Car Rentals in Iceland

Since January 1, 2026, Iceland charges a kilometer fee (kílómetragjald) to pay for its roads. Instead of taxing the fuel you buy at the pump, the government now charges for the distance a vehicle drives.

Is this a price increase?

For most travelers, it shouldn't be. The government removed the road taxes from gasoline and diesel when the kilometer fee started, and says the law is designed to keep the cost of driving an average gasoline car about the same as before. You'll see the fee on your rental invoice instead of paying it at the pump.

How much is the fee?

For cars, SUVs and vans up to 3,500 kg, the fee is 6.95 ISK per kilometer. For rentals of 30 days or less, rental companies can instead charge a fixed daily fee of 1,390 ISK per started rental day, whatever distance you drive. The two cost the same at 200 km a day.

Why did the law change?

Roads used to be paid for through fuel taxes. With more electric cars on the road, that system no longer worked well. Now every vehicle pays for road use by distance, whether it runs on gasoline, diesel or electricity.

I'm renting an electric car. Do I still pay?

Yes. Since 2026, all vehicles pay the kilometer fee, whatever powers them, at the same rate by weight.

How do I pay this fee?

You pay it to the rental company, which pays it to the government. Depending on the company, you'll pay either:

• a kilometer fee after your rental, based on the odometer reading when you return the car, or
• a daily fee of 1,390 ISK per rental day, usually charged at the desk.

When you book on Northbound, you'll see the calculation method and an estimate of the fee at checkout and on your voucher. Your rental terms say whether it's charged at pickup or at return.

For the full guide, with example costs and winter tips, see Road Tax in Iceland 2026: The Kilometer Fee for Rental Cars Explained.

There is a car rental pickup & return available from the following locations:

• Keflavik International Airport
• Keflavik / Reykjanesbaer
• Reykjavik Domestic Airport
• Reykjavik Capital
• Some Guesthouses/Hotels

If you want to return your vehicle at a different location than pickup, there might be an added fee.

The right rental vehicle depends on your travel plans and the time of year. For most travelers driving the Ring Road in summer, a compact or economy car is enough. If you're visiting in winter or plan to drive on F-roads (mountain roads), a 4x4 vehicle is highly recommended. For added comfort or longer trips, many travelers choose a campervan or motorhome to combine transport and accommodation.

Northbound’s search filters make it easy to find the right vehicle for your route, group size, and budget.

You can book your vehicle on Northbound using a credit-card or some 16-digit debit cards.

The card holder does not need to be the same person as the driver. However, a credit card might need to be presented at the time of vehicle pickup where there is a security deposit or imprinting required.

You can go to our Debit Card Car Rentals website for further information about renting a vehicle with a debit card in Iceland.

Booking early is the easiest way to save, especially in high season. You can choose any type of vehicle, as we work with suppliers who offer fuel-efficient options across all categories.

Also, as an added tip, always make sure you have the correct insurance for your needs, reduce the likely hood of getting fines by driving responsibly and return the vehicle on time and full of fuel.

Read further for visiting Iceland on a budget

Mandatory insurances like Collision Damage Waiver (CDW) and Third Party Liability (TPL) are always included in your rental. Many suppliers also offer optional upgrades such as gravel protection, sand and ash coverage, and even zero-risk insurance that reduces your liability to zero in case of damage. It’s a good idea to choose coverage based on your preferences and comfort level.

Yes. All prices listed on Northbound include mandatory fees such as basic insurance, taxes, and airport charges when applicable. You’ll see the full cost before you book, no hidden fees & no surprises. Optional extras like additional insurance or GPS and more can be added during the booking process.

The minimum age to rent a car in Iceland depends on the supplier and the vehicle type. Larger vehicles such as 4x4s, campers and motorhomes can have a higher minimum age. Each vehicle page shows its age requirement, so check it for the vehicle you're booking.

Yes, renting a car in Iceland is highly recommended. It gives you the freedom to travel at your own pace and explore places that are hard to reach with public transport. The international airport (KEF) is about 40 km (25 miles) from Reykjavik, and getting there by bus can be quite expensive, especially for families or groups. In many cases, renting a car is actually more affordable.

The weather in Iceland can also be unpredictable, with strong winds, rain, or snow even in the summer. That's why locals often say that a car is the “Icelander's coat.” It keeps you warm, dry, and mobile when walking or waiting for buses just isn’t practical.

If you have any questions, Contact Us and our team will get back to you.

You’ll need a valid driver’s license, a passport or national ID, and a credit card (or eligible debit card) in the main driver’s name. Some suppliers may require you to have held your license for at least 12 months.

Cost of renting a car in Iceland with Northbound will typically range from $27/day to around $150/day, depending on vehicle type, season, and availability. Early booking usually guarantees the lowest rates. Let us know if you find a lower price else where and we will match it with our price match guarantee promise.

Usually, yes. Most cars booked through Northbound include unlimited mileage, but check the car's terms.

It depends on the supplier. Some offer after-hours pickup, often with a key box or shuttle service, while others don’t allow it at all. In some cases, there may be an extra fee. When booking through Northbound, you’ll see each supplier’s pickup options clearly listed, so you can choose what works best for your arrival time.

You can rent a car at KEF Airport by booking online through Northbound. We let you compare prices from both local and major suppliers with pickup options directly at the airport or via shuttle. Just choose “Keflavik Airport” as your pickup location during booking. All rentals include free cancellation, full pricing transparency, and a price match guarantee.

No, you can't drive on F-roads with a regular (2WD) car in Iceland. F-roads are mountain roads with rough surfaces, loose gravel, and sometimes river crossings. Only 4x4 vehicles are allowed by law. If you drive a regular car there, you risk fines, damage that insurance won't cover, and getting stuck. If you're heading into the Highlands in Iceland, make sure to rent a 4x4.