Best Cities to Rent a Car in Iceland

Calling Iceland’s rental locations “cities” is generous. Reykjavik has about 140,000 people, Akureyri has 19,000, and Keflavik has 15,000. These are the three largest population centers in a country of 380,000 people, and they are the only places with meaningful car rental operations. Everything else is a village, a farm, or a geothermal vent. But each of these three has a distinct role in the rental landscape, and choosing the right pickup point matters more here than in most countries.

A fundamental truth about Iceland’s rental market: Keflavik Airport (adjacent to Keflavik town) is where the serious rental ecosystem lives, with 15+ agencies and the widest selection and most competitive pricing. Reykjavik is for convenience if you need delivery or pickup after spending time in the city. Akureyri is for northern Iceland access or one-way Ring Road strategies.

Reykjavik

Reykjavik is Iceland’s capital and the starting point for most visitors who plan to explore the city before heading out on the road. It has the most rental offices outside the airport, though the selection is still modest compared to continental European capitals.

Do you need a car in Reykjavik? No. The city center is compact and completely walkable. Everything from the Hallgrimskirkja church (hike up the tower for the view) to the harbor, the main shopping street (Laugavegur), the museum district (Tjornin pond area), and the restaurant and bar scene is within a 20-30 minute walk. Buses connect the suburbs efficiently. A car in central Reykjavik means paying for parking in zones that require attention and navigating narrow streets that were not designed for significant traffic.

When to rent: Pick up a car in Reykjavik on the morning you leave for the Golden Circle, Ring Road, or Snaefellsnes. Spend your Reykjavik days car-free, then grab the keys when it is time to drive. Most rental agencies will deliver to your hotel in the capital region, which eliminates the need to commute to an office.

Rental offices in Reykjavik:

Location	Agencies	Best For
BSI Bus Terminal area (Vatnsmyrarvegur)	Hertz, Blue Car Rental, Geysir	Central pickup, good bus/taxi access
Skeifan commercial area (east of center)	Multiple agencies including Avis, Europcar	Heading east or south
Laugavegur area	Select agencies	In-city convenience
Hotel delivery	Most agencies offer this within Reykjavik	No office visit needed

Most Reykjavik-based agencies will deliver the car to your hotel and collect it when you return. This service is usually free within the Reykjavik capital area and eliminates the need to take a taxi to an office. We have used hotel delivery twice and it works smoothly – the agent meets you in the lobby or outside, walks you through the paperwork and vehicle inspection, and you are on the road in 15-20 minutes.

Parking in Reykjavik:

Zone	Rate	Notes
P1 (center core)	350 ISK/hr (~EUR 2.40)	Laugavegur, Hallgrimskirkja area
P2 (inner ring)	200 ISK/hr (~EUR 1.35)	Harbor area, university district
P3 (outer ring)	125 ISK/hr (~EUR 0.85)	Residential areas near center
P4 (free zones)	Free (time limited)	Outskirts, some residential streets

Pay using the Parka app (highly recommended – works everywhere, stores your plate, and allows extension remotely), parking meters, or SMS. Enforcement is consistent during business hours and fines start at 5,000 ISK (EUR 34). The Parka app is worth downloading before you arrive.

Parking garages: The Kolaportid flea market garage near the harbor (reasonable rates, well-positioned for the city center) and the Kringlan shopping center garage (free for customers, far from center) are useful options. For multi-day parking while on a road trip, the BSI bus terminal area has affordable multi-day options at around 800-1,200 ISK per day. Some hotels offer parking for guests at EUR 10-15 per day.

Reykjavik Rental Strategy: Hotel Delivery

If you are spending 2-3 days in Reykjavik before heading out, hotel delivery is the cleanest approach. Here is how it typically works:

Book your car for the day you plan to leave the city (not day one of your arrival)
Contact the agency 24 hours before delivery to confirm your hotel address and preferred time
The agent arrives in your reserved vehicle, usually within a 1-hour delivery window
Conduct the pre-inspection together at the hotel
Drive away from your hotel directly, avoiding the Keflavik-to-Reykjavik transit entirely

For return, the process reverses: arrange pickup from your hotel at a set time on your last day. This means you can use the car right up until departure without the overhead of returning to an airport or office.

