approved testing service confirming that the vehicle satisfies European emissions and safety standards. Iceland drives on the right-hand side of the road, so while right-hand-drive vehicles are not outright banned, they are a rarity and may attract additional scrutiny during the technical inspection process.

Regarding temporary importation and residency: individuals intending to remain in Iceland for no more than one year — for work or travel purposes — may bring in a foreign-registered vehicle without paying import duties, provided the applicable conditions are met. However, once a person has established permanent residence or a legal domicile in Iceland, temporary importation of a foreign-registered vehicle is no longer permitted. A person whose permanent residence remains abroad and who has not registered a domicile in Iceland may still bring in a foreign-registered vehicle. Should that person register a domicile in Iceland within 12 months of their arrival, the vehicle must either be cleared through customs or exported before the domicile registration is completed.

There is also a strict timing rule for those relocating with their vehicle: no more than 30 days may pass between the person’s arrival in Iceland and the importation of the vehicle they intend to bring with them. There is no broad personal effects or removal goods exemption that automatically waives import duties on a vehicle — the standard customs framework applies unless the temporary importation conditions outlined above are satisfied.

The full import process, from start to finish, unfolds as follows:

1. Verify eligibility and vehicle compliance: Confirm that the vehicle holds EEA authorisation, or obtain a technical compliance certificate if it originates from outside the EEA. Check that it has no registered damage history. Use the Ísland.is authorisation checker to confirm.
2. Apply for pre-registration: Before the customs declaration can be filed with Icelandic Customs, you must apply for pre-registration with the Icelandic Transport Authority (Samgöngustofa), as registration is compulsory in most cases. Submit all required documents, including the original Certificate of Conformity (CoC) or its equivalent. Applications supported by a CoC are typically processed within 3–4 business days.
3. Transport the vehicle to Iceland: Arrange shipping to an Icelandic port and retain all documentation, particularly the bill of lading, as this will be needed for the customs declaration.
4. File the customs declaration: Engaging a customs broker to manage the clearance process is strongly recommended. In many cases, the shipping company you used can also arrange customs clearance. Forward the invoice and all supporting paperwork to the broker, who will submit the declaration electronically to Iceland Revenue and Customs.
5. Settle import charges: Once Customs has processed the declaration, the import fees will be ready for payment. These can be paid directly to Iceland Revenue and Customs by online bank transfer. After payment is confirmed, the vehicle is formally cleared and can proceed to inspection.
6. Arrange insurance and obtain temporary plates: Insurance must be in place before temporary number plates can be issued, as these are required to drive the vehicle to an inspection station. Temporary plates are available from the Icelandic Transport Authority and most inspection facilities.
7. Complete the roadworthiness inspection: Bring the vehicle to an approved inspection station. Once it clears the inspection, full registration is confirmed and permanent plates are issued.

The two principal authorities overseeing vehicle imports are Skatturinn – Iceland Revenue and Customs (responsible for import duties and customs clearance) and the Icelandic Transport Authority (Samgöngustofa) (responsible for pre-registration, technical inspection, and licensing).

What are the costs involved in importing a car to Iceland?

Bringing a vehicle into Iceland involves several overlapping charges that, taken together, can easily surpass the vehicle’s original purchase price. Careful financial planning before deciding to import is therefore essential. Unlike some countries where a single flat-rate import duty applies, Iceland’s system stacks multiple charges on top of one another.

The charges levied on importation consist of excise duty, a processing fee covering the vehicle’s battery and tyres, and value-added tax at 24% (as of 2024). All import charges are calculated in proportion to the vehicle’s customs value, which incorporates the purchase price, shipping costs, and transportation insurance. This CIF (Cost, Insurance, Freight) valuation method is internationally standard, but it means that your shipping and insurance expenditure directly increases your overall tax liability — a factor worth considering carefully when selecting a shipping route.

Excise duty is not universally applicable. Certain categories — including driving instructors, taxi operators, and rescue services — may apply for reduced excise duty rates. Most private importers, however, will be liable for the full rate. Rates are differentiated by vehicle classification, weight, and CO2 emissions, so it is essential to confirm the rate applicable to your specific vehicle with Skatturinn before making any financial commitments.

