Hidden Costs of renting a car in Iceland: How to Avoid Them with Blue Car rental

Magnús Jóhann Björnsson
15 Sep. 2025

For a significant number of travelers, the anticipated cost of car rental often escalates far beyond initial expectations. This unwelcome surprise typically stems from a labyrinth of hidden fees, ambiguous insurance regulations, and unexpected charges that can collectively inflate a trip's budget by hundreds of euros. These unforeseen expenses can transform an otherwise dream vacation into a source of financial stress.

Renting a car is undeniably the optimal way to experience the breathtaking beauty of Iceland. It grants you the ultimate freedom to immerse yourself in the country's diverse landscapes, from the majestic roar of cascading waterfalls to the serene, ancient silence of glaciers, the dramatic expanse of black sand beaches, and the charming simplicity of its small, welcoming towns all at your own unhurried pace. This unparalleled flexibility allows for spontaneous detours and prolonged admiration of sights that might be missed on structured tours.

This comprehensive guide aims to demystify the most common hidden costs associated with car rental in Iceland. More importantly, it provides actionable strategies to circumvent these pitfalls, demonstrating why selecting Blue Car Rental for your Icelandic adventure ensures a smoother, safer, and far more transparent experience. We will meticulously break down crucial aspects such as insurance coverage (including essential insights into gravel protection and ash/sand damage), fuel policies and pricing, the complexities of adding extra drivers, the often-overlooked costs of supplementary equipment (like GPS, child seats, and Wi-Fi devices), the intricacies of road tolls, parking regulations and fees, and much more. Throughout this guide, we will offer practical tips and real-world examples to empower you to make informed decisions and avoid any unpleasant financial surprises.

1. Insurance Surprises

Insurance is the biggest area where travelers get caught off guard. Many international rental agencies advertise low base prices but don’t include the protections that are essential in Iceland. Iceland is expensive and car repairs are no exceptions. In case of an accident you don't want a hefty bill from your car rental company to ruin your trip. It's bad enough that you add issues and lost valuable travel time, there is no need for a large amount of money as well. 

• Gravel Damage: Gravel roads are common outside Reykjavík. Stones can chip windshields and scratch paint. Repairs are expensive.
• Sand and Ash Damage: South Coast and highland areas are exposed to windstorms that carry volcanic sand. Even a short storm can strip paint.
• Wind Damage: Strong gusts can rip open doors or damage panels.
• River Crossings: Insurance often excludes water damage from rivers, this is especially important when driving on F-roads.

Costs

• Windshield replacement: €600–€1000.
• Sand damage: Can exceed €2000.
• Door repair after wind damage: €1500+.

How to Avoid

• Choose the right insurance from the start. Blue Car Rental includes Gravel Protection, Tire Insurance, Theft Protection, and CDW/SCDW in its standard packages.
• Additional risks such as Sand and Ash Protection and Wind Protection are available through the Liability Waiver package, which reduces financial responsibility even further.
• Avoid comparing only the “base price.” Look at what’s covered.

Also keep in mind that getting assistance is really expensive. The further you are away, longer it will take and cost more. So make sure to have roadside assistance covered as well. 

2. Fuel and Refueling Charges

Fuel in Iceland is expensive, and stations are not everywhere. That's why it is a good idea to map out gas stations, count the km and calculate approximately how much fuel you'll need for your road trip in Iceland. Having this estimation can really help with keeping your travel budget under control. Here is our guide on how to refuel with confidence with a rental car in Iceland. 

Common Issues

• Returning a car with less than a full tank leads to refueling penalties.
• Remote gas stations may charge more per liter.
• Running out of fuel on the Ring Road can mean calling roadside help.

Table: Average Fuel Prices (2025)

How to Avoid

• Always fill up before returning the car.
• Plan stops with N1, Orkan, and Olís apps.
• Use a Blue Car Rental diesel or petrol vehicle with good fuel economy for long trips.

