Why is renting a car so expensive in Iceland?

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'Expensive' is relative. That said, a quick search on https://book.cartrawler.com saw me get prices for under 500 euros for ten days. Still not very pleasant, but better than 1100 euros.

Your question is really asking why Iceland is so expensive, as the relatively high cost of things in Iceland is not limited to just car rentals.

Numbeo shows that the cost of living in Iceland is about 30% higher than in the Netherlands.

In addition, the cost of getting a car to Iceland and maintaining a car in Iceland will be significantly higher than doing the same on the European mainland: cars need to be shipped farther, in small numbers and suffer from much more corrosive weather.

Furthermore, because it's not as likely that small cars are too usable in Iceland, outside of the city, because weather and road conditions can be quite harsh, it's more likely that the smallest models available in the Netherlands will not be available in Iceland.

So, based on the above points, it would be reasonable to expect the cost of renting a car in Iceland to be significantly higher.

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Tips to rent for cheaper

Last time I went I rented with SADCars. Compared to North American prices I still found it expensive, not to mention the horrifying price of gas (2.5CAD/L), but a much more palatable alternative to the more established companies.

They rent some old cars with high mileage, some not very pretty, but mine did about 2000km without problems.

I also met a couple of Germans who had ferried their own car from the continent to Seyðisfjörður and travelled with it there. Whether or not that's cheaper than renting locally would depend on the length of your trip. Check Smyril Line prices for ferrying a car from Denmark to Iceland.

Upvote:4

I believe Iceland has the most road (by length) per person meaning a little money has to go a long way in maintenance. And priority will be given to those roads that are totally impassable rather than just poorly maintained. Whilst technically being a road quite a bit of it is gravel track and full of pot holes. This will increase wear and tear on a car massively.

The main tourist season is also only a couple of months long so they don't have long each year in which to recoup costs.

The number of new cars bought each year in Iceland will be relatively small compared to a more populous country so there won't be the same savings due to volume shipping used in other countries.

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