How to Plan Your Dream Iceland Road Trip on A Budget

how to visit Iceland on a budget

So you want to know how to plan an Iceland road trip on a budget. Well, you’re in luck! Having done it before (three times!), I have a few practical tips to share that you might find helpful in your trip-planning. They’re all based on common sense, really, so I wouldn’t claim them to be mind-blowing. 🙂

Airfares, accommodations, car rental, gas, and food are usually the costliest parts of a road trip. If you spend less money on those sectors, you could potentially stretch your budget a little further. It would in turn allow you to stay in Iceland longer so you could see more of this amazing country. Trust me, you want to stay longer!

We spent two weeks on our first road trip around Iceland and we still wished we could’ve stayed longer.

Time of Visit

Airfares, car rentals, and accommodations tend to cost less in the off-season, anywhere in the world. Iceland is no exception. Off-season in Iceland is typically from October to April (basically winter). For the longest daylight hours in winter and a chance to see the Northern Lights (if you’re lucky), I would suggest you go in October or April.

Longer daylight hours allows you to spend more time driving and sightseeing on your road trip. And who doesn’t want to see the Northern Lights? On the downside, some attractions and roads will still be closed for the season, but fear not, most attractions are open all year!

We went in May for our first trip because, in 2013, the month of May was still considered off-season. Unfortunately, as Iceland became a more popular tourist destination, it’s now considered high-season by the Icelandic tourism industry. We do feel very lucky to have had the chance to visit Iceland before the big tourism boom.


PLAY Air is the budget option, but we’ve been flying Icelandair because we think their fares are fair for what we get (one checked baggage, one carry-on, one handbag/personal item, free soft drinks on board) and in the dozen times we flew with them, we always had a good experience. It’s just a matter of preference.

Here’s a little tip: Icelandair’s economy fares don’t fluctuate much all year but sometimes they do go lower. To catch the lower fares, set up a price watch for your preferred travel dates on Google Flights. You will receive a notification email from Google when the price changes. When you think the price is right, book the flights and pats yourself on the back. 🙂

Book your tickets early. The closer to the date, the more expensive they will cost.

Car Rentals and Gas

Our trick for a cheaper car rental is to always rent the smallest car available. Not just because of the lower cost but also because smaller cars tend to be more fuel-efficient. You won’t need to refuel as many times as you would a bigger car so you’ll spend less on Iceland’s very expensive gas.

However, there is a catch. In the off-season, the weather can be quite unpredictable and Iceland is prone to gale/hurricane force wind. Small cars can be harder to steer when it’s super windy so please drive carefully and according to weather and road condition. And maybe buff up your steering arms a bit before the trip. 🙂

Also, make sure your rental car has its winter/studded tires on, and please do stay on the ring road or paved roads when driving a small car in the off-season. It’s for your own safety.

To save yourself from having to pay for the airport shuttle busses to Reykjavik and then back to the airport at the end of your trip, pick up your rental car from and return it to the airport if possible (returning to a different location usually costs you extra). Not only will you save money, it will make your life a little easier, too!

Renting a car with manual transmission costs considerably less than renting one with automatic transmission. If you only know how to drive automatic, it might be worth it to learn how to drive manual before the trip.

Alternatively, find a travel companion who can drive manual and who is willing to drive the whole trip. Bonus point if you’re able split the car rental cost with him/her. 🙂


This is the area where you need to do a lot of research and price comparisons through online booking engines in order to find the best deals. When you did find a hotel with the best deal through a booking engine, make sure you visit the hotel’s website and see if you can get a better deal by booking directly.

Book early because the least expensive accommodations will get booked up fast. You also need to make sure that the accommodation cost includes breakfast. Having breakfast included is a money-saver and convenient. Camping, obviously, will save you even more but I wouldn’t recommend it in the off-season when the weather tends to be sketchy.