There is of course another option and that is to skip fuel all together with an EV rental. Blue car rental offers a wide range of EV's and with charging stations now found all around Iceland having an EV rental is now a reliable and cheaper option. 

3. Extra Driver Fees

Some rental companies charge daily fees per additional driver. This is a common practice when renting a car in Iceland but usually it is a small fee for adding the extra driver. This is due to regulations as non-listed drivers cannot drive rental cars in Iceland.

Common Issues

• Couples and groups often switch drivers, leading to higher costs.
• Fees range €5–€15 per day per driver.

How to Avoid

• Blue Car Rental does charge for extra drivers, but the pricing is clear and upfront so you know the cost in advance.
• Add drivers easily at pick-up with your licenses. Knowing the fee before booking means you can budget correctly without hidden surprises.

Keep in mind that unlisted drivers are uninsured and should never drive the rental car in Iceland. 

4. Young Driver Surcharges

Many companies add fees for drivers under 25. Iceland is not an easy place to drive in and experience is very important when driving in remote areas or in the country's challenging conditions during the winter months. That is why most car rental companies have some age restrictions. 

Common Issues

• Young drivers are labeled “high risk” and pay €10–€30 per day extra.
• This is often hidden in small print.

How to Avoid

• Blue Car Rental has clear policies. While minimum age limits apply (20–23 depending on vehicle), there are no hidden daily surcharges.

5. GPS, Wi-Fi, and Equipment Add-Ons

Extra gear can increase rental costs quickly. Make sure you really need add-ons before arrival. Best practice is to have them on your booking before arrival. Not only is that more cost affective, but it also insurces that you will acutally get the items and without waiting. You don't want to be at rental car office in need of a baby seat and there is no availavle. Or standing at the office waiting for employees looking for them. Safe money and time by ordering. 

Common Issues

• GPS: €10–€15 per day.
• Wi-Fi hotspot: €10–€12 per day.
• Child seats: €5–€8 per day.

How to Avoid

• Download offline maps from Google Maps or Maps.me.
• Use your phone with an Icelandic SIM card for data.
• Blue Car Rental offers affordable equipment add-ons and is transparent about costs upfront.

One add-on I can recommend to everyone is Wi-Fi from Blue Car Rental. Because it is cheaper than using the data on a foreign phone, as data is often very limited from the provider and or expensive. It is also better than getting an Icelandic sim card as the Wi-Fi device is portable so can use it anywhere, not just in the car, and can connect to up to 10 devices and is connected to Siminn, the mobile company with the best cellular range in Iceland. Therefore you stay better connected when in Iceland for a fixed price.

See how to stay connected in Iceland.

6. Tolls, Parking, and Fines

Iceland has very few road tolls but strict parking rules. Parking in Reykjavik is the most common issues and going through Vaðlaheiðagöng, the tunnel near Akureyri in North Iceland. 

Common Issues

• Toll Tunnels: Vaðlaheiðargöng in North Iceland charges about €10.
• Parking in Reykjavík: Paid zones, especially downtown.
• Parking Fines: Can exceed €50.

Table: Parking Zones Reykjavík (2025)

How to Avoid

• Pay via the Parka app or ticket machines.
• Park only in marked lots.
• Ask Blue Car Rental staff about safe parking areas.

7. After-Hours Pick-Up or Drop-Off Fees

Flights to Iceland often arrive at odd hours. It is important to know when the office hours are and contact the car rental. What is good to have in mind is the time difference, Iceland is on GMT time and the clock is not changed in October as there is no daylight savings time in the country. Also be aware if the opening hours are in AM and PM or in 24 hours terms. 

Common Issues

• Some desks close at night and charge €50–€100 for after-hours service.

How to Avoid

• Blue Car Rental offers 24/7 key box pick-up and drop-off at Keflavík and Reykjavík.