Cost of hotel delivery: Most agencies offer free delivery within the Reykjavik capital area (Reykjavik, Kopavogur, Garðabaer, Hafnarfjordur). Hotels outside this zone may incur a delivery fee of ISK 5,000-10,000 (EUR 34-69). Confirm at booking.

Day trips from Reykjavik:

Destination	Distance	Driving Time	Notes
Golden Circle (full loop)	300 km	6-8 hrs (with stops)	Full day trip
Blue Lagoon	47 km	40 min	Book entry in advance
Snaefellsnes Peninsula	170 km	2.5 hrs to Stykkisholmur	Better as overnight
Vik (south coast)	186 km	2.5 hrs	Long day trip with stops
Thingvellir National Park	47 km	45 min	Shorter day option
Reykjanes Peninsula	40 km	30 min	Good first afternoon drive
Hvammsvik Hot Springs	75 km	1 hour	New luxury geothermal option
Landmannalaugar (4x4 only)	180 km	3-4 hours	F-road access required; spectacular
Þórsmörk (4x4 only)	160 km	2.5 hours	River crossings; Iceland’s most dramatic valley

Reykjavik driving tips:

The city has a main one-way arterial system that navigates efficiently once you understand it. Street names in Icelandic are long and confusing – use GPS navigation without exception.
Parking payment requires entering your license plate number. The Parka app lets you do this in advance.
The harbor area (Grandi) has reasonable P3 parking and is walking distance to many restaurants and the whale-watching piers.
The Sundahofn harbor industrial area east of the center has a hidden free parking area used by locals.

The Golden Circle: Reykjavik’s Best Day Trip

The Golden Circle is Iceland’s most popular day trip and the best way to justify renting a car for just one or two days in Reykjavik. The three main stops are Þingvellir National Park, the Geysir geothermal area, and Gullfoss waterfall.

Þingvellir National Park (47 km, 45 minutes from Reykjavik): Iceland’s founding parliament site and a UNESCO World Heritage Site, located where the North American and Eurasian tectonic plates visibly split. The park entrance is free; parking costs 750 ISK. Hike the Almannagjá canyon (30 minutes one way) to see the fault from within. Snorkeling or diving in the Silfra fissure (the gap between continents) is possible with pre-booked guided tours.

Geysir area (120 km, 1.5 hours from Reykjavik): The original geyser, Geysir, is mostly dormant, but its neighbor Strokkur erupts every 5-10 minutes to 20-40 meters. The area is free to access and usually crowded. Arrive before 10 AM to experience it without tour bus crowds. The adjacent Geysir Center has good soup and coffee.

Gullfoss (130 km, 1.5 hours from Reykjavik): Iceland’s most famous waterfall, a double-cascade dropping 32 meters into a canyon. The upper viewing path is free; an upper platform closer to the falls can be slippery. In late afternoon, the golden light is extraordinary. Accessible year-round.

Budget: Entry is free for all three main stops. Parking at each is ISK 750-1,000 ($5-7). Allow a full day (7-9 hours from Reykjavik) to do the circuit without rushing.

Akureyri

Akureyri is the “capital of the north” – Iceland’s second-largest urban area and the gateway to Myvatn, Husavik, Dettifoss, and the dramatic north coast. It has a small but functional rental market and makes sense as a pickup or drop-off point for travelers flying between Reykjavik and Akureyri on domestic flights.

Do you need a car in Akureyri? For the town itself, no – it is tiny and walkable in 30 minutes end to end. The botanical garden, the old town wooden houses, the swimming pool (one of Iceland’s best public pools, with geothermally heated water), and the cathedral are all on foot. But Akureyri is completely surrounded by destinations that require a car. Myvatn is 100 km east, Husavik (the best whale watching in Iceland) is 90 km northeast via the Vadlaheidargong Tunnel, and Dettifoss (Europe’s most powerful waterfall) is 175 km.

When to rent: On arrival at Akureyri Airport (if flying from Reykjavik – the flights take 45 minutes and cost ISK 10,000-20,000 one way). Or when your Ring Road trip brings you here from either direction. Akureyri is also the logical one-way drop-off point if you are driving the Ring Road from Keflavik and returning to Reykjavik by plane.