A representative breakdown of costs associated with importing a private car to Iceland (as of 2024–2025) is as follows:

By comparison, importing a vehicle into Norway — another EEA/EFTA country with elevated vehicle taxes — follows a broadly similar structure, combining excise duty and VAT rather than a simple flat tariff. Both countries’ arrangements are considerably more costly than importing into most EU member states. Always use the Ísland.is customs and import calculator as a preliminary guide, and verify exact figures with Skatturinn before proceeding.

How do I register a vehicle in Iceland?

Every vehicle entering Iceland must be registered and pass a technical inspection before it can legally be used on public roads. Vehicles are entered into the Icelandic Transport Authority Vehicle Register. The body responsible for this process is the Icelandic Transport Authority (Samgöngustofa), which also provides services through the national digital portal at island.is.

For a second-hand vehicle purchased locally, the process is initiated by the seller. Once buyer and seller have agreed on a price, the relevant documentation is completed, ownership is transferred, and the change must be recorded with the Icelandic authorities. Registration can be handled online through the Icelandic Transport Authority’s website, and the buyer may complete this step at the point of sale.

For imported vehicles, the process is more involved. All vehicles transported to Iceland must undergo pre-registration with the Icelandic Transport Authority before arriving. This requirement applies to both new and used imports. Before shipping a vehicle, you should confirm that registration will be permitted, that the vehicle meets Icelandic road regulations, and what duties and fees will apply.

A registration number is allocated upon successful registration, and the vehicle then passes through customs clearance and a technical inspection. Full registration is granted once the vehicle has cleared inspection and insurance has been arranged. The registration certificate issued to the owner must be kept in the vehicle at all times.

All vehicles are subject to mandatory periodic technical inspections (PTI) to verify that they continue to meet safety and environmental standards, with compliance directly tied to the validity of the vehicle’s registration. New vehicles benefit from a four-year exemption before the annual inspection cycle begins. This arrangement is broadly comparable to annual MOT-style inspection regimes found in several European countries — such as Germany and Ireland — though the four-year grace period for new vehicles is more generous than many equivalent systems. Iceland’s PTI standards are harmonised with EU requirements under the EEA Agreement, incorporating Directive 2014/45/EU on periodic roadworthiness testing. Areas examined include braking systems, lighting and visibility equipment, exhaust emissions, and tyre condition and tread depth.

What insurance do I need to drive legally in Iceland?

Vehicle insurance is compulsory in Iceland, and cover must be in place before you can legally take a car on the road. Unlike some jurisdictions where insurance is arranged entirely independently of registration, the two processes in Iceland are intertwined — your choice of insurer is made as part of the vehicle registration procedure.

There are two principal categories of car insurance: liability insurance (ábyrgðartrygging) and collision insurance (kaskótrygging). Liability cover is a legal requirement, while collision insurance is optional but highly advisable. Liability insurance compensates third parties for injury or damage caused in an accident. Given the demanding nature of Icelandic roads — including extensive gravel tracks, ice-covered surfaces, and rapidly changing weather — comprehensive collision cover deserves serious consideration for most drivers.

Until the ownership transfer notification has been received and processed by the Icelandic Transport Authority, the seller retains responsibility for the vehicle’s taxes, insurance obligations, any damage caused, and parking charges. Once the transfer is formally registered, the basic liability insurance passes automatically to the new owner and is cancelled by the previous one. This automatic transfer applies solely to the mandatory liability cover; separate arrangements must be made for any collision insurance you wish to hold.

Insurance premiums are influenced by factors such as the vehicle’s age and model, the driver’s history, and the level of cover selected. Iceland operates a competitive private insurance market, so gathering multiple quotations is worthwhile. When approaching insurers, ask whether they will acknowledge a no-claims history built up in another country — practice on this varies between providers. As of 2025, there is no mandatory state insurer; all cover is arranged through private companies. The sector is regulated by the Financial Supervisory Authority of Iceland (Fjármálaeftirlitið — FME).

What driving licence do I need in Iceland as an expat?

Foreign nationals holding a valid driving licence from their home country may drive in Iceland for up to one year. After that point, an Icelandic driving licence must be obtained. The specific rules vary depending on the country that issued your licence.

