The real cost of owning a car in Iceland in 2025 — insurance, taxes, fuel, maintenance, and how it compares to other countries.
Iceland is consistently ranked among the most expensive countries in the world for consumer goods, and vehicles are no exception. The country's remote island location, small population of approximately 380,000 people, and dependence on imports for virtually all manufactured goods creates a cost structure that consistently surprises newcomers — particularly those arriving from mainland Europe or North America.
This guide provides a comprehensive, realistic breakdown of every cost associated with owning a car in Iceland in 2025, from the initial registration tax to ongoing running costs. Understanding these numbers before you purchase will prevent expensive surprises.
Iceland levies a vehicle excise duty (skráningargjald) on the registration of new and imported used vehicles. This is a one-time tax paid at the time of registration and is separate from any import duties (which apply if you are importing from outside Iceland — see our import guide for details).
The registration tax is calculated based on a combination of factors:
As a rough guide for 2025, registration tax on a typical mid-size family petrol SUV might range from 800,000 to 1,800,000 ISK. For EVs, the equivalent is typically 200,000 to 600,000 ISK — one reason why EV sales continue to dominate despite the reduction in subsidies. These calculations are complex and vehicle-specific; the Samgöngustofa website provides an official calculator.
Once registered, all vehicles in Iceland pay an annual road tax (bifreiðagjald). This is charged twice yearly in most cases and is based primarily on:
For a typical family car (1,400–1,800 kg), annual road tax runs approximately 45,000–90,000 ISK per year. Heavier SUVs and 4x4 vehicles pay proportionally more — a Toyota Land Cruiser owner might pay 100,000–130,000 ISK annually in road tax.
A relatively small but worth noting charge is the SORPA recycling fee levied on all registered vehicles. This funds end-of-life vehicle recycling programs. The fee is typically around 3,000–5,000 ISK per year and is collected alongside the road tax.
All vehicles driven on Icelandic roads must carry at minimum the mandatory third-party liability insurance (lögboðin trygging). This covers personal injury and property damage caused to third parties. It does not cover damage to your own vehicle.
The cost of mandatory third-party insurance is standardized across providers and is relatively modest — typically 30,000–60,000 ISK per year for a standard passenger vehicle, depending on vehicle type and owner's driving history.
Most vehicle owners, particularly those with newer or higher-value cars, carry comprehensive insurance (called full-kasko or allsherjartryggingin). This covers:
Comprehensive insurance pricing depends heavily on the vehicle's market value, your age, and claims history. Rough annual costs:
Iceland's main insurance providers include Vátryggingafélag Íslands (VÍS), Sjóvá, TM, and Vörður. It is worth getting quotes from all four — premiums can vary significantly for the same vehicle.
Iceland imports all of its liquid fuels, which means petrol and diesel prices closely track global oil markets plus import costs and taxation. As of early 2025:
For a vehicle consuming 8L/100km, the monthly fuel cost for 1,500 km of driving (roughly typical for an Icelandic commuter) is approximately 35,000–40,000 ISK. Note that N1 and Orkan loyalty cards offer small discounts on fuel — worth using if you fill up regularly.
All registered vehicles in Iceland must undergo a periodic technical inspection (skoðun) at certified inspection stations. The frequency depends on vehicle age:
The inspection covers brakes, lights, tires, emissions, structural integrity, and safety equipment. Cost: approximately 5,500–8,500 ISK per inspection at Bifreiðaskoðun Íslands (BI) stations. Failed inspections require rectification within a specified period before re-inspection.
If you run separate summer and winter tires (standard practice for most Icelandic drivers), you need somewhere to store the off-season set. Options include:
Pulling all of these costs together, a realistic monthly total cost of ownership for a medium family SUV (e.g., Toyota RAV4, Hyundai Tucson, 2–4 years old) driven approximately 1,500 km per month in Iceland looks like this:
Realistic monthly total: 118,000–169,000 ISK. This range will surprise many newcomers. Budgeting for the upper end of this range is advisable in the first year before you have a clear picture of your specific vehicle's costs.
Iceland's car insurance has exclusions that surprise thousands of visitors every year — sand damage, gravel chips, and F-roads void most standard rental cover. Here's the complete guide to staying protected.
Innflutningur bíls til Íslands felur í sér flóknar útreikninga. Þessi handbók útskýrir gjaldakerfið svo þú getir ákveðið hvort þú kaupir innanlands eða flytur inn.
