Renting a Car in Iceland: 10 Mistakes That Cost Money

Last updated: September 2026

Nearly everyone who visits Iceland rents a car, and nearly every angry review I read about Iceland is about a rental car. The same ten mistakes keep coming up. Some are the rental company’s fault, most are not, and almost all of them cost money that could have been spent on something better.

I live here and drive these roads every week. Here is what goes wrong, why, and how to avoid it. Where one of my partner discount codes helps, I say so. I have four car rental partners, and at the end I explain what each is good for.

Safety first!

I want you to be safe on the road. Study the Safetravel website. Follow the advice there. Check the weather on Vedur.is, and road conditions on road.is. Here is my guide to travel safely in Iceland.

One note before we start: rental terms, insurance packages, and fees change, and every company does things a little differently. What I describe here is how things generally work in Iceland. Always confirm the details with your rental company before you book. They are the only ones who can give you the definitive answer.

1. Not understanding the insurance, then paying the excess

This is the big one. Every rental in Iceland comes with basic collision cover, called CDW. It does not make you safe. It leaves you liable for an excess that can run to hundreds of thousands of króna, and it typically does not cover the damage that actually happens in Iceland: gravel chips, sand and ash blasting, tires, and the windscreen. A new windscreen here is expensive. People take whatever the desk recommends, drive off with basic cover, and pay for a chip.

Your credit card insurance is usually no help either. Most cards cover collisions and nothing else, and some cover nothing in Iceland at all. Ask your card company before you rely on it.

How to avoid it:

• Match the cover to the roughest road on your trip. Paved roads in summer: basic cover plus gravel protection. South Coast, Westfjords, gravel side roads, or any winter trip: take the zero-excess package with sand and ash included.
• Never leave Reykjavík without gravel protection. Stones fly on paved roads too.
• Read the exclusions. As a rule, no package covers the undercarriage, river crossings, tires unless you add tire cover, or a door caught by the wind. See mistake two.

Where my discount codes help: All four of my partners offer packages that take the excess down to zero or close to it, and some include gravel protection in every price. The right package depends on your route and the season, so read each company’s insurance page before you book. Go Car Rental, Lava Car Rental, Europcar, and Konvin all give my readers a discount. If the terms are complicated, do as I do and ask AI to explain them to you in plain language.

2. Letting the wind take the door

You open the door, a gust catches it, and it swings past the hinge. It happens often, and no insurance covers it because companies treat it as negligence. Renters have been quoted several hundred thousand króna for a door.

How to avoid it:

• Both hands on the door, every time, until it is shut. Teach your passengers before you leave the car park.
• Park with the nose into the wind, so the doors open against it.
• Check the wind on vedur.is before you get out at the viewpoints on the South Coast. If the forecast says 20 meters per second, that is a gale. Stay in the car.

No code for this one. It costs nothing to hold the door.

3. Getting charged for damage weeks after you got home

A card charged two weeks after return for a dent the renter never saw, photos with no date on them, and a company that says anything you did not point out at pickup is yours. These threads go back fifteen years, and the pattern has not changed.

How to avoid it:

• Before you drive off, photograph every panel, every wheel, and the whole windscreen. Video is even better. Do it with the timestamp on.
• Add every scratch and chip you find to the contract before you sign it. If the desk says, “Don’t worry about that one,” ask them to write it down.
• Return the car in daylight if you can, and be there for the inspection. Get the return report in writing before you walk to the terminal.
• If a charge arrives, ask for the repair invoice and dated photos. You are entitled to both.

4. Booking the low price, paying the desk price

The headline rate on the comparison site is not what you pay. At the desk you meet the extras: a fee for drivers under 25, a fee for an extra driver, a fee for pickup outside office hours, and a deposit hold on your card that can be substantial. One thing catches people every autumn: Iceland does not change its clocks, so the desk’s opening hours may not match the time on your phone.