Licences issued by EEA member states are recognised for up to one year, after which conversion to an Icelandic licence is required. Holders of non-EEA licences may face different conditions and may need to convert earlier or obtain an international driving permit. For EEA/EU licence holders, the conversion process is typically administrative in nature — your foreign licence is exchanged for an Icelandic one without the need to sit a full driving test. Those holding licences from non-EEA countries should contact the Icelandic Transport Authority promptly after arriving to clarify the requirements applicable to their specific country of issue, as recognition arrangements and bilateral agreements differ considerably.

An International Driving Permit (IDP) can be a practical supplement to a non-EEA licence, particularly during the initial period of your stay, as it provides an internationally recognised translation of your licence information. However, an IDP is not a standalone document — it must be carried in conjunction with your original national licence at all times.

For licence exchange and conversion matters, contact the Icelandic Transport Authority (Samgöngustofa / Icetra). Licence applications and related services are also accessible via the Ísland.is digital portal. Always consult Icetra directly for the most current requirements relating to your particular licence-issuing country, as exchange arrangements are subject to revision.

How do I sell a car in Iceland?

The process of selling a vehicle in Iceland follows a structured procedure managed through the Icelandic Transport Authority. Sellers are legally obliged to disclose all material information about the vehicle to the buyer, who in turn is expected to familiarise themselves thoroughly with its condition and history. Full transparency regarding accident history, past repairs, and any outstanding charges is both a legal requirement and a matter of good faith.

Before listing your vehicle, assemble the key documents you will need:

• The vehicle’s registration certificate (which must be kept in the vehicle at all times when it is in use)
• Maintenance and repair records
• Confirmation that road tax and related charges are fully up to date
• Information on any outstanding mortgages or financial encumbrances registered against the vehicle

Buyers and sellers typically draw up a combined purchase agreement and waiver. This document serves as an official record of the transaction but does not need to be submitted to the Icelandic Transport Authority or any other public institution. Retain your copy as a permanent record regardless.

The seller bears the responsibility of notifying the ownership transfer as promptly as possible, since they remain liable for vehicle taxes, insurance obligations, any damage caused, and parking penalties until the Icelandic Transport Authority has formally received and registered the notification. Delays in reporting the sale can leave you financially exposed for costs incurred by the new owner. The fee for recording the ownership change is 3,041 ISK (as of 2024) — confirm the current amount at island.is.

Electronic notifications are processed automatically and the vehicle register is updated without delay. Paper submissions, however, can take up to seven days to be processed. Reporting the sale electronically via Ísland.is is therefore strongly recommended.

In general, private vehicle sales by individuals in Iceland are not subject to capital gains tax. However, if you are engaged in repeated or commercial vehicle sales activity, different tax obligations may arise. Contact Skatturinn (Iceland Revenue and Customs) or a qualified local tax adviser if you have any uncertainty about your personal tax position.

Are there any ongoing costs or obligations for vehicle ownership in Iceland?

Owning a vehicle in Iceland carries a range of recurring financial and compliance responsibilities. Accounting for these alongside the initial purchase cost will help prevent unwelcome surprises down the line.

Vehicle (motor) tax: Registration plates are directly tied to the annual motor vehicle tax, which is administered by Iceland Revenue and Customs and levied every six months based on the vehicle’s kerb weight and registered CO2 emissions (as of 2021). For vehicles weighing 3,500 kg or less, the base rate starts at ISK 6,380 per six-month period for vehicles emitting up to 133 g/km CO2, with progressively higher charges applying to vehicles with greater emissions — a deliberate incentive to choose lower-polluting options. Confirm the current rates with Skatturinn, as these figures are subject to revision.

Road usage tax (per-kilometre charge): Since July 2025, a distance-based road tax has been introduced, set at ISK 6 per kilometre for electric and hydrogen vehicles and ISK 2 per kilometre for all other vehicle categories. This marks a significant shift away from the traditional flat excise model and reflects Iceland’s intent to ensure that zero-emission vehicles contribute their share to road infrastructure funding. As this is a recently introduced system, rates may be subject to review — verify the current figures with Skatturinn.

Periodic Technical Inspection (PTI): Mandatory roadworthiness inspections must be completed annually to confirm that vehicles meet safety and environmental standards; compliance is directly linked to the validity of vehicle registration. New vehicles are exempt from this requirement during their first four years on the road. The inspection is broadly comparable to annual MOT-style checks in countries such as Germany and Ireland, though the four-year exemption period for new vehicles is more lenient than many equivalent schemes. Inspections are conducted at approved stations, and a passing result is required for registration to remain valid.

