Travel Tips for Iceland

Guide to Renting an Economy Car in Iceland

Guide to Renting an Economy Car in Iceland

If you’re just now planning your trip to Iceland, you may be wondering what kind of car you should rent for a road trip around the country — and if you’re travelling on a budget, you might be wondering particularly how to rent a cheap car in Iceland. 

While it’s true that renting an economy car in Iceland is certainly one way to save money, you want to make sure you’re choosing your rental car wisely. Yes, it is possible to explore our country without spending too much money (at least on your rental car), but do you specifically know what car you should rent in order to make your trip to Iceland more budget-friendly? Have you considered that you may be able to rent a camper or a 4x4 vehicle rather than a small, 2WD car in Iceland, and still have an affordable trip? 

Make planning a cheap trip to Iceland a little bit easier — with our full guide to (safely and affordably) renting economy cars in Iceland.

What Exactly is an Economy Car?

Before you rent an economy car in Iceland, you should probably understand what exactly an economy car is. Economy cars are generally considered to be more affordable vehicles that are 2WD and on the smaller side. They can usually fit up to five passengers maximum, but really more like two to three comfortably, especially if you’re travelling with luggage, as economy cars can usually only fit one large suitcase and a few smaller bags. Economy cars come with either automatic or manual transmissions (a bonus for our friends travelling in from countries where manual transmissions aren't as common). 

Economy cars are the way to go when you want to rent a cheap car in Iceland if you’re trying to save the most money possible. Economy car options in the Lava Car fleet include the Hyundai i10 in automatic transmission.

Should You Rent an Economy Car in Iceland? 

There are many reasons why our clients choose to rent economy cars while in Iceland. Not only are they affordable, but they’re also easy to park and very fuel-efficient, thanks to their small size. They’re easy to navigate around narrow streets in the cities and, even though they’re small, economy cars are still safe, just compact. 

Economy cars are ideal for solo travellers, couples, small groups of friends, those travelling with not much luggage and, of course, travellers who want to visit Iceland on a budget. 

Just remember — you should not rent an economy car in Iceland if you plan on travelling to the Icelandic Highlands or on any of Iceland’s F-Roads, as economy cars are not suitable for gravel and mountain roads. 

Reasons to rent an economy car in Iceland

There are many great reasons to rent an economy car in Iceland. If you’re wondering if an economy car is right for you, consider the following benefits:

  • Cost savings

Economy cars are your cheapest option for rental cars in Iceland. If you’re travelling on a budget, economy cars are the way to go. And don’t think that your economy car will be less than enjoyable just because it’s on the more affordable side. Lava Car Rental’s economy cars are safe, newer and clean — they just happen to be smaller, compared to the more expensive, large and luxury rentals that you might find elsewhere. 

  • Easy to drive

If you’re not accustomed to driving in a foreign country or even in a city like Reykjavik, you may find that an economy car is a better fit for your trip. Economy cars are, as mentioned, on the smaller side. While this may leave you with less room to store your luggage, it does make these cars much easier to drive than, say, a large SUV. You’ll find that you can parallel park with ease, make it down narrow historic streets with no worries and overall just enjoy a less stressful driving experience, especially if you’re driving in a foreign country for the first time. (And for more tips, check out our guide to driving in Iceland).

  • Fuel savings

In addition to saving money on the cost of your rental, renting an economy car will also save you money at the fuel pump. Most economy cars are much more fuel-efficient compared to 4x4s or SUVs, so you’ll be able to cut even more money from your transportation budget.

  • Freedom 

While you do need a 4x4 vehicle to travel in some parts of Iceland, like on the F-roads, you don’t need a 4x4 vehicle to see the most popular spots in Iceland during the summer months. With a 2WD or economy car, you can easily travel along the entirety of the Ring Road, while visiting all of Iceland’s most famous attractions. 

  • Everything two people need

If you’re travelling in a group of just two or three people, you'll find an economy car gives you more than enough space. While still being compact, economy cars can fit two to three travellers and their luggage, with no problem.

When Can You Travel with an Economy Car in Iceland? 

And just as you won’t want to take an economy car onto Iceland’s gravel roads, you also won’t want to drive an economy car in Iceland during certain times of the year.

Summertime is the best time to drive an economy car in Iceland. The weather is mild and there’s less precipitation and wind, and you have plenty of daylight hours. While summer is the most expensive season in which to visit Iceland, if you visit Iceland in the summer, the weather is one less thing to worry about during your trip. 

Experience the Midnight Sun with an economy rental car in Iceland

The spring and fall months are a little trickier, as you can sometimes see inclement weather in very early spring or late fall. However, for the most part, it’s safe to drive an economy car in Iceland during these seasons. The temperatures are a little bit colder, but not terrible, and you still have a fair amount of sunlight through most of the day; you also have the chance to see the Northern Lights, if you visit at the right time! These shoulder seasons are also less expensive than what you’ll find if you visit Iceland in the summer. 

