We absolutely wanted to discover Iceland in winter after our 2 trips in summer. The winter is really its own thing over there and we loved it. The light is absolutely incredible and very different from the atmosphere in June, for example, and you won't visit the country the same way.
Overall, even though we were prepared, we were still surprised by the cold. The temperatures don't seem that much colder than at home in January, for example, but the wind chill here is fierce and the perceived temperature is often well below the real numbers on vedur.is.
The Vedur.is application was great, really very accurate from one day to the next, and the hourly weather is almost always accurate. This was vital to adapt our itinerary and hike in the best conditions when the weather is nice, and scheduling indoor activities when the weather became hostile.
We were extremely lucky with the weather despite the cold: it was nice out almost every day, with only half a rainy day in Vik, the second day, and we adapted our afternoon accordingly. For the month of October that's pretty good.
And then we saw the aurora borealis... We worked hard to see them, it must be said, but we got so lucky. That night really will remain etched in our memories forever. Again, I strongly recommend using the vedur.is and My Aurora Forecast applications, which helped us a lot. During our week there, the famous KP index was often at 2 which means low chances of seeing any, but for 3 days the index sat between 4 and 6 which is excellent.
We weren't prepared however, and the photo session was difficult because of the cold. That first night was really very cold with very high wind, which made the tripod shake and ruined our long exposure shots.
We found a useful trick to recommend, however. The essential tripod is of course the main tool, but having a lens with a 2.8 aperture was ideal because I think that anything above would have made clean shots difficult. We had also read that light pollution can really spoil the show, and this is even more true than we imagined, especially when the aurora is mild.
One thing that we may have underestimated is the length of the days, which was manageable in late October compared to January, but the itineraries really need to be planned carefully. The sunset starts at 5PM and the light was dwindling long before then. With this in mind, we had planned to visit some places early in the morning before the tourists arrived, but often it was still too dark! Still, you should take advantage of the darker hours 7:30 and 8:30AM for example to get to your chosen site, as we were able to do when going to Hofn. Being on site just as the sun rises can really make your visit a magical experience. This is what we managed quite well when we visited the DC3 wreckage.
The sunrises and sunsets are absolutely magnificent, so always plan your days around having a quiet moment admiring one of the many sublime landscapes that Iceland has to offer when the sun is rising or setting. In June the sun does not set so you can't exactly do that...
In terms of prices, it's true that housing is a bit cheaper, but restaurants are the same as the high season. In general, there are far fewer tourists. There are always a few at very touristy sites (Skogafoss, Seljalandsfoss...) but when you venture into nature, like Snaefellsnes, you'll see much less of them.
As for driving, we were very happy with the equipment provided on our SUV. Snow tires are “basic” tier so we never had to worry about that.
We were happy with the car rental, no problems to report to BCR or with the car itself.
The accommodations were excellent, especially the one where we spent 3 days in Vik, and by staying in the same place over a few evenings we really got to organise our days and visit many places. I think it's a good idea to do this in winter in some parts of the island. Not having to check out in the morning and carry the suitcases, packing everything up twice a day saves a lot of time.
In conclusion, we loved Iceland in October. The country has a lot of charm at this time and I think that October has great perks compared to some months like January-February: the road conditions are safer, the days are longer, and it's quiet...
So we highly recommend this time of year for a stay in Iceland!