If you sign up for a Hostelling International membership and don’t mind staying in a dormitory-style room with other travellers, or a single room if you travel solo, it can be a good way to save money. Double rooms in hostels, however, are not quite budget-friendly in my opinion. They seem to cost as much as a budget hotel double room, if not more (correct me if I’m wrong).

In Reykjavik, unless you can find a budget hotel room with a decent rating (we’ve never had much luck with it in our two visits), you’d be better off staying at an Airbnb. If you choose to rent a private room instead of an entire home, it can be cheaper than a Reykjavik hostel room and you’ll get to stay with a local or a local family.

Some smaller, entire home can be quite affordable as well. As an added bonus, they usually come with a kitchen. Being able to cook your own food will save you money because eating out is expensive anywhere in Iceland.

If you don’t have an Airbnb account yet, sign up using our referral link to receive a CA$50/US$40 credit to spend on your first stay. You’ll also help support this site because we’ll get some credits too for our future trips!

Budget is super tight? Check out Couchsurfing. You might be able to crash on someone’s couch for free. However, only Reykjavik locations are available.

Food and Drinks

As mentioned above, booking accommodations that include breakfast is a good way to save money. If you stuffed yourself at breakfast, you could probably get by with having only snacks for lunch.

When we’re on a road trip, one of the first places we visit is usually a local grocery store. We would put together a “goodie bag” full of snacks like potato chips and chocolate bars, fruits like bananas and apples, and the staples: bread, butter, and jam. Go to Bonus, Netto, or Kronan supermarkets for the lowest prices.

If you really have to eat out, research the restaurant beforehand and check out the menu online, if possible. Find out how much it would cost. That way you avoid getting a sticker shock.

It also allows you to decide whether it’s within your budget to eat there, or if eating out of the “goodie bag” is a better option. Hotdogs, sandwiches/wraps, pizza, and fish and chips are among the least expensive food in Iceland. Many gas stations like N1 serve pretty decent hotdogs for cheap.

We enjoy visiting local bakeries when we’re travelling for a taste of local pastries and sweets. I would strongly recommend a visit to any bakery in Iceland. Baked goods are usually inexpensive and would make good snacks or even a light meal. My favourite Icelandic pastry is called kleina, a knot-shaped donut. Can’t get enough of them! 🙂

As for drinks, always pack your own reusable water bottle(s) when you travel to Iceland. Never buy bottled water! Iceland has one of the best quality drinking water in the world. You can get it for free out of the tap.

For alcoholic drinks, be sure to buy them from the duty free shop at the Keflavik airport when you arrive as alcohol is very expensive in Iceland. Or better still, don’t buy alcohol at all!

Tours and Activities

Organized tours and activities in Iceland are what I would call luxury items. They tend to be quite expensive and cost over $100 per person. But sometimes you just have to take a tour or an activity no matter how much they cost because it’s been on your bucket list forever. That is fine. Consider it a reward for watching your spending.

You might want to plan ahead and decide which tours or activities you’d like to splurge on and then stick to the plan. A visit to the Blue Lagoon was one of the two luxury items we splurge on on our first trip. The other splurge was on a lopapeysa, the traditional Icelandic handmade wool jumper. No regrets on both accounts.

Professionally Organized Iceland Road Trip on a Budget

If the whole trip planning thing sounds too daunting, you might want to consider booking a self-drive tour from Hey Iceland. I think their prices are quite fair, especially in the off-season. They do have some budget options. Plus, almost all of the accommodations in their network include breakfast.

We booked some of our accommodations through them on our first Iceland road trip and were not disappointed. They’re also sponsoring our next Iceland road trip in October this year (full disclosure!) but I wouldn’t have recommended them if we hadn’t used and been satisfied with their service in the first place. 🙂

Well, I hope this post helps you a little bit in making your dream Iceland road trip on a budget a reality. If you’re ready to make an itinerary, check out our itinerary for inspiration. Also, if anyone has any other tips to add to the list, please feel free to share in the comment.

Happy trip-planning!

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