How to Plan a Budget-Friendly Road Trip in Iceland

Introduction

There’s nothing quite like exploring Iceland on your own four wheels. With its dramatic landscapes, from volcanic black sand beaches to roaring waterfalls and glittering glaciers, a self-drive holiday gives you the freedom to shape your own adventure. But Iceland also has a reputation for being one of the more expensive destinations in Europe.

The good news? With some planning, a bit of local know-how, and the right rental car partner, you can enjoy the road trip of a lifetime without breaking the bank. At Höldur, we’ve been helping travellers hit the road since 1966, and we’re here to share our expert tips on planning a budget-friendly road trip in Iceland.

Whether you’re looking for car hire in Reykjavik, picking up your rental straight from Keflavik International Airport, or simply searching for ways to stretch your krona on the road, this guide will steer you in the right direction.

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1. Choosing the Right Car Hire for Your Budget

Your rental car is the backbone of your Icelandic road trip. To save money:

• Book early: Car hire demand in Iceland peaks in summer. Booking well in advance not only secures availability but also ensures better rates.

• Pick up at Keflavik Airport: If you’re arriving by air, starting your journey at our Keflavik International Airport car hire desk saves on costly transfers to Reykjavik.

• Select the right vehicle type: Don’t over-rent. A compact car is perfect if you’re sticking to the Ring Road in summer, while a 4x4 is necessary for highland routes. Choosing wisely saves significantly on rental and fuel costs.

• Look for inclusive packages: Höldur offers flexible options with insurance, unlimited mileage, and support that make your journey hassle-free and budget-smart.

Tip: When comparing Iceland car rental prices, check what’s included — insurance extras can add up quickly.

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2. Saving Money on Fuel

Fuel is one of the biggest costs on a road trip in Iceland. Here’s how to keep the expense in check:

• Plan your route efficiently: Use apps like Google Maps or Vedur.is (for weather) to minimise detours.

• Choose fuel-efficient cars: A smaller, newer model will stretch your fuel budget further than a big SUV if you’re not going off main roads.

• Use the discount key:  It helps you save on fuel costs. ISK 5 discount off the liter at N1 outlets, around the country.

• Refuel in towns: Fuel is often cheaper in larger towns compared to remote rural areas.

Tip: Always fill up before venturing into the highlands — not only for savings, but because fuel stations can be scarce.

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3. Budget-Friendly Accommodation Options

Hotels in Iceland can be pricey, but there are plenty of alternatives:

• Guesthouses & farm stays: Affordable, authentic, and often include breakfast.

• Self-catering cottages or Airbnb: Great for groups, with kitchen facilities to save on dining costs.

• Camping: With a rental car or campervan, camping is a cost-effective and immersive option (available May–September).

• Hostels: Popular with solo travellers and young adventurers.

Tip: Always book in advance during summer, even campsites, as demand outstrips supply in popular areas.

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4. Food and Dining on a Budget

Eating out in Iceland can add up quickly, but you don’t have to splurge at every meal:

• Shop at local supermarkets: Bonus and Kronan are budget-friendly grocery chains.

• Pack picnics: Enjoy Iceland’s landscapes with a packed lunch from your rental car.

• Cook your own meals: Choosing accommodation with a kitchenette helps save money.

• Treat yourself selectively: Try traditional Icelandic dishes in Reykjavik or Akureyri, but balance with self-catering.

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5. Free and Low-Cost Activities

The best part of Iceland? Its greatest attractions are natural — and free.

• Waterfalls: Skógafoss, Seljalandsfoss, and Dettifoss are unforgettable, and don’t cost a thing.

• National parks: Þingvellir, Vatnajökull, and Snæfellsjökull are open to all with minimal parking fees.

• Hot springs: While the Blue Lagoon is iconic, many natural hot pots like Seljavallalaug are free or inexpensive.

• Hiking: From glacier valleys to volcanic craters, trails abound at no cost.

Tip: Plan your itinerary around free attractions and sprinkle in one or two premium experiences like whale watching or a glacier tour.

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6. Practical Money-Saving Travel Tips

• Travel off-season: Spring (April–May) and autumn (September–October) offer lower prices on flights, car hire, and accommodation.

• Travel in a group: Sharing costs on car hire, fuel, and lodging is a great way to save.

• Bring your own gear: Pack waterproofs, sturdy walking boots, and even a refillable water bottle — Iceland’s tap water is pure and free.

• Avoid unnecessary extras: GPS hire or child seats can be brought from home if possible to avoid rental fees.

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Sample 7-Day Budget Road Trip Itinerary

• Day 1: Arrive at Keflavik Airport, pick up your rental car, explore Reykjavik.

• Day 2: Golden Circle (Þingvellir, Geysir, Gullfoss).

• Day 3: South Coast waterfalls and black sand beaches.

• Day 4: Skaftafell National Park and Jökulsárlón glacier lagoon.

• Day 5: East Fjords scenic drive.

• Day 6: North Iceland — Akureyri, Godafoss, and Myvatn area.

• Day 7: Return via Hraunfossar and Borgarfjörður.

This itinerary balances must-see sights with cost efficiency by reducing backtracking and focusing on free natural attractions.

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FAQs

What is the cheapest way to rent a car in Iceland?

Booking early, picking up directly at Keflavik International Airport, and choosing the right size vehicle are the best ways to save. Höldur offers competitive Iceland car hire rates with transparent pricing.

Do I need a 4x4 to travel around Iceland?

Not always. For summer Ring Road trips, a standard car is sufficient. A 4x4 is only necessary if you plan to drive on F-roads into the highlands.

How much should I budget for fuel in Iceland?

Expect to pay slightly more than the European average. A Ring Road trip can cost €250–400 in fuel, depending on your car’s efficiency.

Can I camp anywhere in Iceland?

Wild camping is restricted. Always use designated campsites, which are affordable and widely available.

What’s the best time of year for a budget trip to Iceland?

Spring and autumn offer lower prices and fewer crowds, while still providing good driving conditions.

Is it cheaper to rent a car in Reykjavik or Keflavik Airport?

Renting at Keflavik Airport is often more convenient and cost-effective as it saves on transfers. Höldur has you covered at both locations.

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Conclusion

A road trip in Iceland doesn’t have to drain your wallet. With smart planning, careful choices, and the right partner in car hire in Iceland, you can enjoy an unforgettable adventure while keeping costs under control.

At Höldur, we’re more than just a car rental provider — we’re your trusted travel companion, ready to help you explore Iceland your way. From Reykjavik car hire to seamless service at Keflavik Airport, we make sure your journey is reliable, affordable, and full of discovery.

Your Icelandic adventure awaits — let’s make it budget-friendly.

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