The 7 step guide to renting a car in Iceland without getting caught in a car rental horror story

Now that summer has arrived (according to the calendar – not the weather), more and more of you are going to be traveling around Iceland in rented vehicles. Figuring out who to rent with can be a difficult decision, especially if you go through the Tripadvisor forums and read all the horror stories there about people getting ripped off by the car rental agencies. Who can you trust? How can you do this without getting a nervous breakdown somewhere on the way from the sheer pressure of keeping your rental vehicle intact?

Before we go any further, I need you to keep one thing in mind regarding all those stories you read: They are a tiny fraction of all the car rental stories written every day here in Iceland when people pick up and drop off their vehicles. Most people never have any problems but for some reason, we as humans are less likely to share a good experience with our peers than a negative one.

Here’s not to say that there’s not some truth to these car rental horror stories. Some of them are completely justified and even too fair on the company in question. There are people out there working in customer service that really should find a new job more suited to their skills and personalities. And normally lovely people can have a really bad day. In some cases the rules are unfair and the enforcement of them are unnecessarily harsh but then it’s extra important to know exactly what you’re getting yourself into before it all goes sour.

So below you can find some basic, but not always obvious, things that should get you better prepared to avoid a car rental fiasco that can potentially put a dent in your wallet and your much needed holiday.

1) Understand that the conditions in Iceland are probably very different from what you are used to at home

Before you decide which car rental company you should book with or whether you need a 4×4 or not,  it’s good to take a step back and honestly evaluate your skills as a driver to cope with the conditions in Iceland. This is less of a consideration in summer but an essential one in winter. The Icelandic weather is unforgiving, the road system primitive at times and you will be sharing the road with other inexperienced drivers that sometimes put you into situations where you need to think quickly.

Most people should be fine but if you are at all hesitant there are other ways to experience and enjoy Iceland. Just because you read somewhere that renting a car is the only sensible way to travel around Iceland it doesn’t mean that it is necessarily the right way for you. You are not any less of a traveler if you do tours instead of renting a car. You just choose to go a different route and that’s fine. Whatever is best for you!

2) Book with a reputable car rental company

Renting a car and driving yourself is a great way to explore Iceland and if you decide that’s the right way for you the next step is finding the right car for your adventure.

I understand the temptation to just jump at the lowest price possible, especially now when Iceland is becoming more expensive due to the currency fluctuation and imminent tax changes, but sometimes you end up spending more by saving money. Let me explain that a little bit further.

If you rent a car from a company with great prices that only has 50 cars and no service around the country and your car breaks down, you might be left to your own devices to fix the situation. Taking the car to a service shop might end up costing you time, which is a valuable resource on a short holiday,  and maybe you’ll miss a pre-booked tour that is non-refundable. Then if the company you booked with is really bad (this has happened) they might not do anything to help you and you will have to spend money on renting another car or getting a bus or a flight back to Reykjavík.

Because of this, I think it’s important that you rent with a company that has a relatively new fleet (newer cars usually mean fewer maintenance problems) that is big enough that you don’t have to worry about getting a new car if yours breaks down and one that can offer you good service all around the country.

It may end up costing you more (not necessarily though) but it will be worth it if something happens.

3) Take the extra insurance

A while ago, after we had an accident while driving a rental car in California, I wrote a whole post around this subject.

Again, I understand the argument that the car rental is already expensive and that you don’t want to add to those expenses but you will be so thankful to have the extra insurance if something happens to your car.

With normal car rental insurance that is included in your rental price there is this thing called self-reliability (sometimes also called deductibles) and if something happens to your car the insurance will cover it minus this amount. What people don’t always realize is that the self-reliability amount is often substantial. Usually, when you buy an extra insurance here in Iceland it means that it will lower the self-reliability to about 1000 USD or so (depending on the car and other such factors). Even though that seems like a high amount it’s considerably better than 3000 USD for example.

From January 1st 2017, my partner Budget has changed their insurance terms in a way that if you pay for their extra insurance you are completely covered (subject to the terms of the contract of course). So instead of a paying a deductible, like has usually been the case, you now don’t have to pay anything. This is a game changer in car rental terms here in Iceland and for this alone I think you should really consider booking your car with them. They are the only bigger car rental company in Iceland to offer this at the moment – to my knowledge at least.

Keep in mind though that the sand and ash insurance that you have probably read about is not included in the full coverage. Under normal circumstances, I would say you don’t need it but then there’s that one day when you really need it – like at Jökulsárlón this winter when a random sandstorm completely trashed all the cars at the Jökulsárlón parking lot. At least if you do a tour you don’t have to worry about that.

