Planning a self drive in Iceland usually triggers the same questions. Do you really need a rental car? What does a car rental in Iceland cost once you include fuel, parking, tolls, and the new kilometer based road tax? And how do you keep your budget under control without sacrificing peace of mind?
This guide breaks down the real cost of driving in Iceland in clear, practical terms. You will get realistic price ranges, budgeting examples, a decision checklist, and simple ways to avoid the common cost traps that cause surprise invoices after the trip.
If you are comparing providers, start with a fair framework. Our guide on how to choose the perfect Iceland car rental company shows exactly what to compare so you are looking at total trip cost, not a low headline rate.

Do you need a rental car in Iceland?

A rental car is not mandatory for every trip, but it is the most flexible way to see Iceland on your schedule. Use this quick checklist.

• You will usually benefit from a car if you want to explore beyond Reykjavík. The Golden Circle, the South Coast, Snæfellsnes, and the Ring Road are easier with your own wheels, especially when two or more travelers share costs. If your first days are classic sights, our Golden Circle guide is a good starting point. 
• You prefer sunrise stops, late night northern lights drives, or empty parking lot moments. Tours run on fixed timetables, a car lets you time around weather windows and crowds. If you want a shoulder season strategy that keeps costs down and crowds lighter, see the ultimate off season Iceland road trip guide. 
• You are visiting for five days or more. Short city stays can work with day tours, but a week or more usually favors a rental car because per day tour costs add up quickly.
• You are comfortable with basic rural driving. Iceland’s main roads are well maintained, but you should still check conditions daily. The Driving in Iceland guide is the page to bookmark before you commit to a long route.

If you are still deciding where to pick up, read rent at KEF Airport or Reykjavík and choose based on your itinerary, arrival time, and budget.

 

If most boxes above are “yes,” a rental car will likely improve your trip and reduce per-person costs. If your plan is two days in Reykjavik with one guided Golden Circle tour, you can skip the car until you are ready for a road trip.

For more help choosing a provider, see how to choose the perfect Iceland car rental company on our blog for a simple, fair comparison framework that avoids common traps.

 

How much is a rental car in Iceland

Daily rates depend on season, vehicle class, and what is included. For 2025, realistic ranges often look like this.

• Small cars are commonly $40 to $90 per day.
• Mid size cars and compact SUVs often land around $70 to $140 per day.
• 4x4 vehicles and larger SUVs often range $100 to $220 per day.
• Electric vehicles often sit around $80 to $180 per day.

Those figures are for the car itself. The big variable is what is included. Many companies advertise a low base rate, then add multiple insurance products and extras at pickup. If you want to see what a full breakdown looks like, use how much does it cost to rent a car in Iceland as your benchmark.

If you want to choose the right vehicle class for your route, not just the cheapest one, use the best cars for every traveler and trip. It saves money by preventing the wrong car choice, like paying for a 4x4 you do not need or choosing a small car for a winter heavy itinerary. 

Seasonal patterns to expect

• June to August is peak season. Inventory is tight and prices are highest.
• May and September are strong value months with long daylight.
• October to April often has lower base rates, but plan for winter conditions, short daylight, and occasional weather holds. 

If you are traveling in the colder months, read winter tires in Iceland so you understandwhat tires do, and what they do not do.

If you want deeper model-by-model advice, read our Iceland car rental guide: best cars for every traveler and trip for tailored picks from budget city hatches to Highland-ready 4x4s and EVs.

4 Factors That Impact Your Total Driving Budget

1. Fuel Prices and EV Charging (Post-KM Tax)

Fuel is still a meaningful driving cost in Iceland, but prices have dropped dramatically following the introduction of the kilometer-based road tax. The reduction comes from fuel taxes being lowered, with road maintenance now partly funded through the fixed KM fee instead.

What prices look like today:

Budget stations and Costco locations are as low as 170–185 ISK per liter

Most major stations across the country cluster around 200–215 ISK per liter

Remote locations and smaller towns can be slightly higher, but still far below previous levels

For trip planning, a realistic nationwide budgeting range is 190–215 ISK per liter, which reflects what travelers will actually encounter on the Ring Road and main routes.

