Best Car Rental Companies in Iceland

Renting a car in Iceland is not like renting one in most other countries. The roads are rough, the weather is unpredictable, and the insurance situation is genuinely more complicated. Choosing the right rental company matters more here than almost anywhere else you will drive.

I have lived in Iceland for over a decade. I have rented cars here myself, helped friends and family find deals, and heard enough horror stories from visitors to know which companies deliver and which ones cut corners. This is an honest comparison — not a list of whoever pays the highest affiliate commission.

How we compare rental companies

We evaluate each company on four things that actually matter for Iceland driving:

• Included insurance — Does the base price include CDW? Gravel protection? Or is everything an expensive add-on at the counter?
• Vehicle condition — Are the cars well maintained? Iceland roads are hard on vehicles, and older fleets mean more breakdowns.
• Transparency — Is the final price close to what was advertised? Hidden fees are a real problem in the Iceland rental market.
• Customer service — When something goes wrong (flat tire, breakdown, damage dispute), how does the company respond?

Discover Cars — Best for most visitors

Discover Cars is not a rental company itself — it is a comparison engine that searches 50+ providers operating in Iceland and shows you live prices side by side. Think of it as the Skyscanner of car rentals.

The reason I recommend starting here is simple: Iceland rental prices vary enormously between providers for the exact same car category on the exact same dates. A compact 4x4 might cost $80/day from one company and $140/day from another. Without comparing, you are guessing.

Why we recommend Discover Cars

• See prices from local Icelandic companies and international brands in one search
• Filter by included insurance, so you compare total cost, not just the base rate
• Free cancellation on most bookings — important since Iceland travel plans change
• Clear display of what insurance is included with each offer
• Customer support if something goes wrong with the booking

Watch out for

• Some providers listed may still try to upsell insurance at the counter
• The cheapest option is not always the best — check what coverage is included

Blue Car Rental — Best local operator

Blue Car Rental is a family-owned Icelandic company that has been operating since 2010. They are headquartered near Keflavik Airport with a quick shuttle transfer, and they have built a strong reputation among both locals and return visitors.

The standout feature: Blue Car Rental includes gravel protection (GP) free of charge on all rentals. Since gravel protection is essentially mandatory for Iceland driving and typically costs $5-$15/day elsewhere, this alone can save you $50-$100 on a week-long rental.

Why we recommend Blue Car Rental

• Gravel protection included free — a genuine money-saver
• Well-maintained, relatively new fleet
• Transparent pricing with few surprise charges at the counter
• Excellent customer service and responsive to damage disputes
• Quick airport shuttle (5-minute ride from KEF)

Watch out for

• Not always the cheapest base price — but factor in the free GP
• Limited exotic vehicle options (no campervans)

Cars Iceland — Solid local alternative

Cars Iceland is another established Icelandic operator with a good track record. They are a booking platform that partners with vetted local rental companies, giving you access to multiple fleets through a single booking interface.

Their prices tend to be competitive, often running about 7% below the rates you would get booking directly with the same providers. The tradeoff is that you are dealing with a middleman, so if there is a problem, you have an extra layer of communication.

Why we recommend Cars Iceland

• Competitive prices, typically 5-7% below direct booking
• Access to multiple local rental fleets in one search
• Good selection of 4x4 and highland-approved vehicles
• Responsive English-language support

Watch out for

• You book through Cars Iceland but pick up from the actual rental partner — can be confusing
• Insurance inclusions depend on which partner fulfills your booking

Lava Car Rental — Budget-friendly option

Lava Car Rental is a smaller local operator that consistently offers some of the lowest base rates in Iceland. If you are on a tight budget and know exactly what insurance you need, Lava can save you real money.

They run a no-frills operation — the office is modest, the shuttle is basic, and you will not get a cappuccino while you wait. But the cars are in good condition, the paperwork is straightforward, and the prices are hard to beat for economy and mid-size vehicles.

Why we recommend Lava Car Rental

• Among the lowest base rates for economy and compact cars
• Straightforward pricing — what you see is close to what you pay
• Good fleet condition for the price point
• Convenient KEF airport location

Watch out for

• Fewer insurance packages included in the base price
• Smaller fleet, so popular dates book out faster
• Less hand-holding — you need to know what coverage to add

Reykjavik Cars — Convenient city pickup

Reykjavik Cars operates from downtown Reykjavik and near Keflavik Airport. They are a mid-size local operator with a solid reputation for clean vehicles and fair pricing. If you are spending your first night in Reykjavik and want to pick up the car in the city rather than at the airport, they are a good option.

Why we recommend Reykjavik Cars

• Downtown Reykjavik pickup option — handy if you do not need a car on day one
• Competitive mid-range pricing
• Clean, well-maintained vehicles
• Friendly English-speaking staff

Watch out for

• Smaller fleet than the bigger operators
• Airport pickup requires shuttle transfer

Side-by-side comparison

Our recommendation

For most visitors, I recommend starting with Discover Cars to compare prices across all available providers. This gives you a clear picture of what the market looks like for your dates and makes sure you are not overpaying.

If you value simplicity and want to book with a local company directly, go with Blue Car Rental. The included gravel protection alone makes them worth considering, and their service is consistently good.

If you are watching every krona and know what insurance you need, Lava Car Rental delivers reliable cars at the lowest prices. Just make sure to add gravel protection — do not skip it to save money.

Whichever company you choose, book early. Iceland's rental fleet is limited, and summer availability starts disappearing by March. Winter bookings are more flexible, but 4x4 vehicles still go fast. A booking made two months out will almost always be cheaper than one made two weeks out.