If you have insurance at home that will cover accidents, just keep in mind that you will have to pay for the damage here in Iceland and then claim them from your insurance company when you get back home. A lot of people don’t realize this and get very angry when they are asked to pay on the spot. Also, make sure you always keep your contract and any paperwork in a safe place as you will need it if you need to make a claim. I know Budget send the contract electronically to you so it’s less likely that you’ll lose it.

4) Inspect the car carefully when you pick it up

Most of the problems people have with their rental car are dents and scratches on the car that were not there when they picked it up. When you rent a car you will have to sign a form where you agree to dents and scratches that have already been discovered that will be used as a reference when you drop the car off.

Therefore it’s very important to inspect the car before you sign the form to make sure they haven’t missed something. Another good rule is to take photos of every side of the car before you drive away. Once you leave the rental place it becomes your burden to prove that whatever they are trying to charge you for was there from the beginning so it’s good to cover your basis.

If you do find something that is not listed on the form, ask the car rental agency representative to inspect the car with you again and have them add the new scratches to the form before you sign it.

5) Follow the rules set by your rental company

When you rent a car and sign the car rental agreement you are entering a legally binding contract where you promise to follow the rules set by the car rental agency and their insurance company or else they can charge you for any damages you cause. The terms and conditions are usually pretty standard so if you rent a car often you know the basic gist of them but what people often forget is that there’s nothing standard about Iceland.

According to most rental terms, the undercarriage of your rental car is not insured and if you cause damages to it you will be charged fully for them (even if you have the extra insurance). That’s one of the reasons why you are told not to drive F-marked roads unless you have rented a vehicle where that is allowed. Many F-roads have big stones in them and if you drive over them in a normal street car you risk damaging said undercarriage.

Another thing that is never insured is water damages There are a lot of unbridged rivers in Iceland (like on the way to Þórsmörk and Landmannalaugar) and if you cross them in a vehicle that can’t handle such conditions you risk ruining it. So the risk is always yours if you cross an unbridged river.

You would be amazed how many people think it’s smart to drive the road over Sprengisandur in a Suzuki Swift or cross a river in a Yaris and then they get all mad when they have to pay for damages caused.

You can avoid all that by simply following the rules and renting a bigger vehicle for conditions that require one.

6) Pay parking fees and speeding tickets immediately

A lot of people think that they will not need to pay for a parking ticket that they get while driving a rental car but those people would be wrong. If you get a parking ticket and you don’t pay it – the car rental company will in most cases charge the ticket to your card and then add a processing fee on top of the amount.

If you pay a parking ticket within 4 business days of receiving it you will get a considerate discount so try to pay it straight away. You can pay your ticket at any bank but they are open from 9:00 to 16:00 on weekdays in most cases.

It depends on what kind of speeding ticket you will get how you can pay for it. If you are stopped by the police they give you instructions on how to pay (I do believe you also get a discount if you pay straight away) but if you get caught by a speed camera the ticket will go through the system and the processing fee will always be added.

7) Try to drop off the car during opening hours

When you drop off your rental car a member of staff at the car rental agency should inspect it with you and use the form you signed with you pick it up as a reference to see if there are any additional damages there that were not present at that time of pickup. It’s good to take photos (like you did when you picked it up) before you go through this process with the staff member so you have some source of reference of your own.

When you drop off the car outside of opening hours you are responsible for it until the car rental company has opened. So if you leave a car at their parking lot and somebody keys the car before they open, according to the legally binding contract you signed this would be your responsibility and consequently you would need to pay for it.

So always try to drop it off during opening hours but if that’s not possible, make sure you take photos of the car before you leave it so you at least have some proof at hand if you need it.


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39 thoughts on “The 7 step guide to renting a car in Iceland without getting caught in a car rental horror story”

  1. Deanna Schultz says:

    When I was in Iceland it was perfect summer weather with easy road conditions, and I only covered the southern part of Iceland. Thus my travel was simple. I rented a camper van from Happy Campers and had a completely marvelous experience camping in campgrounds. Nice, clean, well maintained vehicle (and campgrounds) with ease of checking in and out. Pleasant and helpful personnel. I think the article is excellent advice for winter rentals.

    1. Frank says:

      Thanks for this! One tip you may want to share is to consider the add-on WiFi hotspot device some companies (e.g., Budget) offer. This enabled me to use Google Maps on my own U.S. mobile without having to use international roaming. It also enabled me to check email, Google things, and make Skype calls. Also, you can put it in your pocket and take it hiking with you, which can be a big help.

      1. mm Auður says:

        Good advice.

