What to expect when you rent at Keflavik

Keflavik International Airport (KEF), located about 50 kilometers southwest of Reykjavik, has a dedicated rental car facility in the arrivals hall. Most major rental companies operate desks there: Hertz, Avis, Budget, Europcar, and several local operators like Alamo Iceland and Sixt. You can walk directly from baggage claim to the rental counters without leaving the terminal.

The rental process at Keflavik is straightforward if you arrive with a reservation. You present your driver's license, passport, and credit card, sign the rental agreement, and collect your keys. Most transactions take 10 to 20 minutes. If you did not reserve in advance, you can rent on the spot, though availability and pricing vary by season — summer months book up faster than winter.

One practical detail: Iceland requires an International Driving Permit (IDP) if your license is not in Latin characters. If your license is in Cyrillic, Arabic, or another script, obtain an IDP from your home country's automobile association before you travel. Keflavik rental desks will not rent to you without one.

Key Takeaways

  • Rental desks are in the arrivals hall at Keflavik, and you can complete the transaction within 20 minutes if you have a reservation.
  • You will need a valid driver's license, passport, and credit card; if your license uses non-Latin characters, bring an International Driving Permit.
  • Advance reservations lock in pricing and may provide vehicle availability, especially important during summer and holiday periods.
  • Rental companies at Keflavik typically require a credit card hold of 500 to 1,500 ISK (roughly $4 to $12 USD) for damage deposit, separate from your rental rate.
  • Gravel road damage and tire punctures are common in Iceland and often not covered by basic insurance, so review what your rental agreement includes.

Comparing rental companies at Keflavik

The major international chains (Hertz, Avis, Budget, Europcar) offer consistent pricing and familiar terms, but local operators sometimes undercut them on daily rates. Alamo Iceland and Sixt often have competitive rates for economy cars, though their fleets skew smaller. The trade-off is that international chains have more locations around Iceland if you need to return the car elsewhere, while local operators may charge a one-way fee or require return to Keflavik.

Insurance coverage differs significantly between companies. Most base rentals include third-party liability (required by law in Iceland) but exclude collision damage, gravel road damage, and tire/windshield damage. Declining the rental company's damage waiver and using your personal auto insurance or credit card coverage can save 30 to 50 percent on daily rental cost — but only if your coverage actually applies to rental cars in Iceland. Check with your insurer or credit card company before you book.

Fuel policy also varies. Some companies charge a premium per liter if you return the car with less fuel than you rented it with; others charge a flat fee. A few allow you to prepay for a full tank at a locked rate. Prepaying is usually the better deal if you plan to drive far from Reykjavik, where fuel is more expensive.

Booking in advance versus renting on arrival

Booking before you travel locks in your rate and guarantees a vehicle in your chosen category. Prices at Keflavik fluctuate by season: summer (June through August) rates are typically 50 to 100 percent higher than winter rates for the same car. If you book two to four weeks ahead, you also have time to compare insurance options and read the rental agreement without pressure.

Renting on arrival works if you have flexibility on vehicle type and are traveling in shoulder seasons (April, May, September, October). In peak summer, walk-up availability is limited and prices are at their highest. Winter rentals (November through March) are usually cheaper on arrival, but you may face longer wait times if multiple flights land simultaneously.

One hidden cost: if you book through a third-party site (Kayak, Rentalcars.com, Autoslash), the rate shown may not include airport fees, taxes, or local surcharges. The rental company's own website often displays the full price upfront. Compare the final checkout total, not just the daily rate.

Insurance and damage coverage you actually need

Iceland's gravel roads and unpredictable weather create specific risks. Collision damage waiver (CDW) covers damage to the rental car from accidents, but most policies exclude gravel road damage — damage from driving on unsealed roads, which cover roughly 40 percent of Iceland's road network. Gravel road damage typically costs 500 to 2,000 ISK ($4 to $16 USD) per incident and is common enough that many renters buy the add-on coverage.

Tire and windshield damage are also common and usually not covered by basic CDW. A single tire puncture or windshield chip can cost 200 to 500 ISK ($1.50 to $4 USD) to repair, but if the damage is deemed severe, replacement can run 1,500 to 3,000 ISK ($12 to $24 USD). Some rental companies offer a tire and glass package for 1,500 to 2,500 ISK per day.

Before you buy the rental company's insurance, contact your personal auto insurer or credit card issuer. Many premium credit cards (American Express Platinum, Chase Sapphire Reserve) include rental car coverage that extends to Iceland and covers gravel road damage. If your coverage applies, declining the rental company's add-ons saves money. If it does not, buy the gravel road and tire coverage from the rental company — the cost is small relative to the repair bill.