How to avoid it:

• Book an all-inclusive rate and prepay it. The number on the booking should be the number on the card.
• Ask three questions before booking: how much is the deposit, when is it released, and what are the pickup hours on my arrival day.
• If you land late at night, choose a company with a desk in the terminal, a 24-hour key box, or a shuttle that runs to your flight time.

Where a code helps: All four of my partners publish what is included in the price, and some skip the deposit or young driver fee altogether. That can be worth more than any discount code if you are under 25 or traveling on a debit card. Compare them on my car rental discount page, and check the current terms on each company’s site.

5. Not knowing about the kilometer fee (new in 2026)

This is new, and most visitors haven’t heard of it. Since 1 January 2026, Iceland has stopped collecting road tax through fuel and instead charges every car on the road per kilometer, including travelers. As of this writing, the rate for an ordinary car is 6.95 ISK per kilometer. It shows up as a separate line on your rental, not in the daily rate. Fuel at the pump got cheaper as a result, so over a long trip the two roughly cancel out, but the line on the invoice surprises people.

For a full lap of the Ring Road, around 1,400 kilometers, the fee comes to roughly 10,000 ISK. A Golden Circle and South Coast week is about half that.

How to avoid the surprise: Ask how your rental company bills it. Some charge per kilometer driven, others charge a fixed daily amount, and some fold it into the price. Get the answer before you book, not at the desk.

I pay this fee too. It is not a tourist tax; it is how the roads get maintained now.

6. Taking the small car up a mountain road

Iceland’s mountain roads are marked with an F on the map. They are legal only in a four-wheel-drive vehicle; they open between late June and mid-July depending on the snow, and they include unbridged rivers. Water damage, undercarriage damage, and off-road driving are excluded from every insurance package in the country. Drive a two-wheel-drive up an F-road, and you are on your own for the whole bill, plus a fine if you leave the track.

How to avoid it:

• If the road number starts with F, check your rental contract before you turn. Most small cars are banned from them outright.
• Even in a proper 4×4, don’t cross a river you haven’t walked first. Nobody on their first trip should be crossing rivers.
• Off-road driving is illegal everywhere in Iceland, and the fines are large. Tracks only.

Where a code helps: If the Highlands are the dream, let someone else drive them. Gravel Travel runs super jeep tours into the interior; my readers get a discount, and the river is their problem.

7. The speeding ticket that arrives two months later

Icelandic Police are tough on speeding, and speed cameras are active on Icelandic roads. The rental company gets the ticket, forwards it to you weeks later, and adds an admin fee for the trouble. Ignore it and the fine grows. Speed limits are 90 km/h on paved roads, 80 on gravel, and 50 in towns, and the fines start high.

Two related bills people miss: the Vaðlaheiði tunnel near Akureyri, which you must pay online within a few hours of driving through it or the price rises, and the parking fees at popular sights, which are enforced by camera and sent to the rental company the same way. In summer I would skip the tunnel and drive the Víkurskarð pass. It has nice views. However, if you’re there in winter, always take the tunnel.

How to avoid it: Drive at the limit, pay for the tunnel from the car park before you set off, and pay the parking meters even when the car park looks unattended. It is not unattended.

8. Renting the wrong car for the season

A two-wheel-drive economy car on a gravel side road in February. A tall, light van in a gale. Every winter the roads fill with rentals that were the right price and the wrong vehicle. All rental cars here should have winter tires from November; that is not the problem. The problem is ground clearance, weight, and drive.

How to avoid it:

• October to April, outside Reykjavík: four-wheel-drive. No exceptions.
• Summer on paved roads only: a small car is fine, and it costs less to run.
• Check the roads every morning on umferdin.is, and read my guide to staying safe in Iceland before a winter trip.

Where a code helps: All four of my partners have four-wheel-drive, and my codes work on them. Konvin’s fleet is mostly 4x4s, which is why I recommend it to winter travelers first.

9. Not knowing where the car is when you land

Some companies have a desk in the arrivals hall at Keflavík. Others put you on a shuttle to a lot down the road, and with the cheapest operators that can mean an hour of waiting and two buses. People arrive at midnight after a long flight without knowing which kind they booked.