Upon completion, an inspection can yield one of several outcomes: a full pass, which confirms registration and displays an inspection sticker showing the next due date; a conditional pass for minor deficiencies requiring rectification within 30 days; a failure requiring re-testing following remediation of significant faults; or a prohibition order preventing use of the vehicle until repairs have been verified.

Insurance: As discussed above, minimum third-party liability cover is a legal requirement and represents a continuing annual expense. Premiums differ based on the vehicle type, age, and the driver’s history. It is worth reviewing your policy and comparing providers annually, as rates can vary meaningfully between insurers.

Fuel and maintenance: Fuel costs in Iceland tend to be on the higher side, which adds up over time. Setting aside a budget for routine maintenance and unexpected repairs is equally important — Iceland’s roads, particularly the highland tracks and gravel routes outside Reykjavík, can place considerable strain on vehicles, which is why robust, four-wheel-drive models are so prevalent among residents.

Frequently asked questions

Do I need to be a resident to buy a car in Iceland?

In practical terms, yes — you need a kennitala (Icelandic ID number) to register a vehicle and arrange insurance. The kennitala is issued to individuals who register a domicile in Iceland. Short-term visitors who do not hold a kennitala will find it extremely difficult to purchase and register a vehicle locally. If you are relocating to Iceland, applying for your kennitala from Registers Iceland (Þjóðskrá Íslands) should be among the very first administrative tasks you complete.

Can I drive my foreign-registered car in Iceland after I move there?

Only for a limited period. Once you formally register a legal domicile in Iceland, you are no longer entitled to keep or use a foreign-registered vehicle on a temporary basis. The vehicle must either be cleared through customs and registered in Iceland or exported before you register your address. Non-compliance can result in the full customs duties becoming immediately payable. Review the current rules with Skatturinn.

Are right-hand-drive vehicles permitted in Iceland?

Iceland drives on the right, and the overwhelming majority of vehicles on its roads are left-hand-drive. Right-hand-drive vehicles are not explicitly outlawed, but they may need modifications to comply with Icelandic road safety and lighting standards and will receive close attention during the mandatory PTI inspection. In practice, the costs and complications involved in importing a right-hand-drive vehicle rarely make it a worthwhile undertaking.

How much does it cost to import a car to Iceland?

The overall cost is determined by the vehicle’s customs value — comprising purchase price, shipping costs, and transportation insurance — along with its CO2 emissions and weight. As of 2024, you should expect to pay excise duty plus 24% VAT on the combined customs value, in addition to shipping fees, customs broker charges, pre-registration fees, and inspection costs. Use the Ísland.is customs calculator for a preliminary estimate, and confirm precise figures with Skatturinn before committing to an import.

How long does the vehicle import process take?

Pre-registration with the Icelandic Transport Authority takes 3–4 business days for vehicles supported by a valid Certificate of Conformity (CoC). Customs clearance, payment of import charges, and the roadworthiness inspection each add further time. From the moment the vehicle arrives at an Icelandic port to it being fully licensed and ready for use, you should generally allow between two and four weeks, though this timeline can vary. Engaging a customs broker typically streamlines the process considerably.

Is my foreign no-claims discount recognised by Icelandic insurers?

There is no single answer — it depends entirely on the insurer in question. Some Icelandic insurers will take into account a verifiable no-claims history from another country; others will apply a standard starting rate regardless. Before relocating, request a no-claims certificate from your existing insurer and present it when collecting quotations in Iceland. Contact insurers individually to find out their specific policy on recognising overseas no-claims history.

How do I check if a used car has outstanding finance or fines before I buy it?

Ask the seller to provide official documentation and search the vehicle register on Ísland.is to verify ownership history and any registered financial charges or encumbrances. You should also request full disclosure of any mortgages registered against the vehicle. Having the car independently inspected at an approved inspection station prior to purchase is strongly advisable.

What happens if I sell my car but forget to notify the Transport Authority?

Until the Icelandic Transport Authority has received and registered the change of ownership notification, the seller retains full legal responsibility for vehicle taxes, insurance obligations, any damage the vehicle may cause, and parking fines. This means that fines or damage incurred by the new owner before the notification is processed could fall on you. Always report the sale without delay — electronic reporting through Ísland.is on the day the transaction is completed is the safest course of action.