Driving in Iceland
Traffic in Reykjavik:
Icelanders have a very high car ownership percentage, 580 cars/1000 people, about the same as in the USA. The traffic, however is not to bad as Reykjavík is quite large compared to it's population. The signs are not as good as in many cities so it's a good idea to get a map of the city. Once you have started to drive around it's quite easy to find your way as the city has some noticeable landmarks that are easily spotted. Parking in Reykjavík is very easy. The only place one can't expect to find a parking space immediately is the city centre but even there it's easy at most times. Speed limit is 50 km/hour unless there are signs that show otherwise. Some of the main roads have 70 km/hour speed limit and many of the smaller streets have 35 km/hour speed limit.
Traffic in towns:
Driving in towns around the country is very easy and parking spaces available everywhere. The one thing visitors might notice is that most people almost always drive where they are going, even if it's only a short distance within the small towns. The same speed limit rules apply as in Reykjavík.
Country highways:
The icelandic highways are all dual lane, that is one lane for each direction. They are tarmac roads with 90 km/hour speed limit. Most of them are quite good but care should be taken when overtaking other cars. Not all of the ring road has tarmac. There are some parts that have gravel surface in the Northeast and the East Fjords. Animals shouldn't be near the roads, but sometimes they are. Be careful. There have been some accidents where drivers trying to avoid hitting animals have overturned their cars. This has even caused some deaths. Be prepared, its better to hit the animal than risk a serious accident if you find yourself in such a situation.
Country roads:
The ring road and the most commonly used local routes are tarmac roads. Outside those many of the less used country roads are gravel roads. Those can be difficult to drive for people that are unfamiliar with such roads. They are usually quite narrow and therefor it's necessary to slow down when meeting another car. Use common sense and keep in mind that animals can be expected on the roads at any time.
Interior roads:
The roads in the icelandic highlands are all gravel roads. The main roads are between the big glaciers. Kjolur lies from Gullfoss waterfall to the North between Langjokull and Hofsjokull glaciers. Sprengisandur road is east of Hofsjokull and goes from Thjórsárdalur in the South to the North between Akureyri and Myvatn lake. These roads and some shorter ones are drivable in passenger cars although they are better suited for trucks or four wheel drives. Ask the locals about the condition of the road before you go. Most of the interior roads are for four wheel drives only and the vehicle should be very reliable.
Driving in the highlands:
The best thing to bring along to the interiors is common sense. Never drive into something if you are not sure it's safe. The rivers are especially tricky. They can change a lot during the day and if your not sure wait for the next car rather than attempting a river alone. It's a good idea to wade the river before driving across. Many of the roads are quite rough and it takes a long time to drive short distances. When planing your trip take this into account and also that you will need quite a lot of fuel. Bring extra fuel in containers. A good map is a necessity and always let someone know where you are going and when you plan to return.
Rivers:
Most of the big rivers in the highlands have bridges but there are a lot of rivers that don't. Many of them are glacial rivers that change a lot during the day as water melts from the glacier and the rivers grow during the day. If you plan to spend a lot of time driving in the highlands it's a good idea to bring waders and a yard stick along on the trip. If you aren't sure by visually inspecting the river them wade across before you drive. If the current is strong tie a rope to you body and use a yard stick to brace yourself and poke the bottom. Remember, if the river is difficult to wade, it is difficult to drive. Please remember there have been some very serious accidents and deaths in those rivers so be careful.
Things to bring:
Most probably you'll be able to travel the icelandic highlands without any incidents. Most people do. But if something goes wrong you may find yourself stranded in a very remote place. It is therefor necessary to bring along warm clothing and extra food. Also make sure you have enough fuel to last your trip including unexpected delays. Spare tires and common tools are a must. Ropes, a shovel, waders, a yard stick and gloves. Maps are a must and a GPS unit adds extra safety. GSM phones can only be used in some places but NMT phones are usable in most places.
Above all bring along your good spirit but please don't underestimate the conditions. If possible travel with other cars.