How to avoid it: Check “in terminal” or “shuttle” on the booking before you pay. A short shuttle from a company that times it to your flight is no hardship; a long wait for a bus that may or may not come is. My Keflavík arrival guide walks you through the terminal.

Where a code helps: Europcar has a desk in the terminal. Lava Car Rental and Konvin are both a few minutes from the airport with a free shuttle, and their reviews say it turns up. And if you are spending your first night in Reykjavík, skip the car for that night entirely, take the airport transfer, and pick the car up in town when you leave. See mistake six on my hotel page for why.

10. Driving gravel like it is tarmac

Tires are not covered by insurance, and a tow from a remote spot can cost a great deal if you did not take the roadside waiver. Most of it comes from driving gravel roads the way you would drive at home.

The driving lessons every Icelander gets:

• Slow down before the tarmac ends, not after. The first fifty meters of gravel is where cars leave the road.
• When you meet a car on gravel, slow right down and keep to your side. Flying stones are what gravel protection is for, but it is cheaper not to need it.
• One-lane bridges: whoever gets there first goes first. Stop and look before you commit.
• Blind hills are marked “blindhæð.” Keep right and slow down. There may be a car, or a sheep, on the other side.
• Sheep own the road. If one is on the left and its lamb is on the right, the lamb will cross. Brake.
• Take the roadside assistance waiver. It costs a little per day and a tow costs a lot.
• If you are stuck in snow, never use brute force to get out. The risk is that you will just dig the vehicle deeper.

Smaller things worth knowing

• Headlights on, always. It is the law, day and night, all year.
• Automatics sell out. If you can’t drive a manual, book the automatic early for summer.
• Fuel pumps need a PIN. Most are unattended and pre-authorize a large amount on your card. It drops off in a few days. A chip-and-PIN card is essential. Read my tips about paying for things in Iceland.
• Electric cars pay the same fee. The kilometer fee is the same for every ordinary car, but charging is much cheaper than fuel.
• The sulfur smell is not the car. It is the hot water. See the hotel page.

Which of my partners to choose

I have four. They are all decent, and they suit different people. What follows is my impression of each at the time of writing; their fleets, packages and terms change, so check their sites for the current details.

Europcar Iceland

Desk in the terminal at Keflavík, a large fleet, four-wheel-drives in winter. The plain choice for a late arrival, a family with luggage, or anyone who wants a big company behind them. Discount code and details here.

Lava Car Rental

Family-owned Keflavík company a few minutes from the airport with a free shuttle. They include most insurance in the price, so the number on the booking is close to the number on the card, and they are known for being easy on younger drivers and debit cards. Good for anyone who wants the rental to be the simplest part of the trip. Book through this link and the reader discount is applied automatically.

Go Car Rental

Icelandic company with easy-to-understand packaged insurance, zero-excess options, and packages that do not require a credit card. Good for anyone who wants to pick a package and stop thinking about insurance.  Book through my link, and the discount is applied automatically.

Konvin Car Rental

Keflavík company running since 2011, free airport shuttle, and a fleet that leans heavily toward newer 4x4s, with rooftop-tent SUVs, campers, and a nine-seater for big groups. They can also hand the car over at your Reykjavík hotel. The choice for winter, for groups, or for anyone who wants a specific kind of car. Reader discount here.

If you would rather sleep in the vehicle than pay for a hotel, that is a different page: Go Campers gives my readers a discount on camper vans, and Lava and Konvin both rent campers too.

Get the codes

All my car rental discounts, and every other partner code, are on the discount codes page. Newsletter subscribers get the new ones first.

Sign up for the Stuck in Iceland newsletter

 

Frequently asked questions about renting a car in Iceland

Any questions I have not answered? Reply to any of my newsletters, and I will tell you what I know.

[IMAGE: something calm to close on]

One last thing

The car is there to get you to the places you came for, not to be the trip. Do not drive five hours a day. Pick fewer places, stay longer, sleep in, and leave the car parked for a whole day now and then. You are on vacation.