Fuel, tolls, and other charges to budget for

Fuel in Iceland costs roughly 200 to 250 ISK per liter ($1.60 to $2 USD per liter), which is 50 to 100 percent higher than fuel in North America or Western Europe. A mid-size sedan with a 50-liter tank costs 10,000 to 12,500 ISK ($80 to $100 USD) to fill. If you prepay for fuel at the rental desk, the rate is usually locked at the time of booking, which protects you if prices rise but locks you in if they fall.

Iceland has no toll roads, so you will not encounter toll booths. However, some parking areas and mountain roads have small fees (typically 500 to 1,000 ISK, or $4 to $8 USD). These are rare and clearly marked.

GPS and child seats are add-ons. A GPS unit costs 1,500 to 2,500 ISK per day; most phones work fine with offline maps downloaded before you travel. Child seats (required by law if you are traveling with children under 6 or under 150 cm tall) cost 1,500 to 2,000 ISK per day. If you need a child seat, reserve it when you book the car — availability at the counter is not may provide.

Pickup and return logistics at Keflavik

Rental desks are open from early morning (typically 4 or 5 a.m.) until late evening (11 p.m. or later), aligned with flight schedules. If your flight arrives outside these hours, confirm with your rental company that a desk will be staffed. Some companies offer after-hours pickup for an additional fee, usually 3,000 to 5,000 ISK ($24 to $40 USD).

Return is simpler: you drive to the rental lot (separate from the terminal, a short shuttle ride away), park in your assigned space, and hand over the keys. The attendant inspects the car for damage, checks the fuel level, and processes your final bill. This takes 5 to 10 minutes. If you are returning the car before your flight, allow at least 30 minutes to account for shuttle time and the return process.

If you are returning a car rented from a Keflavik desk to a location in Reykjavik or elsewhere in Iceland, confirm the one-way fee when you book. Some companies charge 3,000 to 8,000 ISK ($24 to $64 USD) for a one-way return; others include it in the rate. Returning to Keflavik is always included in the rental price.

Driving conditions and road rules in Iceland

Iceland's road network is well-maintained on major routes (Route 1, the Ring Road, and main highways), but secondary roads are often gravel or unpaved. Speed limits are 90 km/h (56 mph) on highways, 80 km/h (50 mph) on rural roads, and 50 km/h (31 mph) in towns. Speeding fines are steep — 10,000 ISK ($80 USD) or more — and enforced by speed cameras.

Headlights must be on at all times, even during daylight. Winter driving (November through March) requires studded tires or winter tires with adequate tread; rental companies automatically provide these in winter. Summer tires are standard in summer months. Four-wheel drive is not required on Route 1 year-round, but it is strongly recommended for mountain roads and F-roads (high-altitude routes, typically closed in winter).

Seatbelts are mandatory for all passengers. Drunk driving laws are strict: the legal blood alcohol limit is 0.04 percent, lower than in most countries. Rental companies provide basic safety equipment (warning triangles, high-visibility vests), but you are responsible for knowing Iceland's traffic rules before you drive.

Frequently Asked Questions

Do I need an International Driving Permit to rent a car at Keflavik?

You need one only if your driver's license is not in Latin characters. If your license is in Cyrillic, Arabic, Chinese, or another non-Latin script, obtain an IDP from your home country's automobile association before you travel. Rental companies will not rent to you without one. If your license is in English or another Latin-based language, an IDP is not required.

Can I rent a car if I am under 25?

Yes, but most rental companies charge a young driver fee (typically 2,000 to 3,000 ISK per day, or $16 to $24 USD) for drivers under 25. Some companies set the minimum age at 20; others at 21. Check the rental company's policy when you book. The fee is separate from the daily rental rate.

What happens if I damage the car and I did not buy damage coverage?

You are liable for the full repair cost. The rental company will inspect the car at return, document any damage, and charge your credit card. Repair bills for gravel road damage, dents, or windshield damage can range from 500 to 5,000 ISK ($4 to $40 USD) or more, depending on severity. This is why reviewing your personal insurance or credit card coverage before you travel is important.

Is it cheaper to book through a third-party site or directly with the rental company?

Prices are often similar, but third-party sites sometimes hide airport fees, taxes, or local surcharges in the fine print. Always compare the final checkout total, not just the advertised daily rate. Booking directly with the rental company also gives you more control over insurance options and makes changes easier if your plans shift.

Can I return a rental car to a different location in Iceland?

Yes, but most companies charge a one-way fee ranging from 3,000 to 8,000 ISK ($24 to $64 USD), depending on the distance and the rental company. Some companies include one-way returns in the rate; others do not. Confirm the fee when you book. Returning to Keflavik is always included in the rental price.