Complete guide and tips for driving in Iceland

Get a car or do a tour:

• If all you want to do is the Golden Circle (the area around Reykjavik with lots of attractions, including the Blue Lagoon) and southeast Iceland (including glaciers, black sand beach), you don't need a car. There are lots of tours all year around that take you to all the sights in this area
• Personally I think the scenery in the Golden Circle pales in comparison to the areas far away from Reykjavik in the western, northern and eastern parts of the country. To see these areas you should plan for a minimum of 8 days including arrival and departure and it's much easier to drive
• My recommendation is to get a car if you're in Iceland for 8 or more days

2x4 or 4x4:

• From my experience, the vast majority (over 90%) of the attractions around Iceland are accessible by 2x4
• The only places you need 4x4 are the F-roads, which are exclusive to the interior or Iceland and very few places in Westfjords (the vast majority of Westfjords is non F roads). From my trip, the only place I wanted to go that required a 4x4 was Maelifell
• Keep in mind that 4x4 is significantly more expensive than a 2x4. When I went it was almost double the price
• My recommendation is to get a 2x4 unless you want to go to the interior

Regular car or campervan (a.k.a. motor home):

• You have 2 choices of car to rent in Iceland: regular cars or campervans
• Campervans enables you to sleep in them comfortably, which can save you a lot of money by avoiding the ridiculously pricey hotel and guest houses in Iceland (hotels range from $150-$200 a night everywhere in the country whereas campsites cost no more than $18 a night)
• In the summer though (April - September), you can also camp with a regular car, you just have to pitch the tent at the camp sites
• Regular cars are significantly cheaper than campervans (50% - 75% cheaper)
• My recommendation is to get a campervan in the winter (October - March) and a regular car in the summer (April - September)

How to rent a car:

• Renting a regular car in Iceland is the same process as anywhere else
• All the major international car agencies operate in Iceland, including Hertz, Avis, Budget, Enterprise, Thrifty, Europcar, Sixt, plus tons of local agencies
• The two decent websites for price comparison I found for Iceland are: Skyscanner and Guidetoiceland (this one is great for local agencies, which seems to be cheaper than international agencies)
• Renting a campervan in Iceland is also straightforward. There's only a handful of major campervan rental agencies in Iceland, and you'll need to book directly with them instead of through an online price shopping tool
• The 4 major campervan agencies operating in Iceland are CampEasy, Kuku, Go Campers, and Happy
• I personally went with Go Campers. I wrote about it in more details here. Overall I have nothing bad to say about them. Good service and good van
• Most agencies (including campervan agencies) will have both manual and automatic cars

Price range:

• Price varies quite a bit by car type, agency, and season, but here's a rough rule of thumb based on what I've seen for the low season (late Octotober - March):
• Regular cars are around $25-50 USD per day for small economy cars (4 passengers). International agencies would be on the higher end of this range
• Campervans are around $90-$100 USD per day for 2 passenger vans
• In the busy season (April - mid-October) expect these prices to be around 50% higher
• You'll also need to factor in gravel insurance, which can add around $10-$20 more per day. Gravel insurance is pretty much a necessity if you want to travel to the western, northern, and eastern part of Iceland

License:

• More likely than not, you do not need an IDP (International Driving Permit)
• No matter where your home country is, your driver's license is sufficient by itself as long as it has these 4 things on it:

1. A license number
2. The license holder´s photograph
3. A valid date
4. Been printed in Latin characters

• If it doesn't have any of these (for example if it's written in Russian or Chinese characters of Latin alphabet), then you'll need an IDP in addition to your driver's license (meaning you need both)
• You also need to have held the full driver's license for at least 12 months

Minimum rental age:

• Generally speaking you need to be 20 years of age or older to rent a car in Iceland
• But there may be some exceptions. Best check with your rental agency

Insurance:

• In addition to the basic CDW insurance that you'd get elsewhere (or comes with your credit card), all agencies in Iceland will offer gravel, sand, and ash protection for additional fees ($10-$20 per day)
• I can't stress enough how important it is to get the gravel protection if you plan to go outside of the Golden Circle area. There are a lot of gravel roads in Iceland (from my 8-day road trip I'd estimate around 30% of the roads I drove on were gravel), and almost all gravel roads are riddled with pot holes. Driving over the gravel roads is kind of like playing reverse guitar hero with your car with you trying to dodge the string of potholes coming at you. Bottom line is, flying rocks everywhere
• Even on the paved roads, there are random rocks that will hit your car once in a while. My van was hit by a single gravel rock while I was on the ring road close to Reykjavik and it make a tiny crack in the windshield. I would've been charged for it if I didn't have the gravel insurance

Gas prices:

• Gas is ridiculously expensive in Iceland
• Diesel is slightly cheaper than gasoline (around 4 ISK per liter, or 14 cents per gallon cheaper when I went)
• Diesel price is around 235 ISK per liter / $7.4 per gallon / €1.7 per liter
• My agency gave me a discount card for 5 ISK per liter off (16 cents per gallon off). I imagine most car rental agencies will provide similar discounts

