We think renting a camper van is the best way to see Iceland. It's a popular and convenient way to get around the country, and there are plenty of companies and options - big and small - to accommodate most travellers.
Iceland is full of affordable and well-equipped campsites, but sparsely populated. Finding a hotel or guest house to sleep in every night will limit your route, especially once you get away from Reykjavik and the South Coast. Touring in a camper lets you explore more freely, and gives you a lot of room for clothing, cooking supplies, and camera gear.
Another great option is a regular car rental with tents and sleeping bags, but check which season you are going in and that you have adequate gear. We ended up going the camper van route for our two week roadtrip, but we also saw lots of groups with tents.
What to look for in a camper van
Aside from your travelling buddies, your rental van is one of your most important companions you'll need to get along with on a camping trip in Iceland. The country is spread out, rugged and the weather can be wild... so you might be spending a lot of time with it! Make sure you find one that suits your needs.
There are many van companies in Iceland, offering all sorts of different options and price points...I don't want to tell you which company to go with, because they are always changing, getting new models in, adding new features, so here are a few of the things to look for when renting your van:
4WD or 2WD - Depending on the season, you may or may not need a 4WD van. Ring Road and all main roads in Iceland's towns are paved, and the secondary roads are either paved or graded gravel roads. In general, you should be able to get to all the highlights and do lots of exploring around Ring Road in just a 2WD van. Iceland's road system has a designation for 4x4 only roads: F-Roads, and these are mostly in the highlands and interior of the island. Each rental company will let you know which roads your rental can go on, but unless there is a lot of snow on the roads, you probably won't find yourself limited with just a 2WD van.
Spare Tires - Even though Ring Road is nicely paved, the secondary roads are gravel and can be a bit rugged. The vans also get a lot of use and their tires aren't necessarily the newest, so a flat tire isn't that uncommon... we ended up getting multiple flats! Double check that your rental has a spare tire (or two) and what their policy is if you get a flat (some make you pay to fix or replace the tire) and if you get a flat without a spare and require help.
Does it have a heater? - Again, dependent on the season, but Iceland's nights can be chilly all year round, and the supplied sleeping bags can be a bit thin. Some of the vans have a separate heater system, running off a separate battery, for use when you are stopped. We found this invaluable as it was quite cold at night during our 2-week trip.
Refrigerator - We found that some of the vans had integrated fridges, running off a secondary battery and charged with solar panels on the roof and others had a cooler that plugged into the car's DC socket while it was running. Depends on how long your trip is and what type of food or drinks you'll be storing, but make sure your van has the type of fridge you'll need.
Sink - Some of the vans even have pump sinks, which made for washing dishes when you weren't in a campsite a nice treat... but most of the facilities at the campsites were so good that we didn't use the sink much, except for washing up after breakfast or lunch -- or when the weather was terrible.
Interior Configuration - All the vans had different internal layouts. In some, the bed was always down, with storage underneath, others had a couch that converted into a bed at night, and some had a narrow bed built into the roof. We personally chose one with a couch/convertible bed as it gave us more room in the back during the day and made it easier to store wet and muddy gear without messing up the bed... but whatever you want, make sure your van has a layout you can work with.
Wifi? - You might be surprised, but Iceland has excellent cellular coverage all around Ring Road and a lot of rental companies will offer built-in unlimited wifi. This might be important to you or it might be a downfall, but it's there if you want it!
Pickup/Dropoff - Where will the company pick you up and drop you off? A lot of the rental companies are outside of Reykjavik and most of them will pick you up in Reykjavik or at the airport... but some will only drop you off at the airport (which is 45 mins from Reykjavik). So if you're planning a couple days in Reykjavik before or after your roadtrip, or a day at the Blue Lagoon before your flight, make sure the company will pick you up or drop you off in the right location... otherwise, like me, you'll waste a few hours taking a bus to the airport to catch a shuttle back to Reykjavik.
Resources
A few of the more popular rental companies we looked at:
