If you are coming to Iceland for a longer period than a few days you will definitely rent a car in Keflavík on your arrival or you will rent a car in Reykjavík once you get there. The fact is that public transportation in Iceland isn't as good as in major cities in Europe and to experience Iceland a rental car is a wise choice.
In this post I will try to answer a couple of questions regarding renting a car in Iceland that we get a lot and point out some important safety issues that seem to be causing a lot of traffic accidents with tourists involved.
Why is it so expensive to rent a car in Iceland?
First of all it's not just expensive to rent a car in Iceland, everything is expensive in Iceland! Cost of living is much higher than in many other countries so maintaining a car, paying wages for the staff, buying a car insurance and so on simply comes down to a certain price. We have never had as many car rentals in Iceland as now and it doesn't seem like we're slowing down so we should have a healthy competition. We also have to factor in that we live on an island in the middle of the atlantic ocean and shipping and tolls make everything in Iceland more expensive than in for example the mainland of Europe.
I also have to point out that the prices are highest in the peak season july and august so if you can, travel to Iceland in oktober or november and prices might be 100% lower.
Do I need to buy all those extra insurances the car rentals offer in Iceland?
This is a really common question and I totally understand the reason. The first price you see on all websites is the price without all the extra cost, that's just how business works. But once you go through with the booking you'll be asked if you want to add this and that and you feel like you're being robbed in broad daylight. Here are some of the extra insurances that we have seen and my recommendations for them.
Gravel protection: When deciding if you buy this one you should ask yourself the following questions: Will you be driving a lot on gravel roads and do you have experience driving in those conditions? If the answer to the first question is yes and the second one is no you should buy this insurance! If you are not sure whether you'll be driving a lot on gravel roads you should check your itinerary and let google help you. Places like Icelands Austurland (east Iceland) and Icelands Vestfirðir (Westfjords) will have a lot of gravel roads for example.
Sand & Ash protection: We get a lot of stories about people that rent a tiny cheap car and drive all around Iceland and return the car with serious damage caused by a mix of hurricane winds and sand or/and ash. It's a common misunderstanding that this is a protection from volcanic eruptions but in fact this is just like it says, sand & ash protection. Should you buy this insurance? I would. If you, though it's unlikely, get caught in a classic icelandic sand storm it might cost you a lot of money if you don't have this insurance. A tiny example: a tourist I know rented a toyota aygo and returned it with serious damage caused by sandstorm (that he had no control of) had to pay 7.000 EUR when he returned the car. It might just be better to pay 10 EUR extra per day..... Of course it goes without saying that it's highly unlikely that you need this insurance if you are simply driving in Reykjavík. The most common place for this kind of damage is in south iceland when you are driving through the "sand fields". I would say from Hvolsvöllur to Höfn you might be hit by a sand storm but the most "dangerous" area is from Vík to Kirkjubæjarklaustur.
Super Collision Damage Waiver: This insurance varies a lot between car rental companies so if they offer one read carefully what's included. Normally a collision damage waiver is included in your car rental. This means that there is a maximum amount that you will pay if you crash the car under normal conditions. This amount is normally about 300.000 ISK. By buying this extra insurance you will reduce that amount. That amount varies also but a common amount is around 80.000 ISK. In the example above, you just have to decide, is it worth it to pay about 10 EUR per day to reduce the financial responsibility from 300.000 ISK to 80.000 ISK. It's totally up to you :)
Car theft insurance: If this insurance is sold separately I would skip it. Car thefts are not that common in Iceland. Just take all valuables with you when you leave the car and you will be fine :)
Should I pick up my rental car in Keflavík airport or in Reykjavík?
It's fairly simple to answer this one. If you pick your car up in Keflavík you do not have to pay to get to Reykjavík. So if you get the same price for your rental car in Leifstöð (Keflavík airport) and in Reykjavík you should pick it up in the airport. If you get a rental car in Reykjavík that is so much cheaper that you can actually take a bus from the airport and pick it up in Reykjavík and save money I would do that :)
What kind of car should I rent when coming to Iceland?
It depends! Where are you going? What is your itinerary? Will you be crossing rivers or simply driving around the capital. Just don't make the mistake of renting the cheapest car you find and then try to go to places like Þórsmörk, it won't happen! If you are able to rent a 4x4 do it. This will give you much more freedom and safety while driving around Iceland.
Remember that gas is pretty expensive in Iceland so if you can, choose a car that's fuel efficient and spend your money on something else!
What do I have to know about driving in Iceland?
First of all the roads in Iceland are not that good. There is a maximum speed limit for a reason, the roads don't handle speeds that german auto bans handle quite well, so drive carefully!
Watch out for sheep that tend to jump out on the road almost all around Iceland. If you see a sign it's there because it happens a lot! Be extra careful around one lane bridges that cause many accidents since tourists do not slow down enough before crossing and either lose control and crash or hit another car coming from the other way. If you are visiting Iceland during the winter be extra careful. The weather can change very very fast so it's a good rule to look at weather forecasts every morning before you hit the road. Make sure you rent a car on winter tires since we have heard that some car rentals still, for some reason, offer tourists unsafe tires during the winter. Safety should always come first!
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