Road types:

• Broadly speaking there are 3 kinds of roads in Iceland:

1. Paved roads: easiest roads to drive on. The entire ring road (route 1) and a lot of the smaller highways (numbered with 2-3 digits) are paved. Road condition is great and snow is removed promptly. About 70% of my trip was on paved roads. Any kind of cars can go on these, obviously
2. Gravel roads: smaller, less traveled roads numbered with 2-3 digits. Any kind of cars are allowed to go on them but they are in really rough shape. Speed limit is lower and the vast majority of them are riddled with potholes. Around 30% of my trip was on a grave road.
3. F roads: they are specifically labeled with "F" in their names. They're mountain roads. You are not allowed to go on them unless you have a 4x4. The F roads are almost all in the interior of Iceland. Some F roads require river crossing as well, and know that there's no insurance anywhere in Iceland that covers water damage

• If you're in the Golden Circle you probably won't come across any gravel roads. But if you explore the country on the ring road there will be lots of detours that require gravel roads. Some gravel roads may be closed after snow storm because they're not maintained to the same level as the paved roads

Where you can't go on your car:

• You're not allowed to go off road in Iceland no matter what kind of car you have
• Some F roads require river crossing. While you are certainly allowed to do that, you do so completely at your own risk because no insurance covers water damage. I recommend you don't try river crossing unless you have prior experience doing so (going to Maelifell, for example, require river crossing)

Speed limit:

• Limits:
• 90 km/h (55 miles/h) on highways
• 70 km/h (44 miles/h) on sections of highways that are close to towns:
• 50 km/h (31 miles/h) in towns
• Enforcement:
• There are sporadic speeding cameras around Reykjavik and Akureyri (2nd largest city in Iceland; in the north)
• These cameras are always preceded by warning signs to give you a heads up. The signs all have this icon (on the actual sign this icon is in black):
• Other than Reykjavik and Akureyri area, I didn't see a single warning sign or camera anywhere else in the country.
• I noticed that it's about 50/50 split there between drivers that followed the 90 km/h (55 miles/h) limit exactly, and the drivers that was speeding to around 110 km/h (70 miles/h). Personally I was driving around 110 km/h (70 miles/h) on average on paved roads, going up as high as 130 km/h (80 miles/h) on straight stretches. I just had to remember to slow down when I got back to Reykjavik area
• I also did see a cop pulling someone over for speeding just outside of Reykjavik. I only saw a single instance of this though

Lodging:

• Broadly speaking you'll have two options in Iceland: 1) hotels/guesthouses or 2) camping
• How to book: you can use the usual booking portals (like Booking.com or Hotels.com) for hotels and guesthouses. For campsites you don't really need to book, but if you really want to book you'll need to contact the camp sites directly
• Price range
• Hotels range from $150-$200 per night everywhere in Iceland. Guesthouses range from $80-$120 per night
• Camping will be no more than ~$17 per night (2,000 ISK per night), some will be lower. In the winter, many of these campsites will nominally close down, but they will more likely than not leave their lot open to campers to use free of charge, but they won't provide any amenities beyond the bathroom
• Locations:
• All along the ring road there will be lots of little towns and settlements, with lots of options for hotels and guesthouses. In the peak season (April - mid October), you may want to book ahead of time because there's a general shortage of housing in Iceland due to the tourism boom
• As for campsites, there are lots and lots of them all over the country and you don't need to reserve them ahead of time as they're all pretty spacious. As for their locations, you can just look for this sign in whatever town you happen to be in (even on highways you'll see this sign):Alternatively, some campervan rental agencies also provide maps with the up-to-date list of campsites (including all-year campsites). Like this page from Go Campers, and this page from CampEasy

Parking:

• Icelandic highways don't have a lot of shoulder space to pull over
• But, all the highways (at least all the ones I've driven on) have designated pull over, resting, and picnic spots every once in a while. In some places (e.g. the southeast coast and the Golden Circle) it can be once every few miles, or in the north it can be once every 5-20 miles. They're easy to spot
• In downtown Reykjavik parking costs money. This map from CityWalk gives you a rough sense of how much they cost:Red/pink colored zones are 275 ISK ($2.3) per hour. Blue areas are 150 ISK ($1.3) per hour. Green areas are 125 ISK ($1.1) first hour then 25 ISK ($0.2) per hour after that

Winter driving:

• Paved roads are shovelled very promptly and are in excellent condition. Gravel roads usually have a layer of snow on them (sometimes thick enough to cover the potholes which I loved). I didn't go to any of the F roads so I can't speak about their winter condition
• From mid October to March, you need to make sure the rental agency has outfitted the car with winter tires. They should, but doesn't hurt to check
• Additionally, if you plan to go outside of the Golden Circle, check with your rental agency to make sure the tires are studded