How To Travel Iceland on a Budget: The Complete Guide

Welcome to your go-to guide for exploring Iceland on a budget. This comprehensive resource is designed to make your journey through the Land of Fire and Ice not only memorable but also wallet-friendly. 

From practical tips on affordable accommodation and dining options to insights into self-guided adventures and the convenience of rental cars, we’ve got you covered. Your Icelandic adventure starts here. 

Where to stay in Iceland on a budget

When you’re looking for a wallet-friendly place to stay in Iceland, there are smart choices that won’t break the bank while ensuring a comfortable experience. 

In Reykjavik, the capital city, consider hostels offering beds at $30-$50 a night or a cozy Airbnb or guesthouse room for $100-$150 a night. In the peak summer months of June to August, Reykjavik tends to be popular, but pricey. To save money, explore accommodation options closer to the airport, the Blue Lagoon, or south of Reykjavik. To snag the best deals, explore both Airbnb and HotelsCombined for a comprehensive search and book early! 

Beyond Reykjavik, a variety of accommodation options await, ranging from $100-$300 a night. Platforms like Airbnb and Hey Iceland provide options like hotels, lodges, Airbnbs, farm stays, guesthouses and cabins across the country – ideal for those seeking a more tranquil and budget-conscious journey. 

Camping emerges as a top-notch choice for savvy travelers seeking both affordability and stunning landscapes during their summer escapades in Iceland. Even those not typically drawn to canvas abodes will find themselves enticed by the combination of cost-effectiveness and picturesque settings. By choosing camping, you not only maximize your savings but also immerse yourself in the breathtaking beauty that Iceland has to offer, creating an unforgettable and budget-friendly holiday experience. 

Where to eat in Iceland on a budget

Navigating Iceland on a budget doesn’t mean compromising on culinary experiences. Here’s a guide on where to eat without breaking the bank. 

Self Catering 

If your accommodation–be it Airbnb, hostel, hotel, or campsite–offers kitchen facilities, consider self-catering. Affordable grocery stores like Netto, Bonus, and Kronan are your go-to spots for budget-friendly food. However, be mindful of their opening hours and they might close early. 

Steer clear of pricier options too, like the 10-11 chain and stores near tourist attractions to avoid unexpected expenses. 


While Iceland boasts its share of high-end restaurants, it’s worth noting the abundance of affordable dining options. Beyond the pricey establishments, Reykjavik is dotted with inexpensive gems, offering a diverse range of flavors without straining your budget. 

Options include Baejarins Beztu Pylsur, a local favorite for Icelandic hot dogs; Hlöllabátar, crafting superb sub sandwiches in downtown Reykjavik; IKEA in Gardabaer for value-packed meals; Pítan, serving top-notch stuffed pita since 1983; and 101 Reykjavik Street Food, offering comforting Icelandic bites. Each spot brings a unique flavor to the table, making them ideal for satisfying your taste buds without breaking the bank. Looking for a tasty takeaway that won’t drain your wallet? We’ve compiled a list of the top fast-food spots in Reykjavik.

Local Markets & Food Trucks 

Another thing you could do is explore local markets and food trucks. Dive into Reykjavik Kolaportid market, a treasure trove of affordable and authentic Icelandic bites. Stroll through the vibrant stalls to discover local delicacies, fresh produce, and handmade treats, all at budget-friendly prices. 

Additionally, keep an eye out for food tricks scattered across popular spots – these mobile kitchens often serve up delicious, wallet-friendly meals, allowing you to savor the diverse flavors of Iceland on a budget. 

Best things to do in Iceland on a budget

Experience the wonders of Iceland on a budget by immersing yourself in its breathtaking natural beauty. The country’s spectacular landscapes offer numerous off the beaten path and cost-free activities once you’ve sorted out transportation: 


With around 10,000 waterfalls to explore, many don’t require a guide or tour. 

Glaciers and glacial lagoons

While activities like glacier hiking and ice cave exploration may have fees, witnessing the grandeur of glaciers and lagoons is free! 


Marvel at Icelands’ iconic mountains without spending a dime. 

Black sand beaches

Wander the famous black sand beaches of Reynisfjara and Diamond Beach, or discover other moody black beaches in South Iceland for a free and dramatic experience. 

Icelandic churches

Admire picturesque churches like the Black Church at Búoir or the turf church at Hof. While entering may not always be an option, exploring their exteriors is a delightful free activity. 

Consider avoiding paid trips and activities, focusing instead on the wealth of natural wonders Iceland generously offers at no cost. While attractions like the Blue Lagoon may beckon, be selective in your choices, as some experiences may not necessarily match their price tags. Reykjavik itself provides cost-free attractions, from a City Walk to sunbathing on Nauthólsvik Beach, exploring the Kolaportid flea market, visiting the Harpa building, and hiking up Mt Esja. 

For multiple Reykjavik sights, the Reykjavik city card offers excellent value, providing access to museums, local public transport, and ferries to Videy Island at a reasonable cost for culture enthusiasts. 

How to get around Iceland on a budget

Navigating Iceland on a budget is both accessible and rewarding, particularly with a focus on budget-friendly transportation, such as rental cars: 

Consider renting a car as your primary mode of transportation. This not only provides the flexibility to explore at your own pace but also allows you to reach remote and stunning locations that may be inaccessible by public transport. Numerous rental agencies offer a range of affordable options, including compact cars and budget-friendly models. Look for inclusive deals that cover essentials like insurance and mileage to avoid hidden costs. 

The best car rental companies in Iceland will offer a varied fleet to cater for a wide range of needs and preferences. You can typically expect to find:

Small & Medium cars

Best for couples or small groups of friends/family that plan on staying in urban areas or on paved roads.

Small and medium cars include the likes of city cars, hatchbacks and estates and are a popular choice amongst couples and small groups of friends. 

Lower to the ground, these vehicles aren’t typically at home on tougher terrain and are unsuitable for F-roads. However, they are very well-suited to urban life in cities such as Reykjavik and are suitable for short stints on gravel roads when required. That being said, there are some small or medium SUVs available that are equipped with 4x4 technology, making them suitable for F-roads.

The most popular small or medium cars include the likes of the Toyota Aygo city car, Tesla Model 3 and Kia Ceed wagon.

Large cars & SUVs

Best for families that require more space or explorers looking to use a mixture of paved and gravel roads.

The most common Large cars you’ll come across will be SUVs such as the Kia Sorento and Toyota Highlander.

Often offering more luggage space and seating for up to seven, these vehicles are popular amongst those looking to have a mixed adventure, exploring both urban and rural areas of Iceland.

A wide variety of large vehicles comes with four-wheel drive technology too, making them suitable for F-roads, although it’s worthwhile double-checking whether your chosen vehicle is approved for this terrain with the rental company.


Best for individuals, couples and groups planning on exploring Iceland’s trickier F-road system.

Most 4x4 vehicles will have a look similar to your typical SUV but will come equipped with four-wheel drive technology and a more rugged nature to ensure they’re a match for tough conditions and terrain. In fact, 4x4s are one of the most popular vehicle types to rent in Iceland thanks to this ability, allowing visitors to explore the country with complete freedom.

The most popular 4x4s include the likes of the Land Rover Defender and Toyota Hilux.


Best for individuals and couples looking to explore the country’s natural wonders and sleep under the night sky.

Campers prove to be a particularly popular choice for those visiting Iceland thanks to their flexibility, allowing you to find a campsite and relax in the wilderness.

Traditional van-like campers have been popular for a while but in recent times cars with rooftop tents (such as the Dacia Duster) have seen a surge in popularity. Wild camping is not permitted in Iceland, so unfortunately you cannot pitch up anywhere, but there are plenty of campsites that have spaces available for camper vans around the country.

If you plan on hiring a camper while in Iceland, it’s worthwhile considering whether you have suitable equipment such as sleeping bags and cooking equipment. Some car rental companies will offer equipment rental too, if required.


Best for large groups of family or friends looking to explore the country’s main road and gravel road system in comfort.

With a van-like look, minivans and passenger vans are a great choice if you need a lot of space for multiple people. Most minivans offer seating for up to nine people, making them popular amongst larger groups of travelers.

While some minivans come equipped with four-wheel drive technology, most rental companies don’t permit this vehicle type to travel on F-roads due to the dangers involved. If you plan on exploring the areas unlocked by F-roads, then you may want to consider splitting your party up into two 4x4 cars that are suitable for this challenge.

The most popular minivans include the Volkswagen Caravelle and Mercedes-Benz Vito.

Explore Iceland on a budget with Lotus Car Rental

We hope you’ve learned a money-saving tip or two with this guide. If you want to learn more about our currency, the Icelandic króna (ISK), check out our currency in Iceland article.

As one of the most popular forms of transport when visiting Iceland, renting a car can unlock further freedom and allow you to experience your adventure as planned. 

At Lotus Car Rental, we have a wide range of rental cars available to cater for various needs and preferences. We also offer a pick-up/drop-off service to help you get behind the wheel of your car and have no limit on how far you can travel. Book your Iceland car rental with us today.