Last Updated on July 27th, 2025
Practical Tips When Buying a Car in Iceland
Are you thinking about buying a car in Iceland? In this guide we will help you get on the right track. Whether you’re new to the country or have been here for a while, getting your own car can completely change how you experience daily life in Iceland. While public transportation works pretty well in Reykjavik, having a car opens up many possibilities, both for getting around the city and exploring what lies beyond it. If you live outside the capital area or want to explore the countryside, a car can quickly become essential rather than optional. At the end of this article we have included a list of car dealerships in Iceland to help you get started.
Choosing Between New and Used Cars
One of your first major decisions in the car buying process is choosing between purchasing a new or used car. New cars come with warranties and the latest features, but you will pay a premium for that peace of mind. To assist with the purchase, many dealerships offer financing options or loans, although this option usually doesn’t become available until after you have lived in Iceland for a little while and built a good credit score.
Used cars are more affordable and could be a more economical choice if you’re on a tighter budget or if you have recently moved to Iceland. It’s worth mentioning that financing options are usually available for used cars, just as new cars.
Conducting Your Research
Once you’ve decided on new versus used, the next phase involves research. Browse online classifieds and dealership websites to find out what’s available in the Icelandic car market, and to get a sense for prices. Pay attention to different makes, models, and understand what types of cars are popular and reliable in Iceland. Timing matters too. If you’re shopping before winter hits, then it can be a plus to find a car that includes winter tires as otherwise you would have to buy them anyway. Reviews and buying guides will help you figure out which vehicles actually hold up well here versus the ones that just look good on paper.
Test Driving and Inspection
Once you’ve found a car that interests you, arrange a test drive to see how it performs. For used cars, especially pricier ones, it’s smart to have a mechanic have a quick inspection to identify any glaring issues.
You should also check the inspection sticker that can be found in the middle of the license plate. It shows the year the car needs to be inspected. If it needs to be inspected soon, then you should take into account that there may be mandatory repairs ahead. But if the car has recently been inspected and has that sticker for next year, then that’s a good sign and it’s less likely that expensive repairs are ahead of you. At least for now.
Negotiation and Finalizing the Purchase
When you’re satisfied with your choice, negotiate the final price. In Iceland, the advertised price, especially for used cars, is often a starting point. Negotiation is expected, and most sellers anticipate some level of price discussion. After you agree on the price, the official paperwork is signed, the ownership of the car is transferred, and you will need to register the car with the Icelandic government. You can register your vehicle online at the Icelandic Transport Authority website. This step should be initiated by the seller and you can complete it on the spot. Keep in mind you have to already have a kennitala (social security number) to buy a car and insurance in Iceland.
Cost Analysis
Buying a car in Iceland involves various costs that you need to take into account. These include the initial purchase price, registration fees, maintenance, fuel, and insurance. New cars tend to have higher upfront costs, but they are usually cheaper to maintain in the first few years. Used cars are cheaper to buy but may require more frequent servicing. Additionally, fuel prices in Iceland are relatively high, which can make owning a car more costly over time. Budgeting for regular maintenance and unexpected repairs is also crucial to avoid surprises.
Insurance Information and Approximate Cost
Car insurance is mandatory in Iceland, and you will need to sign up for insurance before you can legally drive your car. Note that when the car is registered in your name, in the purchase step, you will select the insurance company that you want to use.
The main types of insurance are Liability Insurance (ábyrgðartrygging) and Collision Insurance (kaskótrygging). Liability insurance is required by law, while collision insurance is optional but highly recommended. The cost of car insurance can vary depending on factors like the car’s age, model, and your driving history. On average, basic liability insurance may cost between 120,000 and 160,000 ISK per year, while more comprehensive coverage can go up to 200,000 ISK or more annually. You can usually pay the insurance in monthly installments. Comparing quotes from multiple providers is advised to get the best deal.
Click here to read our article on car insurance in Iceland.
Find the Right Dealership
It’s worth checking multiple dealerships to compare prices, selection, and what kind of service or warranties they offer. Some dealers specialize in imports, others in certified used vehicles. If you’re not sure where to start, the links at the end of this guide are a great place to begin. Many of them regularly work with people who are new to Iceland. While you can buy cars directly from owners using online classified sites or Facebook groups, going through a dealership can often get you the best deal and peace of mind since you’re working with experts. They can also help you decide what car works best for your needs and budget.
Useful Links for Buying a Car in Iceland
Here are some links to car dealerships in Iceland:
- Bilasolur
- Bíll.is
- Bílalíf
- Bilasala Islands
- Stora
- Hofda Bilar
- BR
- Bilasala Selfoss
- Bilak
- Bilaland
- Notadir
- Hekla
- Islands Bilar
- Draumabílar
Not Sure Where to Start? Get a Few Quotes
If you’re not sure which dealership is right for you or what kind of car to get, we can help. Fill out a quick form and we’ll connect you with local dealerships based on your needs, budget, and timeline. There’s no cost or commitment. Click here to request car offers from local dealerships.
Ready to Make Your Choice
Getting a car in Iceland takes some homework, but it’s worth the effort to do it properly. In the end you will have the freedom to get around on your own terms, whether it is for commuting to work, groceries, exploring the country or anything in between.
Do your research, don’t be afraid to negotiate, and you will find something that works for your needs and budget. Good luck with the search!
