Iceland is one of the world’s most popular destinations, but it comes with a hefty price tag. A cheap pint of beer might cost $7, a casual lunch as much as $25, and a hotel in Reykjavik runs between $150-$250 per night. In my opinion, you absolutely get what you pay for. There’s a reason Iceland’s tourism industry is booming, despite the steep cost; but that doesn’t mean you should break the bank unnecessarily. You can still experience all of Iceland’s dramatic geography on a relatively low budget. Here’s how.
1. A small car doesn’t mean a small adventure.
Unless you’re driving a 4×4, roads that stray from the main Ring Road can be dangerous and even impassable. Unfortunately, to rent a 4×4 for a week can easily set you back over $600, and leave you wondering, “Is it even worth it?” Well, the good news is you don’t need to leave the Ring Road at all to get your adventure fix. For half the price, you can rent a compact car or sedan and make your way around Iceland’s lone highway. Enough waterfalls, glacier views, geysers, and mountains line the road to keep you busy for a week, and you’ll have more money left over to spend on the important things — like Einstok (Icelandic beer)!
2. Take the insurance gamble
There’s some controversy surrounding what car insurance is necessary for Iceland. Gravel protection and sand and ash protection are the two most common. The conventional wisdom is “better safe than sorry,” but these insurances are mainly meant for travelers venturing to the highlands, and to protect against the occasional sandstorm, mainly along the southern stretch of the Ring Road near Myrdalssandur and Skeidararsandur. If you drive cautiously and stay aware of your terrain, you can save yourself the $100 insurance fee.
3. Skip the hotels.
This one’s easy, since you won’t find many traditional hotels anyway unless you spend the whole trip in Reykjavik. While you can still find some full-service hotels along the Ring Road, they are expensive and best avoided. A more affordable hotel-like experience can be found in guesthouses, smaller complexes usually consisting of cabins which are reasonably-priced and sometimes even serve breakfast. The Vinland Guesthouse near Egilsstaðir, and Hunkubakkar between Jökulsárlón and Vik, are two cheap, well-located options I would recommend to anyone. For a truly Icelandic experience (and probably a good story or two), stay in Airbnbs. You’d be surprised by how many horse farms in the middle of nowhere open their doors to travelers. You’ll save money, and meet some awesome Icelanders too.
4. Drink from the tap.
At $3-$5 a bottle, stocking up on water for a road trip around Iceland can really add up. Luckily, the tap water in Iceland comes from clean, natural springs, and is perfectly safe to drink. Just make sure to let the water run for a few seconds to get rid of the sulfuric smell. Buy a refillable water bottle and drink for free the whole trip!
5. Get your booze duty-free.
Speaking of drinking for free, don’t expect to do that at bars or restaurants. A standard mixed drink will cost around $11, and a cheap beer around $7. You can get better prices in bulk at markets, but those are few and far between. To affordably stock up on booze for your trip, your best bet is the duty-free store at the airport. That way, when you find yourself at a guesthouse miles from civilization (and from any liquor store), you won’t have to worry about spending the night sober.
6. Don’t dine — snack!
Everyone should treat themselves to one or two nice Icelandic dinners. Hákarl (shark) is a staple, and I had one of the best steak burgers I’ve ever eaten at a restaurant in Höfn. But if you eat out for every meal, you’ll quickly start wondering why your wallet feels so light. Instead of spending $18-$25 at a restaurant, stop at gas stations for cheap sandwiches. Stock up on snacks for the drive or hike, or cook your own breakfasts at Airbnbs. If you do go out for meals, try to make it lunches, which are usually more reasonably priced.
7. Avoid tourist traps and tours.
It might seem like less hassle to book bus tours from Reykjavik, rather than renting a car and going it alone, but Iceland is meant to be explored with as much freedom as possible. A day tour of the Golden Circle can cost upwards of $100. Traveling the same route by car rental allows you to go at your own pace, make impromptu stops, and avoid a cramped bus. One of the most popular (and most expensive) tourist traps is the Blue Lagoon, Iceland’s famous geothermal spa. Prices range from $70 to $500 per person, depending on how much pampering you want. Feel free to indulge if you’ve got the money, but alternatives like Secret Lagoon in Flúðir might be more practical. Less than an hour and a half from Reykjavik along the Golden Circle, Secret Lagoon is a natural hot spring smaller than the Blue Lagoon, but less inundated with tourists, with a more remote feel, and best of all — it’s free! If that’s not enticing enough, there’s also a nearby geyser that erupts every five minutes.