Iceland 2026 Car Rental Guide

Exploring Iceland by car offers the freedom to discover its stunning landscapes at your own pace. A self-drive journey is the best way to witness dramatic waterfalls, volcanic fields, and icy coastlines. As you plan your 2026 adventure, choosing the right vehicle and understanding local driving regulations are key to a seamless trip. This guide provides everything you need to know, from selecting the perfect car to navigating the new kilometer-based road tax system.

Choosing the Right Vehicle for Your Icelandic Itinerary

Your choice of rental car can define your Icelandic experience. The decision depends on your travel plans, the season, and your personal preferences. Whether you opt for an eco-friendly electric vehicle or a rugged 4x4, we have the right car for your journey.

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Passenger Cars: Easy, Efficient Urban and Ring Road Travel

Passenger cars offer a practical, comfortable, and fuel-efficient way to explore Iceland’s major routes and city destinations. Ideal for solo travelers, couples, or small families, these vehicles make navigating Reykjavík, Akureyri, the Golden Circle, and the popular Ring Road smooth and affordable.

Best For:

• City breaks or short business trips in Reykjavík and other towns
• Scenic drives along the Golden Circle, South Coast, or Ring Road
• Travelers prioritizing fuel efficiency and easy parking

Pros:

• Reliable and Economical: Modern models from manufacturers like Toyota, Kia, and Skoda provide dependable performance with low running costs.
• Variety of Options: Choose from manual or automatic transmission to suit your preference.
• Eco-Friendly Options: Select lower-emission petrol or hybrid models for reduced environmental impact.
• Availability: Passenger cars are readily available at multiple locations across Iceland, including airports and city centers.

Considerations:

• Space: Best for individuals, couples, or small families with light to moderate luggage.
• F-Road Restrictions: Standard passenger cars are not permitted on F-roads or highland routes.
• Winter Travel Tips: While many passenger cars come equipped with seasonal tires, always assess your route and weather conditions to ensure suitable vehicle choice.

At Höldur, all vehicles are thoroughly maintained and equipped with the safety features needed for Icelandic conditions. You’ll need to be at least 20 years old, with a valid driving license held for one year or more, and present a credit card at pickup.

See the full passenger car range and details

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Estates (Station Wagons): Space and Versatility for Families and Long Journeys

Estate vehicles (station wagons) combine the comfort and maneuverability of a passenger car with generous cargo capacity, making them ideal for families, groups, or anyone with extra luggage, sports equipment, or photography gear.

Best For:

• Family road trips or group travel where extra room is essential
• Extended journeys around the Ring Road and multi-day excursions
• Travelers needing flexibility for luggage, outdoor gear, or baby seats

Pros:

• Ample Storage Space: Estates provide significantly more luggage capacity than standard passenger cars, accommodating suitcases, backpacks, and equipment with ease.
• Comfort: Designed for longer drives, estates offer more legroom and premium seating comfort.
• Modern Amenities: Many wagons include advanced safety features and features like climate control and connectivity.

Considerations:

• Not Suited for Highlands: Like passenger cars, estates are not permitted on F-roads or highland routes. For highland adventures, choose a 4x4.
• Availability: A range of estate models is available across Iceland, including both manual and automatic transmissions, from trusted brands such as Kia, Skoda, and Dacia.
• Rental Requirements: As with passenger cars, renters must be at least 20 years old with a valid driver’s license held for at least a year.

Estates ensure you don’t have to compromise on comfort or the amount of gear you bring along. They represent an excellent choice for travelers seeking a balance of space and efficiency for their Icelandic adventure.

Explore estate car options and specifications

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Electric Cars: Clean and Quiet Travel

Electric vehicles (EVs) are an excellent choice for eco-conscious travelers exploring Iceland's main routes. With a rapidly expanding charging network, driving an EV has never been more convenient.

Best For:

• Traveling on paved roads like the Golden Circle and the Ring Road.
• City-based trips in Reykjavík, Keflavík, and Akureyri.
• Summer road trips when road conditions are optimal.

Pros:

• Eco-Friendly: Reduce your carbon footprint and help preserve Iceland’s fragile environment.
• Lower Running Costs: Electricity is significantly cheaper than fuel, and most of our rentals include unlimited mileage.
• Silent Driving: Enjoy a peaceful ride through Iceland’s serene landscapes without engine noise.

Considerations:

• Limited Highland Access: EVs are not suitable or permitted for F-roads (mountain tracks).
• Winter Range: Cold temperatures can reduce battery range, so plan for more frequent charging during winter.
• Route Planning: While the charging network is extensive, you will need to plan your route around available stations.

Reserve your sustainable ride and enjoy quiet, clean travel

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4x4 Vehicles: Power and Go-Anywhere Capability

For those seeking adventure off the beaten path or traveling during winter, a 4x4 vehicle is essential. It provides the power, traction, and clearance needed to navigate Iceland's diverse terrain safely.

Best For:

• Exploring the Highlands and F-roads (summer only).
• Winter travel and navigating icy or snowy conditions.
• Reaching remote attractions and traveling with lots of gear.

Pros:

• Access to F-Roads: A 4x4 is legally required to explore Iceland’s rugged interior.
• Superior Winter Handling: Combined with studded winter tires, a 4x4 offers peace of mind in challenging weather.
• Versatility and Space: SUVs provide ample room for families, groups, and their luggage.

Considerations:

• Higher Fuel Costs: Traditional petrol or diesel engines come with higher fuel expenses.
• Rental Price: 4x4s often have a higher rental cost, but it is a worthwhile investment for the flexibility and safety they provide.

