Iceland is one of the most beautiful (if not the most beautiful) country I’ve ever visited. It was totally worth getting bronchitis, losing my luggage, being flown to SFO instead of LAX on the way back and having Russian hackers get their hands on my Uber account, PayPal, credit and debit cards. (After a long and stressful phone conversation with a guy from PayPal, he said, “Now after we get off the phone, I want you to go put a kettle on and make yourself a cup of tea.” LOL).
Tips: Unless you know your way around inflating and deflating tires for certain terrain, how to use a GPS device (that isn’t an iPhone) and how to drive on glaciers and gravel paths on cliffs–I would recommend using a tour company (e.g. Viking Trips, Guide to Iceland, Reykjavik Excursions–we used multiple during our 6 night stay just in case one of them wasn’t good).
If you do decide to rent a car, you have to get an SUV. We went to so many places where there were signs prohibiting sedans from passing (though many tourists decided to ignore those signs and struggle their way to the destination).
Pack lots of snacks. Restaurants are pretty expensive in Iceland (mostly because tip is included and because of how many tourists they have). I went to a grocery store in Reykjavík and definitely paid about $50 for just a few Quest bars.
If you want a “luxurious” vacation–stay in Reykjavik and make day trips out to the southern part of Iceland/the Golden Circle/etc. Otherwise, there are many small, boutique hotels/bed and breakfasts inland.