Rental offices in Akureyri:

Location	Agencies	Notes
Akureyri Airport (AEY)	Hertz, Avis, 1-2 local	Limited selection; pre-booking essential
Town center (near bus terminal)	Select agencies	Mainly Hertz/Europcar affiliates

Availability at Akureyri Airport is genuinely limited – perhaps 30-50 vehicles across all agencies during peak season. Pre-booking is essential. Walk-in availability in July and August is essentially nonexistent. The agencies that operate here are small satellite operations of larger companies, not full-service offices.

Parking in Akureyri: Mostly free. The town center has some paid zones (100-200 ISK/hr) but supply is not limited and finding a spot takes 2-3 minutes at most. Free parking along the fjord road, near residential streets, and at the large parking areas near the shopping center. Long-term parking at the airport is free.

Driving tips for Akureyri area:

The Vadlaheidargong Tunnel (opened 2018) connects Akureyri directly to Husavik, cutting what was a 2+ hour mountain road into 45 minutes. Toll: 1,500 ISK (EUR 10), payable at tunnel.is.
The road from Akureyri to Myvatn (Route 1 east) is paved and straightforward – one of the better-maintained sections of Route 1.
Winter conditions around Akureyri are more severe than the south – snow and ice on the roads from November to April, sometimes extending to May at elevation.

Key destinations from Akureyri:

Destination	Distance	Driving Time	Notes
Myvatn lake	100 km	1.5 hours	Volcanic landscapes, nature baths
Godafoss	45 km	35 minutes	Perfect waterfall, easy stop
Husavik	90 km	1 hour (via tunnel)	Best whale watching in Iceland
Dalvik	42 km	35 minutes	Whale watching, small boats
Dettifoss	175 km	2.5 hours	Europe’s most powerful waterfall
Siglufjordur	75 km	1 hour	Herring Museum, dramatic fjord
Hofssos	80 km	1.5 hours	Geothermal pool with infinity pool design
Grimsey Island	Day trip by ferry or small plane	Straddles the Arctic Circle

The Akureyri One-Way Strategy in Detail

The one-way Ring Road trip is Iceland’s most efficient itinerary for time-constrained travelers. Here is how it works:

Option A: South-to-North (KEF to AKU)

Pick up car at Keflavik
Drive south coast: Vik, Jokulsarlon, Skaftafell
East Fjords: Hofn, Stodvarfjordur
Continue to Akureyri
Fly home from Akureyri (or reverse)
One-way surcharge: EUR 100-200

Option B: North-to-South (AKU to KEF)

Fly into Akureyri (45 min from Reykjavik; ISK 12,000-20,000 / EUR 82-137)
Rent car in Akureyri
Explore north: Myvatn, Husavik, Siglufjordur
Drive south via east fjords or Ring Road west
Drop car at Keflavik
International flight home from KEF

Both options maximize your time in the most dramatic landscapes while minimizing the “driving past the same scenery twice” problem of full Ring Road loops.

Keflavik

Keflavik is not really a destination – it is the town adjacent to Keflavik International Airport, and most travelers pass through it without stopping. However, it has become Iceland’s primary rental hub because of the airport, and some travelers choose to stay nearby for their first or last night to maximize early departure or late arrival convenience.

Do you need a car in Keflavik? Only to leave Keflavik. The town has a few hotels, restaurants, and the Viking World museum (genuinely interesting, with a full-size Viking ship), all within walking distance. The purpose of renting here is the airport proximity and the widest selection in Iceland.

Rental offices in Keflavik:

Location	Agencies	Notes
Airport terminal	Hertz, Avis, Europcar, Budget	Walk to nearby car park
Airport area (shuttle)	Blue Car, Lotus, Lava, Geysir, SADcars, Northbound	5-15 min free shuttle
Keflavik town	Minimal	Better to use airport agencies

For detailed airport pickup information, see our airport rental guide.

