Car rental in Iceland

Ready to explore Iceland by car? Here’s what to know before you hit the road.

Driving through Iceland isn’t just about getting from point A to point B. It’s the in-between moments that make the trip unforgettable. It’s when you pull over to admire a waterfall no one told you about, or catch the northern lights from a quiet rest area just outside town. It’s freedom, in the best sense of the word.

If you're looking for cheap car rentals in Iceland, it’s best to start early. Demand shoots up in the summer and during the winter aurora season, so planning ahead can save you money and give you more choice when it comes to vehicles. Economy cars are great for short routes and paved roads. But if you’re planning to venture into Iceland’s wilder corners, or if you visit in winter, something with four-wheel drive is worth the investment.

Practical tips when renting a car in Iceland

• Book well in advance, especially if you’re travelling between June and August or in December.
• Your Canadian driver’s licence is valid in Iceland. No need for an international one if it’s in English.
• Pick the right car for the route. Compact cars work well for the Golden Circle and Ring Road. For F-roads (gravel mountain routes), a 4x4 with good ground clearance is essential.
• Headlights must be on at all times. It’s the law.
• Don’t drive off-road. It’s strictly prohibited and could land you with a hefty fine. The land is fragile, and Icelanders take this rule seriously.
• Take photos of the car when you pick it up and return it. Icelandic weather can be hard on vehicles, and this helps avoid disputes over damage.

Driving tips for Iceland’s unique conditions

Driving in Iceland isn’t difficult, but it’s different. Roads outside Reykjavík are often narrow, and you may not see another car for kilometres. That’s part of the appeal, but it also means you need to be prepared.

• Single-lane bridges are common. If you and another car arrive at the same time, the vehicle nearest the bridge has priority.
• Gravel roads can pop up unexpectedly. Slow down to avoid losing control or damaging your tires.
• Wind can be powerful enough to damage car doors. Always hold onto them when getting in or out, especially in exposed areas.
• The weather changes fast. A sunny morning can turn stormy by afternoon. Always check the conditions on road.is (Icelandic Road and Coastal Administration) before heading out.
• Sheep don’t care about your itinerary. They roam freely in rural areas, so slow down when you see them.

Iceland’s speed limits (and how to avoid fines)

• In towns and built-up areas: 50 km/h
• On gravel roads in rural areas: 80 km/h
• On paved roads outside towns: 90 km/h

Speed cameras are common, especially near Reykjavík and along the Ring Road. Fines can be steep, and charges are sometimes passed on by your rental company weeks later. It’s not worth rushing, especially with views this good.

What to expect from Icelandic road signs

Most signs use standard symbols, and they’re pretty intuitive once you get the hang of them. That said, here are a few to watch for:

• Blind hills or sharp bends: Often marked with a triangular warning sign.
• F-roads: These are highland routes that require a 4x4. Check that they’re open before setting out.
• Livestock crossings: Not just for show, sheep actually use them.
• Speed limits and road conditions: Usually well-marked, but keep your eyes open.

Google Maps works well across the country, but it’s a good idea to carry a paper map too, just in case. You can also download offline maps, as coverage can drop in remote areas.

Are there tolls or restricted zones?

Iceland is refreshingly toll-free for the most part. The only major toll road is the Vadlaheidi Tunnel in the north near Akureyri. It costs 2,152 ISK for cars under 3.5 tons, and you can pay up to 24 hours before or 24 hours after driving through the tunnel at veggjald.is. If you forget, the rental company may charge you extra, so make it part of your routine.

Off-road driving is banned nationwide. Iceland’s ecosystems are fragile, and tire tracks can scar the landscape for decades. Stick to marked roads and parking spots.

Iceland by car: Where to go

Once you’ve got your rental sorted, it’s time to decide where to explore. Here are some of the most popular and rewarding routes:

• The Golden Circle – A perfect day trip from Reykjavík. Includes Thingvellir (Þingvellir) National Park, the Geysir area, and the mighty Gullfoss waterfall.
• South Coast to Vik – Filled with waterfalls, black beaches, and glacial views. Easily stretched into two days or more.
• Westfjords – More remote and quieter, with dramatic landscapes and winding roads. Not for the faint of heart, but worth the effort.
• North Iceland – Visit Akureyri, explore volcanic Lake Mývatn, and check out Dettifoss, one of Europe’s most powerful waterfalls.
• The Ring Road – Want to see it all? This full loop around Iceland takes at least 7 days, but ideally 10 to do it justice.

Best times to visit

• Summer (June–August): Endless daylight and easier road conditions.
• Autumn (September–October): Cooler, quieter, and a great time to see the northern lights.
• Winter (November–March): Magical snowscapes and auroras, but be ready for road closures and icy conditions.
• Spring (April–May): A good shoulder season. It’s less crowded, but roads are mostly clear.

Language and payments

You’ll find most people in tourist-facing roles speak English, so you’ll have no trouble at rental desks, gas stations, or restaurants. Most signs are in Icelandic, but they’re easy to interpret thanks to international symbols.

The currency is Icelandic Krona (ISK). Credit and debit cards are accepted almost everywhere, including remote gas pumps. Just make sure your card has a chip and PIN.