This is roughly 100 ISK cheaper per liter than before, and it has a noticeable impact on total trip costs, especially on longer itineraries.

If you are considering an electric vehicle, fuel savings are replaced by charging planning. Use our guide to the best travel apps in Iceland to locate charging stations efficiently, avoid detours, and plan charging stops without adding unnecessary mileage.

2. The 2026 Kilometer-Based Road Tax

As of 2026, Iceland has fully implemented a kilometer-based road usage tax. This system ensures that all drivers contribute fairly to road maintenance, regardless of whether the vehicle runs on petrol, diesel, or electricity.

How it works: You are charged based on the total distance driven during your rental period.

Budgeting tip: Plan a realistic itinerary. Instead of chasing every single sight across the country, focus on specific regions to keep your mileage and overall road tax lower. For a full explanation of how the tax is calculated and applied to rental cars, see our Iceland road tax 2026 guide.

3. Parking Fees (The Most Common Surprise Cost)

Parking fees are one of the most common sources of unexpected charges for visitors. Major attractions such as Seljalandsfoss, Þingvellir, and Skaftafell, along with downtown Reykjavík, use pay-by-plate camera systems.

Most locations require payment via mobile apps such as Parka or EasyPark, often without physical ticket machines. To avoid fines or post-trip invoices from your rental company, read our guide on avoiding parking and toll surprises in Iceland.

4. Tolls

The only toll most travelers encounter is the Vaðlaheiðargöng tunnel near Akureyri in North Iceland. There are no physical toll booths. Payment must be completed online within the official payment window after passing through the tunnel.

Failing to pay on time results in a significantly higher charge once the invoice reaches the rental company. If your route includes North Iceland, set a reminder and treat this toll as part of your daily driving costs.

5. Extras that add up

Additional drivers, child seats, roof boxes, and after-hours counters can all change your total. Zero’s self-service pickup and drop-off at Keflavík International Airport and our Reykjavik office remove queue time and late-arrival stress. Even with keyboxes, there is always staff at the KEF office to help if you have questions or need assistance.

Example budgets you can actually use

The examples below use realistic assumptions based on current fuel prices, the fixed kilometer-based road tax used by Zero Car, and typical parking and toll costs.

Adjust the daily car rate up or down depending on season and vehicle availability.

Scenario A: 7 Days on the Ring Road

Two travelers · Small car

Car

• 7 days × $70 per day
• Total: $490

Fuel

• Distance: 1,332 km (Ring Road)
• Consumption: ~6.0 L per 100 km
• Total fuel: ~80 liters
• Price range: 190–215 ISK per liter

Estimated fuel cost: ISK 15,000–17,000 (≈ $110–125)

Road tax

• Fixed fee: 1,550 ISK per day
• 7 days: ISK 10,850

Tolls and parking

• One tunnel crossing + attraction parking
• Estimated: ISK 6,000–8,000

Total vehicle budget

• $630–$670 for the week
• $315–$335 per person

Scenario B: 7 Days With a Compact SUV

Three travelers · Duster-type vehicle

Car

• 7 days × $110 per day
• Total: $770

Fuel

• Distance: 1,332 km
• Consumption: ~7.0 L per 100 km
• Total fuel: ~93 liters
• Estimated fuel cost: ISK 18,000–20,000 (≈ $130–145)

Road tax

• 7 days × 1,550 ISK
• Total: ISK 10,850

Tolls and parking

• Estimated: ISK 6,000–9,000

Total vehicle budget

• $930–$980 total
• About $310–$330 per person

Scenario C: 10 Winter Days in the West and South

Family of four · Mid-size 4x4

Car

• 10 days × $140 per day
• Total: $1,400

Fuel

• Distance: ~1,000 km
• Consumption: ~8.0 L per 100 km
• Total fuel: ~80 liters
• Estimated fuel cost: ISK 15,000–17,000 (≈ $110–125)

Road tax

• 10 days × 1,550 ISK
• Total: ISK 15,500

Parking and tunnel

• Estimated: ISK 5,000–8,000

Total vehicle budget

• $1,550–$1,600 for the trip
• About $390–$400 per person

Do you need a 4x4 or is a small car enough

• Summer on paved routes such as Golden Circle, South Coast to Vík, Snæfellsnes loop, and most of the Ring Road is comfortable in small and mid-size cars.
  
