By Car

Icelanders love their cars for good reason: Iceland has no train transport, and many of Iceland's most beautiful sights are far from populated areas. A private vehicle can be even more necessary in the "shoulder season" (Apr-May and Sept-Oct), when most buses and tours are not operating. Renting a car is costly, but it often stacks up well against air and bus travel, especially if you have three or four passengers. Reykjavík is easy to get around in without a car, and parking there can be a nuisance, so many visitors rent a car upon leaving the city.

Route 1, usually referred to as "The Ring Road," is 1,328km (825 miles) long and circles the entire island. Almost all of it is paved, and it's plowed all winter. Only about a third of Iceland's total road network is paved, however.

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Rentals

It's generally cheaper to rent a car before you arrive at the airport. If you rent in Reykjavík (as opposed to at the airport, which is over 48km/30 miles away), most agencies will deliver the car to your hotel (or deliver you to the car) and then pick up the car (or deliver you to your hotel) when you're done.

Most agencies offer a choice between limited and unlimited mileage plans. Expect to pay at least 5,000kr per day for a small car with unlimited mileage. For a 4WD vehicle, prices start around 18,000kr. If you pick up the vehicle in one location and drop it off in another, the drop-off fee is usually at least 6,000kr. Renting a car usually requires a credit card as a form of deposit.

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The major car-rental agencies in Reykjavík include Avis, Reykjavík City Airport (tel. 591-4000); Holdur/Europcar, Skeifan 9 and Reykjavík City Airport (tel. 461-6000); Budget, BSÍ bus terminal (tel. 562-6060) and Reykjavík City Airport (tel. 551-7570); and Hertz, Holtavegur 10 and Reykjavík City Airport (tel. 562-6060).

Although the majors will have more pickup and dropoff locations, and often better resources for dealing with breakdowns and mishaps, local agencies are generally reliable and slightly cheaper, and you’re usually getting the same product. Consider taking the Flybus airport shuttle (tel. 580-5400) from the airport to Reykjavík, then renting from a local agency once you’re ready to leave the city. Agencies in the Keflavík area can also meet you at the airport. Recommended local agencies that can meet you at Keflavík International Airport include Geysir, Blikavöllur 5 (tel. 893-4455); and SS Car Rental, Iðjustígur 1, Njarðvík (tel. 421-2220). Recommended local agencies that will deliver a car to your hotel in Reykjavík include ÁTAK Car Rental, Smiðjuvegur 1, Kópavogur (tel. 554-6040), which carries automatics; Sixt, Keflavík (tel. 540-2221); and SAD Cars (tel. 577-6300), which, believe it or not, gives new life to used cars (max 5 years old).

The travel agency Touris (Frostaskjól 105, Reykjavík; tel. 551-7196) has good deals on packages combining 4WD rentals with lodging. 

Age Limits & Licenses: Generally you must be 21 to rent a regular car in Iceland and 23 to rent a 4WD vehicle, but company policies vary. No maximum age limit is in effect. All national driver's licenses are recognized, so you do not need an international one.

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Insurance: Basic third-party liability insurance is included in car-rental rates. Cars usually come with a standard collision damage waiver but a high deductible; in other words, if you get into a scrape you are liable for, say, the first 195,500kr in damages, beyond which the insurance pays. For an extra cost—say, 2,500kr per day—you could bring the deductible down to 25,500kr on a standard car. This is often a good idea as cars face hazardous conditions.

Driving on prohibited mountain roads will void your insurance on regular cars. The letter “F” precedes the numbers of mountain roads on maps and road signs. Even with 4WD vehicles, insurance is often voided if you attempt to cross rivers. Standard insurance does not cover damage to the car from a collision with an animal, and you may have to compensate the animal’s owner as well. Even for minor accidents, be sure to get a police report so your insurance will cover it. Note: Many agencies offer sand and ash insurance, which confuses nearly everyone. Freak sand storms with heavy winds, sometimes called ash storms, can blow dry earth onto vehicles and severely damage the paint job. They usually happen in the winter, occasionally in the spring or fall, and are limited primarily to the south of the country. If you’re not going to the south, don’t worry about it.

Automatic vs. Manual Transmission: Even the major Icelandic car-rental companies have very few cars with automatic transmissions. They must be reserved in advance, and usually cost about 10% more.