You should likely not rent an economy car if you’re travelling to Iceland during the winter, though. Iceland’s winter weather is extremely harsh and volatile, with ice and snow, storms and strong winds, as well as very few daylight hours. The roads are frequently hazardous and renting a 4x4 vehicle is advised. 

Can I drive an economy car in Iceland in winter?

If you plan to visit Iceland during the winter months, we do recommend a 4x4 vehicle. These larger cars are safer and more reliable during winter weather events and will provide you with greater clearance and traction when dealing with snow, ice and other conditions. 

However, if you plan on staying within Reykjavik, an economy car will be fine. The roads in the city are kept clean and you’ll find getting around during the winter is safe. However, if you plan on leaving Reykjavik, a 4x4 will still likely be your best option.

Where Can You Go with an Economy Car in Iceland? 

As mentioned, you can’t take an economy vehicle onto any of Iceland’s gravel roads. However, that doesn’t mean that you won’t still be able to see a lot of amazing sights off some of Iceland’s more travelled, paved and asphalt roads. Even if you only have a few days or a layover in Iceland, an economy car can get you to some of the country’s most-visited spots. 

Reykjavik is, of course, an easy city to visit and get around with an economy car, especially when you factor in the small size and how easy it is to park a small car. Other cities around Iceland that you can visit in an economy car include Hveragerdi, Vik and Hofn in the South; Egilsstadir in the East; and Husavik and Akureyri in the North. 

Explore Iceland in a rental car

The Ring Road is Iceland’s primary, paved road that circles the entire country and takes you to can’t-miss sights including Reynisfjara, Vatnajokull, Jokulsarlon, Eastfjords, Myvatn, Dettifoss and Godafoss. If you’re travelling during the summer, you’ll be able to drive around the Ring Road in an economy car with no issues. Just remember that driving around the Ring Road typically takes at least a week, but 10 or more days is advised. Need an Iceland road trip itinerary for seven days, including arrival and departure? Check out our seven-day itinerary for both summer and winter trips

If you want to do an Iceland road trip around just the South and West, you can also do so with an economy car, travelling around the Golden Circle, to the Blue Lagoon and to Vik, Jokulsarlon and Vatnajokull National Park, the Snaefellsnes Peninsula and the Reykjanes Peninsula.

The only popular tourist area where you won’t be able to travel in Iceland with an economy car will be the Highlands, as noted, as only 4x4 vehicles can drive around the Highlands’ F roads. If you do try to take an economy car on one of these roads, not only do you run the risk of getting stuck or stranded, but you will also void your rental insurance policy, leaving you liable to pay for all damage that occurs on the roads. To be safe, rent a 4x4 vehicle if you plan on visiting the Highlands.

Renting a 4x4 car in Iceland will allow you to cross the small rivers in the Icelandic Highlands
Renting a 4x4 car in Iceland will allow you to cross the small rivers in the Icelandic Highlands

And remember: you can’t take any vehicle, no matter what it is, off-roading while in Iceland. Not only is it dangerous, but it’s also illegal. 

How Much Does it Cost to Rent an Economy Car in Iceland? 

Your cost will depend on the season. In the summer months, May through September, economy cars are generally more expensive, but cheaper than renting a 4x4 and a campervan.

Rent a cheap and small car for your Icelandic trip

Of course, rental prices will differ depending on the age and make of the car that you rent. The newer and more luxurious the rental, the higher your rental price. However, regardless of what kind of car you rent, you can typically get a discount if you rent your vehicle for a longer time period. Just make sure that you reserve your rental vehicle well in advance of your trip, especially if you’re travelling to Iceland in the summer, in order to get the vehicle you want at a price you like. 

Extra Rental Car Costs 

Beyond the base cost of your rental car, there are a few other things that can increase your costs, but that may come in handy (or even necessary, as is the case with fuel).

Extra insurance will increase your rental cost, but it may be necessary and can help you save more money in the long run. Learn more about Lava Car Rental’s insurance options to see which you might prefer during your trip. 

You’ll need fuel as you drive around Iceland, no way around it, so you should probably consider that as you budget for your trip. The price of fuel in Iceland fluctuates, so you can use this updated price list to learn more about gas and diesel prices and options in Iceland.

Rental car in a gas station in Iceland

Is it Safe to Rent an Economy Car in Iceland? 

Yes, it’s definitely safe to rent an economy car in Iceland! It all just depends on when and where you use it. There are certain times and places when an economy car isn’t suitable, but if you follow the general recommendations of those who live in Iceland, you can feel confident that you’ll be safe as you drive around the country.