There is no need to worry about this when renting a car with Blue Car as we do offer 24/7 service. However, opening hours are not always 24/7. During winter opening hours at Kef airport and at our Reykjavik city office. For a car rental pick up at that time we offer an after hours service with keybox delivery. An easy and convenient solution but has to be arranged and scheduled ahead of arrival. So, with a little homework knowing the pick up time and opening hours you will have no issues collecting your rental car with Blue Car Rental.  

8. Cross-Border or Highland Use Fees

You cannot take rental cars outside Iceland, but hidden fees apply to highland use. Taking your rental car abroad is really not an issue in Iceland as it is an island and there is no border to cross. However Iceland is a big island and there are areas where you cannot take your rental car. 

Common Issues

• Driving on F-roads without permission can void insurance.
• Extra cleaning or damage fees may apply.

How to Avoid

• Remember: All highland F-roads are closed in winter.
• In summer, only rent 4x4 vehicles approved for F-roads.
• Blue Car Rental clearly explains where you can and cannot drive.

Always be sure before entering F-roads or any other areas off the main road. Simply contact your car rental, check road conditions and be 100% that you can and are allowed to drive there. 

9. Cleaning Fees

Icelandic roads can be muddy and cars get dirty fast. This can happen anywhere, not just in the highland. Even the Ring road or the Golden circle route can be dirty. However there is no law or road rules in Iceland preventing you from driving a dirty car. 

Common Issues

• Some companies charge €50–€100 if the car is returned muddy.

How to Avoid

• Wash at free self-service stations before drop-off.
• Blue Car Rental includes cleaning in the rental — no surprise fees.

In fact Blue car rental prefers customers not to clean the cars themself, as that is our job to maintain the cars and keep them in top condition. So, no need to clean the car when returning at Blue Car Rental, just make sure to take all your luggage and belongings with you when leaving.  

10. Currency Exchange and Credit Card Holds

Be aware that Icelandic car rental companies may advertise prices in foreign currency but the charge is always in ISK. On the other hand if the price is listed in ISK the amount in your currency can change from the time you book and until arrival in Iceland. 

Common Issues

• Agencies place large deposits (€1000–€3000) on cards.
• Refunds may take weeks.

How to Avoid

• Many companies require large credit card holds, but Blue Car Rental does not take any deposit or hold on your credit card.
• Simply pay for your rental and enjoy peace of mind without blocked funds.

Luckily Blue Car Rental customers do not have to worry about any credit card hold amount, since we do not keep a deposit from our customers. With the currency changes we simply recommend to have everything prepaid and ready before arrival to have a more accurate travel budget for your car hire in Iceland.  

Conclusion

Car rental in Iceland doesn’t have to be full of surprises. By understanding the common hidden costs, you can plan better, budget smarter, and avoid stress. Taking time to read the fine print and prepare for extra fees means you’ll be in control of your travel budget rather than reacting to unexpected bills. Most importantly, booking with Blue Car Rental helps you avoid nearly all of these hidden fees. From included gravel insurance to transparent pricing on extra drivers and 24/7 support, Blue offers clarity, reliability, and peace of mind throughout your journey.

In practice this means you can step off the plane at Keflavík Airport, pick up your car with no deposit required, and immediately feel confident that there are no hidden surprises waiting later. Many travelers appreciate knowing that even common worries like cleaning fees or after‑hours arrivals are already taken care of. Blue’s clear approach saves time and stress both at pick‑up and drop‑off, which is especially valuable in a country where the weather can change plans quickly.

When you know the real costs upfront, you can focus on what matters most — exploring Iceland’s waterfalls, glaciers, volcanoes, and northern lights with peace of mind. Instead of thinking about paperwork or worrying about what the final invoice will look like, you can enjoy driving the Ring Road, stopping at hidden viewpoints, and making the most of every day of your trip. With Blue Car Rental, your attention stays where it belongs: on the adventure.

Quick Reference Table: Hidden Costs and How Blue Car Rental Avoids Them