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Hotels and Car rentals

We are going to Iceland for A couple of days in April and wanted to see if anyone had any suggestions for hotels. We wanted to stay one night in Reykjavik one night but thought it might be fun to stay somewhere else the second night. Any suggestions?

I had also heard that it was possible to a rent car from private individuals cheaper than from the rental companies. Has anyone tried it and if so how do you go about arranging it?

Thank you in advance!

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