• Family space or winter stability often points to crossovers and mid-size SUVs.
  
• Highlands F-roads are summer-only mountain tracks that require a four-wheel-drive vehicle by law and experience with gravel, fords, and variable surfaces. A standard 2WD is not permitted on F-roads. If you plan F-roads, choose the correct 4x4 and check road and river conditions every day.
  

Most rental insurance does not cover river crossings and water ingress. Even in a 4x4, treat unbridged fords with caution or join a guided super-jeep tour to reach those locations safely.

For an at-a-glance picker with pros and cons by route and season, bookmark our best cars for every traveler and trip guide.

Practical tips to reduce your total cost

• Book early in peak months. Iceland is a small market and summer inventory sells out quickly. Last-minute bookings are expensive, while early booking in shoulder months still helps you secure the right car class.

• Pick up at KEF Airport. Airport pickup saves transfer costs and time. Zero Car’s secure keybox system means no queues, and there are always staff at the KEF office if you need assistance with pickup or questions.

• Compare the whole price, not the headline rate. Always compare what is included: insurance, mileage, roadside assistance, extra drivers, and deposit requirements. A fair all-inclusive rate is often cheaper than a low base price with paid add-ons at pickup.

• Drive smoothly. Iceland rewards steady speeds and gentle acceleration. With current fuel prices now significantly lower than before, efficient driving still adds up to meaningful savings over a full road trip.

• Plan your route with parking in mind. In Reykjavík’s P1 zone, budget around 630 ISK per hour, and about 230 ISK per hour in P2 to P4 during posted hours. Outside the capital, many car parks are free or charge a modest fee that helps maintain trails and facilities.

• Use the tunnel smartly. If you drive through the Vaðlaheiðargöng tunnel near Akureyri, pay online within the payment window to avoid higher charges later.

• Travel off-peak when possible. May and September often offer excellent road conditions, long daylight, better accommodation availability, and lower overall costs across cars and hotels.

Why Zero Car often costs less in real life

On paper, many rentals look cheap until you add everything you actually need. Zero Car includes the essentials upfront so you can plan confidently and avoid surprises.

• Full insurance with zero excess is included, so you are not juggling add-ons or facing a deductible later.

• Roadside assistance is included with no deductible, which is uncommon in the market but standard with Zero Car.

• Unlimited mileage applies to every booking, so you can drive freely without tracking distance.

• No deposit and no hidden fees keep your credit card free for the rest of your trip.

• Seamless self-service pickup and drop-off 24/7 at KEF and Reykjavík, with staff always available at the airport if you want help.

• A diverse fleet, from budget small cars to family SUVs, 4x4s, and electric vehicles, makes it easy to choose the right car for your route and season.

If you want the deeper explanation, see our guide on why renting a car in Iceland with Zero is the best decision.

Putting it all together

• You need a rental car in Iceland if you want flexibility, sunrise and northern lights chasing, or multi-day exploration beyond Reykjavík.

• A fair daily price for most travelers typically falls between $70 and $150, depending on season and vehicle type, with small cars below that range and larger 4x4s above it.

• Your total budget depends on what is included, lower current fuel prices, the fixed daily road tax, occasional parking fees, and a single toll tunnel if you visit North Iceland.

• The simplest way to save is to book early, travel in shoulder months, choose the right car for your route, and pick an all-inclusive provider so you are not paying per-day extras.

When you are ready, compare cars and dates and focus on the total price you pay to drive away. That is the number that actually matters.