  2. Chrissy says:

    Oh, no! Just based on the title I’m afraid to show this to my husband (but will). I just convinced him yesterday to rent a car there for a couple days while we’re there in May so that we can stay at a working farm…
    I’m sure it will work out…(?!?^(#$) 🙂

    1. mm Auður says:

      you’ll be fine 🙂

  3. Charlene R says:

    Hi! Thank you for this! i just booked through here, great deal!! my only question is about the sand/gravel insurance, do you set that up when you pick up the car??? Thanks!!

    1. mm Auður says:

      For the time being you can add it when you pickup the car yes – hopefully soon you can book it at the time of booking.

  4. Lindsay Bradley says:

    We rented a Kia in Iceland. It was a lovely new vehicle. No trouble picking it up or dropping it off.

    1. mm Auður says:

      See, people do rent cars without having any troubles 🙂

  5. Divya says:

    Thank you for this post but I really think that in Iceland it is better to participate in organized tours.
    That way, you don’t have to drive yourself hundreds of km through deserted areas. It’s safer and actually more fun because you will see a lot more and you can rest any time you want.

    Iceland is not done in one visit – I think you need at least 4 weeks to visit every region. Therefore, there is no need to rush through the Ring Road in a rental car!

    1. mm Auður says:

      I think both ways have their pros and cons but it’s a common misconception that you somehow are a worse traveler by joining tours – that is not the case in my view. A guide on a tour can give you insight into the place you’re visiting that you’ll never get alone in a rental car. Just like with a rental car you can visit places that are often not included on the tours.

  6. Daniel says:

    Hello! We are thinking to hire a car from Do you know this company? It looks like a local car rental. Do you suggest an international company or is it better with a local one?

    Many thanks and regards from Spain!!!

    1. mm Hrannar - I Heart Reykjavík says:

      Hi Daniel

      We don’t know this rental. We of course always recommend our deal with Budget car rental. It can sometimes be the best deal in town 🙂 –

    2. Scott says:

      I agree, this would be a lot more effective article if it actually named the companies that are reputable, but since they have an arrangement with one particular company, they are not willing to do that. Disappointing. The readers should always come first, and this article is not fully serving the readers.

      1. mm Auður - I Heart Reykjavík says:

        I don’t name companies here, good or bad because I can’t comment on what I don’t have personal experience with. It has nothing to do with our deal with Budget.

        Ever since I started this blog 6 years ago I’ve always had it as a rule to only recommend things I do know are good instead of focusing on the negative. Everyone can have a bad day, or do things wrong once, so who am I to blast someone on the internet as someone to avoid just because one person told me a story that I only know one side of?

        This post if full of good advice, whether I name companies or not. A lot of people have recommended companies in their comments on the blog and you can go to Tripadvisor and such places to find out more. The company that probably has the best service out of everyone in Iceland is National but they also have some of the highest prices and we’ve found that Budget is the company that usually has the best prices out of the companies that offer the level of service we want to recommend.

  7. Virgilium says:

    Any thoughts about SAD cars? They are apparently cheaper than the big companies but get decent reviews on some websites? Thanks.

    1. mm Auður says:

      I don’t want to say bad things about a company I’ve never dealt with personally but the worst stories I’ve heard about car rental in Iceland were people who rented with SAD cars. It’s been a while though so maybe they’ve improved their vehicles and service.

  8. Trisha says:

    We are headed to Iceland to drive part of the south the week of Oct 20th 2017. I realize we are in “winter” at this point and hopefully our MN driving experiences will help with any bad weather that may arise. Is there a car company with 4×4 vehicles that you would recommend? I apologize if this question was already answered because I may have skipped over it! Thanks in advance for any help!

    1. mm Ásta - I Heart Reykjavík says:

      Hi Trisha,

      you can check this:
      This company has a range of cars, good service and decent prices. I hope this helps!

  9. Shelagh says:

    Thanks for the post (and all your other posts!) I am about to book with Budget again- thanks to your recommendation -for the 3rd time in 2 years, they have great prices, brand new cars and the free pick up service is really helpful. We combined a Golden Circle tour (with Sterna) and 3 days Budget car hire to Jökulsárlón and back . On the tour it was nice to relax and the driver told us fantastic stories about Icelandic customs, how people live in the different seasons, and all about Grýla and Leppalúði + the scary Yule Lads. 🙂 Equally it was great to be free to stay as long as we liked watching icebergs drifting onto the beach and go for a long walk in Skaftafell far away from the crowds. So would recommend a bit of both types of travel!
    Keep up your good work and interesting blogs!

    1. mm Ásta - I Heart Reykjavík says:

      Thank you!

      I also think that a mix of guided and self drive tours is good. That way you get to meet other people and chat and learn more about the country and get a different insight into life in the place you are visiting – but also get to spend some time just on your own and at your own pace.