The Reykjanes Peninsula first-afternoon drive: If you pick up at Keflavik and are not heading straight to Reykjavik, the Reykjanes Peninsula around the airport has several worthwhile stops that make an excellent first-afternoon orientation drive:

Blue Lagoon (pre-booking required, 40 km from airport): Iceland’s most famous geothermal spa. Book well in advance in summer – it sells out. The silica mud face mask is included in all packages and should not be skipped.
Gunnuhver hot springs (45 km from airport): Large geothermal area with boiling mud pools and fumaroles. Free, dramatic, somewhat sulfurous.
Reykjanesviti lighthouse (50 km from airport): Iceland’s oldest lighthouse on a dramatic lava field headland.
Bridge Between Continents (40 km from airport): A footbridge across the gap between the North American and Eurasian plates. Short, free, geologically remarkable.

Keflavik driving tips:

The drive from Keflavik airport to Reykjavik (50 km, Route 41 then Ring Road 1) takes 40 minutes in light traffic, longer during morning rush hour when Reykjavik residents who live on the Reykjanes Peninsula commute in.
Route 41 (the Reykjanesbraut) is fast and straight but heavily monitored for speed.
If heading directly to the south coast from the airport, take Route 43 to Grindavik, then Route 42 east to connect with Route 1 near Selfoss. This bypasses Reykjavik entirely.

Staying Near Keflavik: When It Makes Sense

Hotels near Keflavik Airport make sense in two specific situations:

Early departure: If your international flight departs at 06:30 AM, staying near KEF means a 5-minute drive versus the 40-minute commute from Reykjavik. The Northern Light Inn (next to the Blue Lagoon), the Keflavik Airport Hotel, and the Icelandair Hotel Reykjavik Marina all serve this purpose.

Late arrival: Landing at 23:00 and not wanting to navigate to Reykjavik in the dark, tired, with unfamiliar road signs. Stay near the airport, rest, and drive or take the bus to Reykjavik the following morning.

For a Ring Road trip starting immediately from the airport, the Keflavik area hotels are excellent departure points: pick up the car in the morning, explore the Reykjanes Peninsula as a warm-up, and be in Selfoss (Ring Road south coast) by early afternoon.

City Comparison Table

City	Avg Daily Rate	Parking	Agencies	Best For
Reykjavik	EUR 55-110	Paid, limited in center	8-12	Hotel delivery, Golden Circle start, south coast
Akureyri	EUR 60-120	Mostly free	3-5	Northern Iceland, Myvatn, one-way Ring Road
Keflavik	EUR 50-100	Free at most lots	12-18 (airport)	International arrivals, immediate road trips

City Driving Tips

Pick up at the airport, not in Reykjavik. Unless you are spending several days in Reykjavik first and want hotel delivery, Keflavik Airport offers the widest selection, most competitive prices, and avoids the Reykjavik parking problem entirely. The drive from Keflavik to Reykjavik (50 km, 40 minutes) is scenic enough to serve as your warm-up. Most Ring Road trips start directly from the airport without stopping in Reykjavik at all.

Akureyri one-way for time-savers. If you only have 5-6 days, consider flying to Akureyri (45 minutes from Reykjavik on Icelandair), renting there, driving the north and east sections of the Ring Road, and dropping the car at Keflavik. This concentrates your time on the Myvatn region (which many consider the most extraordinary of the Ring Road), the east fjords, and the south coast, while avoiding the less visually dramatic northwest section. The one-way fee (EUR 100-200) is justified by the time saved.

Campervans change the equation entirely. For a Ring Road trip, a campervan from Keflavik eliminates accommodation costs that can reach ISK 20,000-35,000 (EUR 135-240) per night at guesthouses. Daily campervan rental (EUR 150-280 in summer) can be cheaper than a rental car plus accommodation, and it adds total flexibility – stop wherever, sleep wherever (at designated campgrounds – not random spots). Go Iceland and Happy Campers are well-reviewed agencies with solid 4x4 campervans.

Fuel before the remote sections. Whichever city you start from, check fuel station locations for your first 200 km. Fuel in Reykjavik and Akureyri costs the same as elsewhere in Iceland (there is no city premium). Fill up before heading into rural areas, particularly the east and northwest sections of the Ring Road.

Weather before city departure. Before leaving any city for a long drive, check road.is and vedur.is. Iceland’s weather can make a road that was driveable this morning impassable this afternoon. This is not paranoia – it is the reality of driving in a subarctic island with active volcanoes and unpredictable weather patterns.