As mentioned, economy cars are safest for spring, summer and fall driving in and around Iceland’s towns and more developed areas. They’re not to be used on gravel or F-roads, and they’re not ideal for winter. In fact, we’d highly advise you not to drive a 2WD vehicle in Iceland during the winter months. If you do want to drive on the F roads, in the Icelandic Highlands or during the winter, you need to rent a 4x4 vehicle

We recommend driving a 4x4 in Iceland in winter to face the weather conditions

If your safety concerns are more about COVID-related matters as they pertain to rental cars as a whole, you can rest easy there as well. Lava Car Rental takes your health and safety seriously, so we ensure that each of our vehicles is completely sanitised and safe before you receive it. Employees wear masks and social distancing, too.

How are Economy Cars Different from 4x4 Cars?

Yes, there really is that much of a difference between economy cars and 4x4 vehicles, which is why economy cars aren’t suitable for getting around everywhere a 4x4 car can be used. Here is a comparison table with the main differences between the two car types:




4-5 (ideal for 2-3)


Trunk capacity

1 big suitcase
+ 2 small bags

3/4 big suitcases
+ 2 small bags

2WD / 4x4







No Yes


Manual / Automatic

Manual / Automatic

Use as accommodation



Minimum age



As you can see, the biggest changes are size and the ability to drive in harsher conditions. A 4x4 vehicle can fit more travellers, up to 7 versus an economy car’s comfortable 2 or 3. A 4x4 car can also fit more luggage, up to 4 large bags and 2 small bags, versus an economy car’s 1 large bag and 2 small bags. Additionally, you can take a 4x4 vehicle anywhere in Iceland where harsh weather and tough road conditions may be an issue. 

Obviously, with this increased size and mobility comes a higher price tag, so you’ll want to take this into consideration as you’re planning your Iceland trip. If staying within a small budget is very important to you, you may want to choose to rent an economy car during the winter months, and then only travel around Iceland’s southern region.

Economy cars are a great choice to explore Iceland in summer

Lava Car Rental offers a range of economy vehicles, but the Hyundai i10 is always our most popular economy car option: 

However, if you do want a 4x4 vehicle that can hold more people and more luggage, plus actually travel through the Highlands or the winter weather, we recommend the most affordable 4x4 in our fleet, the Dacia Duster.

Rent a Dacia Duster in Iceland

In the same way, you can also choose to rent a campervan and save money by using your transportation as your accommodation as well.

What’s Included When You Book With Lava Car Rental? 

In addition to getting a great deal when you book with Lava Car Rental, you’ll also enjoy access to a fleet of brand-new economy cars with an automatic transmission. CDW and theft protection insurance are both included in your standard rental fee (though you’re more than welcome to upgrade your insurance coverage further, if you so wish). 

A Quick Recap: How to Travel with an Economy Car in Iceland

To recap, here’s everything you need to know before you start travelling with your economy car in Iceland:

  • Drive on asphalt, paved roads only
  • Avoid all gravel roads
  • Only bring the amount of luggage your car can hold
  • Plan for short periods of driving (as the car is smaller and not as comfortable for long trips)
  • Follow all the Icelandic rules for driving and parking (such as following the speed limit and keeping your headlights on at all times)
  • Never go off-roading 
  • Check the road safety and weather conditions before heading out on the road

Driving an economy car in Iceland

For more tips on driving in Iceland, check out our full guide, and for extra tips on exploring Iceland on a budget, check out our full article on affordable travel in Iceland.


Renting an economy car in Iceland can certainly make your trip more affordable, but you want to be sure that you’re renting the right car for you and for your itinerary. Have questions about economy car rentals in Iceland that weren’t answered above? Reach out to Lava Car Rental! We’ll help you book the best car for your upcoming Iceland vacation.

Check the availability by selecting the dates

Related Travel Tips

Exploring Iceland on a Budget

Exploring Iceland on a Budget

Wondering how to plan a budget Iceland trip? We have all the tips and tricks you need for seeing Iceland at an affordable rate. 

Renting a Car for a West Iceland Self-Driving Trip

Renting a Car for a West Iceland Self-Driving Trip

Planning a trip to West Iceland and wondering if a self-driving itinerary is the best option for you? Here’s everything you need to know: West Iceland’s regions and must-see spots, the best rental car for a West Iceland trip, top tips for taking a camper van to West Iceland and whether or not you should rent a 2WD car for your itinerary.

Gas Stations & EV Charging Stations in Iceland

Gas Stations & EV Charging Stations in Iceland

If you rent a car, eventually, you’ll need to fuel it up. Even if you’re not planning on taking a full road trip around Iceland, it’s still expected that you’ll fuel up your vehicle before returning it to your rental provider. So, whether you’re travelling near or far, here is everything you need to know about refilling your tank or your battery.