All-inclusive car rental in Iceland
In Iceland an all-inclusive rental gives you full insurance with zero excess - the single most valuable thing here, because gravel, sand and volcanic ash make damage common and local desks otherwise sell costly extra cover.
Iceland is one of the world’s great road trips: the Ring Road links thundering waterfalls, black-sand beaches, geysers and a glacier lagoon, while the summer-only highland F-roads reach a raw, empty interior. A car is the only practical way to see it.
It is also the place where rental insurance matters most. Loose gravel, windblown sand and volcanic ash make minor damage common, so the zero-excess cover in a Cardamar all-inclusive booking - handled by Sunny Cars - is genuinely valuable here, not just a nicety.
Good to know before you drive in Iceland
| Drives on | Right-hand side |
|---|---|
| Minimum rental age | Usually 20 (23-25 for 4x4/larger) |
| Speed limit | 90 km/h paved, 80 km/h gravel |
| Toll roads | None, except the Vaðlaheiði tunnel near Akureyri |
| Best months to drive | June-August for the highlands; Ring Road year-round |
Popular places to rent a car in Iceland
Self-drive routes in Iceland
Prefer to plan a drive? These scenic routes come with a full guide and where to pick up your all-inclusive car.
Driving tips for Iceland
- F-roads (the mountain interior) are unpaved, summer-only and legally require a 4x4 - driving them in a 2WD voids your insurance entirely.
- Watch for single-lane bridges, blind summits (blindhæð), loose gravel and sheep on the road; headlights must be on day and night.
- No insurance covers river-crossing (water) damage - never ford a river unless you know its depth and your rental explicitly allows it.
The Ring Road and the F-roads
Iceland’s Route 1 - the Ring Road - circles the island on good paved tarmac and opens up the south-coast waterfalls, the glacier lagoon at Jökulsárlón, Akureyri in the north and the eastern fjords. It is drivable year-round, but winter demands care, winter tyres and flexible plans.
The interior highlands are reached by F-roads: unpaved mountain tracks that open only in summer (roughly late June to mid-September) and legally require a 4x4. Driving an F-road in a 2WD is illegal and voids your insurance, and no policy ever covers damage from crossing rivers.
Insurance in Iceland: why zero excess matters most here
Iceland is the destination where rental insurance matters most. Loose gravel chips paint and windscreens, and windblown sand and volcanic ash in the south can strip a car’s paint in minutes - which is why local desks sell separate gravel protection (GP) and sand-and-ash protection (SAAP) on top of a high excess, often €1,000-3,000.
An all-inclusive Cardamar booking with zero excess removes that pile of add-ons and the deductible in one go. Confirm the Iceland-specific terms shown at booking, but the principle is simple: the rougher the roads, the more a zero-excess price is worth.
Driving conditions and the weather
Beyond the surface, Iceland’s roads have their own etiquette: single-lane bridges (einbreið brú) where you yield to the nearest car, blind summits, gravel shoulders and sheep that wander onto the tarmac. Headlights must be on at all times.
The weather changes fast - check road.is and vedur.is before each leg. In winter, daylight is short and conditions can close roads at short notice, so build slack into your plans and use free cancellation to stay flexible.
No tolls, and where you collect the car
Iceland has no road-toll network: the only charge is the Vaðlaheiði tunnel near Akureyri, paid online within 24 hours. Almost every rental is collected at Keflavík Airport (KEF), about 45 minutes from Reykjavík, with downtown Reykjavík and Akureyri as alternatives.
An all-inclusive Cardamar booking already includes full insurance, zero excess, unlimited mileage and airport fees, so on top of the rental you only budget for fuel - which is pricey in Iceland, so fill up when you can.
All-inclusive vs. a cheap basic rate plus counter insurance
Two cars on the same lot in Iceland can advertise very different prices. The gap is almost always insurance: an all-inclusive rate settles it up front, while a "basic" rate leaves you to buy excess cover at the desk. Here is what each really means.
| All-inclusive (Cardamar) | Basic rate + counter insurance | |
|---|---|---|
| Damage & theft excess | €0 – fully covered | High excess (often €800–2,000) blocked on your card |
| When you insure | Before you travel, at a fixed price | At the desk, under time pressure, price varies |
| Tyres, glass & undercarriage | Included | Usually excluded or charged extra |
| Deposit / card hold | None or low at most stations | Large hold blocked for the whole trip |
| Cancellation | Free cancellation | Often non-refundable |
| What you pay in total | Known the moment you book | Can climb sharply at the counter |
A basic rate can look cheaper online, but once you add proper excess cover at the desk it usually costs more than an all-inclusive booking - with none of the certainty.
Iceland car rental - FAQ
Do I need a 4x4 in Iceland?
For the paved Ring Road and the south and west in summer, a 2WD is fine. For the highland F-roads a 4x4 is legally required, and a 2WD there voids your insurance. In winter a 4x4 with winter tyres is safer everywhere.
What are gravel and sand-and-ash protection?
Two Iceland-specific covers: gravel protection (GP) for stone chips on unpaved roads, and sand-and-ash protection (SAAP) for windblown sand and volcanic ash, common in the south. An all-inclusive zero-excess booking avoids paying these separately - confirm what your Iceland terms include.
Are there tolls in Iceland?
Almost none. The only toll is the Vaðlaheiði tunnel near Akureyri, paid online within 24 hours of passing. There are no other road tolls in the country.