Road Conditions by Month: Quick Reference

Month	Ring Road	F-Roads	Worst Hazards
June-August	Generally clear	Open (June onward)	Tourist traffic, some construction
September	Clear	Closing late month	Ice possible at elevation
October	Generally clear	Mostly closed	Black ice on mountain sections
November-March	Open but winter	Closed	Ice, snow, winter storms, limited daylight
April-May	Improving	Opening gradually	Unpredictable; check daily at road.is

Reykjavik: What to Do Without a Car

If you are spending time in Reykjavik before picking up a rental, these are the car-free highlights:

Hallgrimskirkja: The iconic Lutheran church and the city’s landmark. Take the elevator to the tower for views over the city and harbor. Entry: 1,000 ISK (EUR 7). Book in advance in summer or arrive early.

Laugavegur street: Reykjavik’s main shopping and dining street. Walk end-to-end (about 1 km), then branch into the side streets. The Grandi harbor area at the far end has become the city’s creative and culinary hub — the Matholl food hall is excellent for a casual lunch. The Flatey pizza restaurant in Grandi has a reputation worth testing.

National Museum of Iceland: Comprehensive coverage of Icelandic history from the settlement age through the 20th century. Well-curated and surprisingly moving given the scale of what Icelandic settlers accomplished in a genuinely hostile environment. Entry: 2,500 ISK (EUR 17).

Tjornin pond: The central city lake with walking paths, feeding ducks (also geese, a few swans), and a backdrop of government buildings. Quiet at any hour.

Swim at Laugardalslaug: Reykjavik’s largest geothermal swimming complex — heated outdoor pools, hot pots at 38-42°C, water slides, steam rooms. Entry: 1,100 ISK (EUR 7.50). This is how Icelanders actually use their geothermal water, not the Blue Lagoon. Cheaper, local, and an entirely different experience.

Walking the harbor: From the Harpa concert hall to the whale watching pier (Aevar pier) to the Sun Voyager sculpture is about 1.5 km. The Harpa building’s glass facade is architecturally striking at any time of day, particularly in evening light.

Settlement Exhibition (Landnámsýningin): Underground museum built around a 10th-century Viking longhouse discovered during construction in 2001. The excavated walls are visible through glass floors as you walk. Compact but fascinating. Entry: 2,800 ISK (EUR 19).

The Reykjavik Art Museum (Listasafn Reykjavíkur): Three locations (Hafnarhus, Kjarvalsstadir, Ásmundarsafn), all included in a single ticket. The Hafnarhus (harbor house) also hosts the Erró donation – thousands of pop-art collages by the Icelandic artist Erró. Entry: 2,100 ISK (EUR 14) for all three.

Whale Watching: Departures from the harbor near the Sun Voyager sculpture. Operators include Elding, Whale Safari, and Whale Watching Reykjavik. Tours: ISK 11,900-13,900 ($82-96) for 3 hours. Humpbacks, minkes, and white-beaked dolphins are the most common sightings. Summer has highest success rates.

Akureyri: What to Do Without a Car

Akureyri’s in-town highlights are compact enough to cover in a day on foot:

Botanical Garden (Lystigardurinn): Free entry, one of the world’s northernmost botanical gardens. Impressive in summer. Located on the hillside above town — a pleasant 15-minute walk from the center.

Akureyri Church: Designed by the same architect as Hallgrimskirkja in Reykjavik. Smaller but equally striking from the steps down to Kaupvangur street.

Akureyrirkirkja steps: From the church, you look down a long staircase to the main shopping street (Hafnarstrati). The view down the fjord from the church steps is one of Akureyri’s better moments.

Swimming at Akureyrarlaugg: Outdoor geothermal pool complex with hot pots and a slide. Entry 1,100 ISK. The pools overlook the fjord and the mountains on the opposite side. Worth every minute.

Hof Cultural Center: The main arts venue overlooking the fjord, with the Christmas Garden (Jólahúsid) adjacent — an entire shop dedicated to Christmas decorations that operates year-round, because Icelanders take Christmas seriously and have the sense of humor to admit it.

Akureyri’s Restaurant Scene: The town punches above its weight on food. Rub23 is the consistently reviewed best restaurant, specializing in sushi and grilled meats. Strikid (the Strike) does local fish with a casual atmosphere. For coffee and pastries, the Bautinn and Kaffi Ilmur are local institutions.

Campervans: The Fourth Option

Beyond the three cities, campervans represent a distinct approach to Iceland travel that changes the rental calculus entirely:

Factor	Campervans	Car + Guesthouse
Total daily cost (peak)	EUR 160-280 (van)	EUR 80-120 (car) + EUR 100-200 (room)
Flexibility	Maximum	Fixed by booking
Comfort	Variable	Better sleep quality
F-road access	Only with 4x4 campervan	Any 4x4 car
Campsite location	At campground (5-15 km off road)	Anywhere near road
Winter viability	Limited	More manageable

The campervan economics: A campervan at EUR 200/day versus a car at EUR 90/day + guesthouse at EUR 150/night equals EUR 240/day for the traditional approach. Campervans can be cheaper for couples — particularly if you book in shoulder season (May or September) when campervan rates drop while guesthouse rates have already fallen.

Agencies: Go Iceland and Happy Campers are the largest and best-reviewed campervan agencies, both based at Keflavik. Kuku Campers and Cozy Campers offer smaller, more compact vans suitable for couples. All operate from Keflavik Airport with shuttle service.

Camping Card program: The Camping Card (available online at campingcard.is) costs EUR 179 and covers 28 nights at participating campgrounds across Iceland. For a 10-14 day Ring Road campervan trip, it pays for itself immediately. The card covers two adults and children under 18. Available online before arrival.

Campervan vs. Car + Accommodation: The Real Math

For a 10-day summer trip with two people:

Option	Daily Cost	10-Day Total
Compact 2WD + budget guesthouse	EUR 80 + EUR 90	EUR 1,700
Compact 2WD + mid-range guesthouse	EUR 80 + EUR 150	EUR 2,300
4x4 campervan + campground	EUR 230 + EUR 15	EUR 2,450
Campervan with Camping Card	EUR 230 + EUR 13.50	EUR 2,435

At mid-range accommodation prices, the campervan is comparable to or cheaper than the car + guesthouse option, with the added benefit of unlimited flexibility and no advance booking required for accommodation.

Reykjavik Hotel Delivery: The Logistics

If you are staying in Reykjavik and want the car brought to you:

Standard service area: Most agencies deliver within the Reykjavik capital region (Reykjavik, Kopavogur, Garðabaer, Hafnarfjordur) for free. Hotels outside this area may incur a delivery fee.

What to have ready: Your booking confirmation number, the address for delivery, and a phone number the agent can call when arriving. The agent will conduct the vehicle inspection at your hotel — walk around the car with them and photograph existing marks before signing.

Timing: Agencies typically ask for a 2-4 hour delivery window. For hotels in central Reykjavik (Laugavegur, Skólavörðustígur area), delivery is usually on time. During busy summer periods, allow for 30 minutes of variability.

Return pickup: When your rental is over, the agency will arrange pickup from your hotel at a scheduled time. Leave the car where it can be found (hotel parking or street access), ensure the tank is full (fill at the nearest station the morning of return), and document the car condition with photos before the agent arrives.

Which Starting Point for Which Trip?

A simple decision guide:

Your Itinerary	Pick Up At	Why
Direct to south coast or Ring Road	Keflavik Airport	No city overhead
2-3 days in Reykjavik first	Reykjavik hotel delivery	Convenience; no city driving
Golden Circle first, then north	Reykjavik office	Central position
Northern Iceland only (fly Akureyri)	Akureyri Airport	Saves the 450 km drive from Keflavik
Ring Road one-way (south coast start)	Keflavik → drop Akureyri	Maximize south coast time
Snaefellsnes first, then Ring Road	Reykjavik or Keflavik	Similar distance; Keflavik slightly more direct
F-road highland trip	Keflavik (4x4 specialist)	Widest 4x4 selection
Campervan Ring Road	Keflavik Airport	All campervan agencies here

For pickup logistics at Keflavik, see our airport rental guide. For road rules and driving conditions, check the driving guide. And for full cost planning, our costs and tips page covers everything from insurance to fuel budgeting.

Best Cities to Rent a Car in Iceland — Reykjavik, Akureyri & More