  10. Carly says:

    Thanks for the great post. I’m traveling in the beginning of August with my sub and and 2 small kids (1.5 & 3.5 years old). Do you know of anywhere to rent car seats? I’m considering a car rental for the 5 days we will be staying in Iceland with local friends. Perhaps we can get away with taking a taxi to shuttle to their house and only renting a car on a few of the days to save some money.
    Any input is greatly appreciated!

    1. mm Hrannar - I Heart Reykjavík says:

      Hi Carly

      The car rentals usually have child seats that you can add. I know that Budget has child seats –

  11. Heath says:

    Rented a 4×4 with a more reputable company and it was expensive, especially when the front desk lady told me of the adverse weather conditions and I took the extra insurance. But, I’m glad I did, each time a stone flicked up I didn’t cringe as much as I would’ve if I didn’t have that extra insurance backup! Usually I wave it off…but for Iceland I thought it was a good thing. It was the best money I spent on the trip because having the 4×4 made exploring the SW of the island the absolute highlight of the holiday.

  12. David says:

    For American please note green is petrol and not diesel. Black is diesel… easy and costly mistake to make, Thanks to Hertz for not making me any more dumb.

    1. mm Auður - I Heart Reykjavík says:

      I didn’t know this was a thing that could confuse people 🙂

      1. Janna says:

        Green is diesel in America!

  13. Jennifer says:

    i am coming to Iceland from Sept 6 to Sept 22 and doing the entire Ring road going clockwise. Your post was very timely in that I have changed my mind on getting a 4×4 and getting a sedan instead due to the winds. I know this is a shoulder season, but in your picture above, what vehicle type is this. I am going to go with Budget, and want a diesel sedan if possible. I want a heavier sedan and not a light compact. I have been told or at least from what I have read, that I can use a 2WD if I am not going on any F roads. The only places off the Ring I am going to are The Snaellsfelle region and Detifoss/Asburgyeri. But I don’t think those are F roads to get to those sites. Please correct me if I am wrong.

    1. mm Auður - I Heart Reykjavík says:

      The car we drive is a Kia Sportage and it’s labeled as a jeep with the car rentals although it really isn’t.

      There’s some good information about Ásbyrgi and Dettifoss here:

  14. Liz says:

    Could you pleas let me know if the quote using the Budget link on your site includes the extra optional insurance, such as the gravel coverage, and the ash & sand coverage or does that have to be purchased separately? I can’t not seem to locate if it is an additional cost and if so, what Budget charges for those options. The extra insurance coverage cost seem to vary greatly from company to company, sometimes as much as double for the same coverage per day.
    Thank you and your site has been very helpful for planning our first trip to Iceland the first of December.

    1. mm Auður - I Heart Reykjavík says:

      The only thing that is included is the CDW – you need to purchase any extra insurances extra. The SCDW is 2200 ISK a day for the smaller cars and 2900 ISK for the bigger cars and if I remember correctly the sand and ash is 1900 extra a day. Those prices are pretty standard, in Iceland at least.

  15. Alex says:

    I’ve booked a trip to go to Iceland on the first week of October! I have found your blog very helpful in planning.

    We rented a 4×4 since we plan on going on some F roads. Would you recommend getting the Gravel Protection or Sand & Ash Protection? Several blogs seemed to give mixed recommendations on this.

    Thank in advance!

    1. mm Auður - I Heart Reykjavík says:

      I believe in most cases the gravel protection is included. The sand and ash is a little bit difficult because in most cases you don’t need it but then maybe 5-10 days a year you really do need it but you can never know when those days come.

      When I rent cars to drive around Iceland (which happens quite frequently) I usually take the SCDW but not the sand and ash.

  16. Danielle says:

    Do you know how much of a deposit Budget holds on your card? Thanks in advance!

    1. mm Auður - I Heart Reykjavík says:

      Apparently most (if not all) rental companies will hold the cost of the car plus one tank of gas. But only when you pickup the car, not when you book.

  17. Lynsey says:

    Hello! We are going to be driving up to Grundarfjörður and down to Vík and Jökulsárlón next week in a regular rental car (I think Hyundai i20 or similar). On the map those looked like pretty major routes that wouldn’t need a 4×4—am I correct about that? Will there be any “F roads”? We’re sticking along the coast because I heard that driving inland is where the conditions are more difficult.
    Thank you! Love your blog, I’ve been reading it like crazy to prepare for my trip 😀

  18. John Parker says:

    Great advice, thanks! I’m dying to go to Iceland!

  19. dorothy robbins says:

    A requirement for renting a car in Iceland is for the renter/driver to have a license for at least a year. I cannot find information about this for added drivers. Does anyone know if additional drivers must also have a license for a year?

    1. mm Auður - I Heart Reykjavík says:

      Yes, all drivers need to have had a license for at least a year.

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