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2WD vs. 4WD: Many of Iceland's most beautiful landscapes are accessible only to 4WD vehicles, so if you're in a regular car, be prepared for serious envy as you watch the 4WD vehicles turn off the Ring Road into the great unknown. All the major agencies rent 4WD vehicles and can provide you with tow ropes, shovels, extra fuel cans, and GPS navigational systems. On the other hand, the vast majority of roads are accessible to regular cars, and for the more difficult traverses, you can take buses or sign up for 4WD tours. This saves money on fuel, and the environment will thank you.

Campers: Icelanders often travel in campers, and the concept of a "portable hotel" holds great appeal in a country with so much open space and so many accessible campgrounds. As hotel prices continue to rise, it is becoming an increasingly popular option for traveling around the country. Some recommended agencies, all of which have a wide range of vehicles, include Happy Campers, KúKú Campers, and Go Campers.

Driving Laws: Icelanders drive on the right side of the road. Unless otherwise marked, speed limits are 30kmph (18.5 mph) in residential areas, 50kmph (31 mph) in towns, 80kmph (50 mph) on unpaved roads, and 90kmph (56 mph) on paved roads. No right turns are allowed at red lights. In rotaries (aka roundabouts), right of way goes to the driver in the inside lane. Headlights must always be on.

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Seat belts are mandatory in both front and back seats, and children under 6 must be secured in a car seat designed for their size and weight; these are usually available for rent, but you may want to bring your own. No one less than 140cm (4ft. 7in.) tall, weighing less than 40kg (88lb.), or under the age of 12 is allowed to ride in a front seat equipped with an airbag. Talking on phones is prohibited unless you have a hands-free system. Many intersections in the capital have automatic cameras to catch traffic violators.

The blood alcohol limit is extremely strict at .05%, so getting behind the wheel after just one drink could make you guilty of a crime. Drivers stopped under suspicion for drunk driving are usually given a “balloon” or breathalyzer test, which cannot be refused.

To protect the fragile sub-Arctic vegetation, all off-road driving is strictly prohibited, except on some beaches.

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Driving Safety: Iceland is not for Sunday drivers. Weather conditions are erratic; roads are winding and narrow, with no guardrails and many blind spots; and most routes are unpaved. We cannot emphasize enough how important it is not to speed; a majority of fatal car accidents in Iceland involve foreigners unfamiliar with the country's driving hazards.

Before you set out, ask your car rental agency about potentially difficult road and weather conditions, especially in the off season. For road conditions, Icelanders rely heavily on information continually updated by the Public Roads Administration at tel. 354-1777 (May-Oct 8am-4pm; Nov-Apr 8am-5pm) or www.vegag.is. For weather, contact the Icelandic Meteorological Office (tel. 902-0600, press "1" for English; www.vedur.is).

Most roads are steeply sided and do not have shoulders -- two seconds of inattention and you could topple off the road into great danger. Many road signs indicate dangers ahead, but few specify how much to reduce your speed, so always be on the safe side. Slow down whenever pavement transitions to gravel; tourists often skid off gravel roads, unaware of how poor traction can be on loose dirt and stones. Flying stones launched by oncoming traffic are another hazard on gravel roads, often cracking car windows; slow down and move to the side, especially if a larger vehicle is approaching. For traction, it's often safer to slow down by lowering the gears instead of using the brakes.

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Most bridges in Iceland are single lane -- signposted Einbreið brú -- and the first car to reach it has right-of-way.

Always bring sunglasses into the car. Glare is a common hazard, and the sub-Arctic sun is usually low to the horizon.

Be on the lookout for sheep on the road, particularly when a lamb is on one side and its mother is on the other.

Mountain Roads and Fording Rivers: Do not attempt highland interior routes in a 2WD car. Roads that require 4WD vehicles are indicated by the letter “F” on road signs and maps. The safest procedure on these roads is to travel with other cars. Always carry repair kits and emergency supplies, and on particularly remote routes, inform someone of your travel plans before setting out. If you don’t have a GPS navigation system, at least bring a compass.

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Unbridged river crossings for 4WD vehicles are marked on maps with the letter “V.” Water flow at these crossings can change dramatically and unpredictably from hour to hour. A sudden increase in flow can be caused not only by rain, but also by the sun melting glacial ice. Water levels are usually lower earlier in the day. Several drivers have drowned in river crossings; always seek advice if you have any doubts. Many drivers wait and watch other vehicles cross before making their own attempt. Sometimes it’s necessary to check the water depth by walking into the current; bring sturdy rubber sandals, a life jacket, and a lifeline for this purpose. Before crossing, make sure the 4WD is engaged. Drive in first gear and use “low” drive if you have it. It sometimes helps to cross diagonally in the direction of the current.

