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Iceland - Rent Car or take Bus?

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Greetings,

I'm planning a two week trip to Iceland in summer 2015. My friend and I are trying to decide the best way to get around the island. We'd like to do some day hikes, sightseeing, and see quite a bit of the country (loop road maybe). Can anyone give me advice on how we should travel?

Should we rent a car or is it easy enough to take public transportation?

Thanks!

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