A practical guide for new residents on getting a car in Iceland — buying vs leasing, required documents, insurance, and registration.
Before anything else, it is worth being honest about this question — because the answer is almost always yes, but with important nuance. Within Reykjavík's central urban area, you can manage without a car. Bus service in the capital is reasonable, cycling infrastructure has improved significantly, and many residents in the 101 Reykjavík postcode walk to most daily needs. But step outside the central postcode and the situation changes rapidly. Suburbs like Kópavogur, Garðabær, Hafnarfjörður, and especially areas beyond the capital have limited and infrequent bus service.
Outside the capital region, Iceland has essentially no meaningful public transport beyond long-distance bus services in summer. If you live anywhere outside Reykjavík — and many employers in fishing, agriculture, geothermal, and manufacturing are based in rural areas — a car is not optional. It is the difference between being able to live and work in Iceland and not.
Before you can buy a car, insure it, register it, or finance it, you need your kennitala — Iceland's personal identification number, a 10-digit code assigned to every resident. The kennitala is the universal identifier used for every formal transaction in Iceland: banking, insurance, government services, and private contracts.
To obtain a kennitala, register with Þjóðskrá Íslands (the National Registry of Iceland). EU/EEA citizens registering as residents can do this at the District Commissioner's office (Sýslumaður). Non-EEA citizens need to coordinate with Útlendingastofnun (Directorate of Immigration) for residence permit processing, after which Þjóðskrá assigns the kennitala. Processing times vary but plan for 1–4 weeks depending on your nationality and situation.
You will need an Icelandic bank account before you can set up insurance by direct debit, arrange vehicle financing, or make larger purchases. The main retail banks are Íslandsbanki, Landsbankinn, and Arion Banki. Account opening requires your kennitala, passport, and proof of address. Some banks also require proof of employment or a signed rental contract. Online banking in Iceland is sophisticated and widely used — the Íslykill/Auðkenni digital ID system means most banking tasks can be completed without visiting a branch once you are set up.
Most Icelanders buy vehicles outright or with bank financing (bílalán). Icelandic car loans typically require:
New residents who have just arrived face the challenge that Icelandic banks have no credit history data on them from foreign sources. If your Icelandic employment has been only a few months, you may need a larger deposit or a guarantor to access financing. Íslandsbanki, Landsbankinn, and Arion Banki all offer car loan products — compare rates and terms before committing.
Vehicle leasing is less common in Iceland than outright purchase but is available through several channels, including manufacturer-affiliated finance companies and independent lease brokers. Leasing typically requires a stronger credit profile and employment history than a bank loan. For new residents, leasing is rarely the most accessible route in the first year.
Icelandic law requires that every vehicle on the road is insured before it moves. This is not a technicality. Do not arrange to collect a vehicle without having insurance confirmed and active. The process:
Iceland's main insurers are Vátryggingafélag Íslands (VÍS), Sjóvá, TM (Tryggingamiðstöðin), and Vörður. It is worth getting quotes from all four — premiums can vary significantly. Online quote tools are available on each insurer's website and work with your kennitala. As a new resident without Icelandic driving history, your premium may initially be higher, but it typically reduces as you build a claims-free record in the system.
When you purchase a used car in Iceland, the seller typically initiates the transfer of ownership (eigendaskipti) via Samgöngustofa's online system. As the buyer, you will need to confirm the transfer. Ensure this is completed promptly — as the new registered owner, you become responsible for road tax, insurance, and any traffic violations from the transfer date.
If you are buying a newly imported vehicle or a vehicle that requires re-registration, you will need to attend Samgöngustofa in person (at Borgartún 7, Reykjavík, or a regional office) with your kennitala, insurance certificate, payment for the skráningargjald (registration tax), and the vehicle's documentation.
If you purchase a vehicle that is due for its annual skoðun (technical inspection), arrange this promptly. Driving a vehicle with an overdue or failed skoðun is technically illegal and may affect insurance validity in some circumstances. Bifreiðaskoðun Íslands (BI) operates inspection stations in Reykjavík and across Iceland — appointments can be booked online.
Icelandic law and basic common sense both require that your vehicle is equipped for Iceland's conditions. As a new resident experiencing your first Icelandic winter with a car, ensure you have:
The 112 Iceland app should be installed and set up on your phone before any journey outside Reykjavík. It is free, it works even in areas of limited mobile signal (storing GPS data until signal is recovered), and it has been attributed with saving lives in remote area accidents.
Iceland has an active English-speaking expat driving community. Facebook groups including Iceland Expats and Expats in Iceland regularly share advice on vehicle purchases, insurance recommendations, and road conditions. The Rafbílasamtök Íslands Facebook group is specifically focused on EVs in Iceland and is an excellent resource for EV-specific advice. These communities are genuinely helpful for new residents navigating Iceland's unique automotive landscape.
Reykjavík's parking zone system catches thousands of visitors off guard every year. Here's how the P1-P3 zone system works, how to pay, where to park free, and how to avoid fines.
Að flytja til Íslands með erlend ökuréttindi? Umbreytingarferlið fer eftir hvaða land gaf þau út. Þessi handbók leiðir þig í gegnum sérhvert tilvik.