Rent a 4x4 and access the F-roads with confidence

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Understanding the 2026 Kilometer-Based Road Tax

Effective January 1, 2026, Iceland has introduced a new kilometer-based road tax for all vehicles. This modern system replaces certain fuel taxes, creating a fairer way to fund the maintenance of Iceland's road network.

How the New Tax Works

The tax is calculated based on the distance you drive. It applies to all passenger vehicles, including electric, hybrid, petrol, and diesel cars. The odometer reading at the start of your rental is recorded and compared to the reading upon return.

The total charge is comprised of two parts:

• Government Road Tax: A fee of ISK 6.95 per kilometer.
• Holdur Administration Fee: A fee of ISK 1.86 per kilometer (including VAT) to cover processing and compliance.

The total rate you will pay is ISK 8.81 per kilometer. For example, a 1,500-kilometer trip around the Ring Road would result in a charge of ISK 13,215. This amount will be charged to your credit card at the end of your rental period.

Good News: Lower Prices at the Pump

To offset this new tax, the government has removed specific excise duties on fuel. This means you will see a significant drop in fuel prices.

• Petrol: Approximately ISK 94 less per liter.
• Diesel: Approximately ISK 87 less per liter.

These savings at the pump help balance the overall cost of driving, making your daily expenses for fuel considerably lower.

Tips for Driving in Iceland

Driving in Iceland presents unique challenges and rewards. Being prepared is key to a safe and enjoyable journey.

• Check Road Conditions: Weather can change rapidly. Always check the latest road status at umferdin.is and weather forecasts at vedur.is before you set out.
• F-Roads: These mountain roads are only open in summer and legally require a 4x4 vehicle. Off-road driving is strictly illegal and damages the delicate environment.
• Winter Driving: From October to April, a 4x4 is highly recommended for improved traction on snow and ice. All our vehicles are fitted with season-appropriate tires at no extra cost during the winter months.
• Insurance: Your rental includes a Collision Damage Waiver (CDW) and other basic protections. We strongly recommend additional coverage like Gravel Protection (GP) and Sand and Ash Damage Waiver (SADW), as many roads outside of main towns are unpaved.

Why Choose Holdur Car Rental?

As Iceland's largest car rental service and the official franchisee for Europcar, we combine decades of local expertise with global standards of quality.

• Iceland's Largest Fleet: With over 8,000 vehicles, we offer everything from compact cars to rugged 4x4s and spacious motorhomes.
• Convenient Locations: We have 20 rental stations across Iceland, including at Keflavík International Airport (KEF), Reykjavík, and Akureyri.
• Customer-Focused Service: Enjoy benefits like unlimited mileage on most rentals, 24/7 roadside assistance, and flexible cancellation up to 48 hours before pickup.
• Transparent Process: We handle the administration for the new kilometer tax automatically. Your final invoice will provide a clear breakdown of all charges with no hidden fees.

FAQs

How does the new kilometer-based road tax affect my rental costs?

Starting January 1, 2026, all rental vehicles in Iceland are subject to a kilometer-based road tax. The tax is calculated according to the distance you drive during your rental and is charged at ISK 8.81 per kilometer. This fee is processed automatically at the end of your rental and detailed on your final invoice for transparency.

Should I rent an electric car or a 4x4 for my trip?

Your choice depends on your planned route and season. Electric cars are ideal for paved roads, city travel, and summer road trips. A 4x4 is recommended if you plan to explore the Highlands, drive F-roads, or visit Iceland during the winter months for added traction and safety.

Are there enough charging stations for electric vehicles in Iceland?

Yes. Iceland’s charging infrastructure is robust and expanding, with charging stations available in major towns, around the Ring Road, and at select hotels and attractions. It’s wise to plan your charging stops ahead of time, particularly for longer journeys.

What insurance options are available for my rental?

Every Holdur rental includes Collision Damage Waiver (CDW), third-party liability, and Personal Accident Insurance (PAI). We also offer additional coverage options such as Gravel Protection (GP), Sand and Ash Damage Waiver (SADW), and Super Collision Damage Waiver (SCDW) for added peace of mind. Our team can assist you in selecting the best protection for your needs.

What are F-roads and can any car drive on them?

F-roads are Iceland’s mountain roads, often unpaved and only open in summer. A 4x4 or AWD vehicle is legally required to drive on these routes. Standard passenger cars are not permitted, and off-road driving is strictly prohibited to protect the environment.

What should I know about driving in winter?

Winter conditions in Iceland can be challenging due to snow, ice, and rapidly changing weather. A 4x4 vehicle with studded winter tires is highly recommended for safety. Always check local weather and road conditions before setting out, and allow extra time for your journey.

Can I pick up or drop off my rental car at different locations?

Yes. Holdur offers one-way rentals between our 20+ locations throughout Iceland, including major airports and cities. This provides flexibility to plan your route without the need to return to your original pick-up point.

Is it possible to rent a car without a credit card?

A credit card in the primary driver’s name is required as a security deposit for all rentals. Debit cards are generally not accepted for this purpose. Please contact our team if you have specific questions about payment methods.

 

Start Your Icelandic Adventure

Renting a car is the ultimate way to experience the land of fire and ice. With the right vehicle and a clear understanding of the road ahead, you are ready for an unforgettable journey. Trust Holdur to provide a reliable vehicle and exceptional service for your 2026 trip.

Ready to explore Iceland? Search our wide selection of vehicles and book your car today.

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