Off Season: In winter the weather is particularly volatile and daylight hours are limited. Most roads are open by April or May, but some interior routes are impassable as late as early July. Make sure your vehicle has snow tires or chains, and always pack blankets, food, and water in case you get stranded.

Filling Stations: Iceland has many long gaps between fuel stops, so keep your vehicle filled and know how far you can go before you have to refill the tank. Many pumps are automated and remain open 24 hours. Machines for swiping your credit or debit card usually expect you to know the card’s PIN. The machines also ask you to input the maximum amount you want to spend, but you are only charged for what is pumped. N1 and Olís, the companies with the most stations in Iceland, both sell prepaid cards. Some small-town stations indicated on maps are tiny operations, so you may want to call ahead to make sure they’re open.

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Road Maps: The Iceland Road Atlas (Stöng Publishers), updated every 2 years, is a phenomenal compendium of maps and information and a must-have for any serious road trip. It’s nearly impossible to find online or abroad, but it is available at most Iceland car-rental agencies and many fuel stops and bookstores. Each map is focused narrowly on short stretches of individual roads, so you may prefer a simpler road atlas that gives you the big picture; these are easy to find.

Carpooling: Samferða (www.samferda.net) effectively connects people looking to carpool on specific routes at specific times. Anyone receiving a ride is expected to share the costs of gas or car rental. The bulletin board at Reykjavík City Hostel is also popular with visitors looking to split car costs.

By Bus

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Iceland's bus system is reliable and punctual. Public buses link all major towns, and even some barren interior routes are covered in summer. (Icelandic buses are impressive machines, chugging right through rocky terrain and raging rivers.) Buses are up to European standards of comfort.

Several bus companies operate in Iceland, but all scheduled routes are coordinated by Iceland's main bus company, BSÍ (tel. 562-1011 daily 4:30am-midnight; www.bsi.is). Bus schedules are available online or at bus stations and tourist information offices across the country. The website www.nat.is is also great for bus timetables and bookings; click "Travel Guide," then "Transportation," then "Bus Schedules and Rental." Most long-distance bus routes run only in summer.

Buses on the Ring Road do not require reservations, and you can pay on board with cash or credit card. In small towns the bus stop is usually the main filling station. Coverage of the Ring Road is complete from June through August, but from September through May it extends only from Reykjavík to Akureyri in the north and to Höfn in the southeast.

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Bus travel is not as inexpensive as you might think compared to car and air travel, especially for longer distances. Reykjavík to Akureyri by bus costs around 10,200kr, more than the cost of a flight. Bus passes can make travel more economical. An enjoyable way to see Iceland is on Reykjavík Excursions (tel. 580-5400) bus passes, available online or at the BSÍ terminal in Reykjavík. For example, the Iceland On Your Own bus pass includes coverage on all routes, including through the interior, for 30,200kr.

By Plane

Air travel in Iceland is common, easy, cost-efficient, and often necessary, especially in winter. Booking online and in advance is likely to save you money. Some routes are highly trafficked (like Reykjavík to Akureyri, 10 flights per day in summer) and some far less so (Reykjavík to Gjögur, twice per week).

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Air Iceland (tel. 570-3030) handles most domestic air travel, serving seven destinations inside Iceland (Reykjavík, Akureyri, Egilsstaðir, Ísafjörður, Grímsey, Þórshöfn, and Vopnafjörður) as well as the Faroe Islands and Greenland. Children under 12 get 50% off on Air Iceland.

Eagle Air (tel. 562-4200) connects Reykjavík to Westman Islands, Sauðárkrókur, Hornafjörður (Höfn), Bíldudalur, and Gjögur, and also offers sightseeing tours.

One-way prices from Reykjavík began at 16,200kr to the Westman Islands (25 min.), 11,500kr to Akureyri (45 min.), and 16,600kr to Egilsstaðir (1 hr.).

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Note: Because of Iceland’s high winds and unpredictable weather, you should always be prepared for delays and cancellations, especially in winter.

By Boat

Iceland’s ferry system is often used by tourists. The only ferries that take cars are the Baldur, which connects Stykkishólmur on the Snæfellsnes peninsula to Brjánslækur in the Westfjords, and the Herjólfur, which connects Landeyjahöfn to the Westman Islands. 

Note: This information was accurate when it was published, but can change without notice. Please be sure to confirm all rates and details directly with the companies in question before planning your trip.