PenFed Auto Loan Review

PenFed auto loans at a glance

With its car-buying service and easy application process, PenFed Credit Union makes shopping for an auto loan almost as much fun as shopping for a new car. PenFed car loan rates are competitive, and fast approval helps you shift your car-buying experience into high gear. The credit union offers:

• 125% financing: You can borrow 25% more than the vehicle’s price to cover dealer add-ons like an extended warranty or window tinting, as well as title, taxes and registration fees.
• Large loans: Qualified buyers can borrow up to $150,000 with a PenFed auto loan.
• Easy experience: Apply online to get preapproval in minutes.
• Refinancing loans: You can lower your monthly payment or interest rate with a PenFed auto refinance loan.
• Buyer benefits: PenFed’s car buying service can help you save and get bonus benefits.
• Wide open membership: Like most credit unions, PenFed requires a membership to get an auto loan. Unlike some, PenFed is open to anyone with a Social Security number or U.S. individual tax ID number.
• Best for buyers who use the online car buying service: Take advantage of rate discounts and bonus cash offers when you use PenFed’s car buying service, which is powered by TrueCar.

PenFed auto loan requirements

Because PenFed doesn’t provide any information on what it takes to qualify for a car loan, such as a minimum credit score or minimum salary, you’ll have to apply for prequalification to get a sense of the rate you may be offered.

While there’s no official minimum credit score to get an auto loan, generally, a credit score of 661 or higher will help you qualify for better rates and terms.

With good credit (670) and higher, you will likely get approved by multiple auto lenders. With a credit score of 660 or less, you may be eligible for a bad-credit car loan.

Overall, PenFed limits loans to vehicles with fewer than 125,000 miles.

You don’t have to be a member to apply for an auto loan. But if you decide to accept PenFed’s offer, you must open a savings account with a minimum balance of $5.

PenFed pros and cons

There’s a lot to think about when applying for a car loan, and more information can help steer you in the right direction.

If you’d like to get the “as low as” rates on PenFed’s website, take advantage of the car buying service powered by TrueCar. You can search for the best deals on new and used cars near you. Those who have been PenFed members for 60 days or longer are eligible for members-only cash incentives on specific makes and models.

When you use the service to buy through a certified dealer, you may qualify for additional benefits such as reimbursement of up to $500 twice a year (for a total of $1,000 annually) for your deductible on insurance claims (not available in New Hampshire or New York). The PenFed car buying service is available in all 50 states.

Don’t put the pedal to the metal just yet — you must become a member to get a PenFed Credit Union auto loan and use the car buying service to get the lowest APRs. Fortunately, you can sign up to become a member during the loan application. All it takes is opening a savings account with a $5 deposit.

PenFed company overview

Pentagon Federal Credit Union, or PenFed, was founded in 1935 and is now one of the largest credit unions with nearly 3 million members. Originally opened to cater to military members, veterans and government employees, it’s now open to anyone. It still offers benefits such as VA home loans for military and government personnel.

PenFed auto loan types offered

PenFed offers loans for new and used cars and auto refinancing. It doesn’t offer specialty vehicle financing such as RV or motorcycle loans.

New car loans

• Model years plus or minus one year from current year
• Less than 7,500 miles
• Never titled

Used car loans

• Financing up to 125% of the value based on market prices from J.D. Power
• For an 84-month loan term, the vehicle must be no older than five years and under 60,000 miles

Refinance auto loans

• Financing up to 125% of the value based on market prices from J.D. Power
• Title loans available for paid-off cars

For those who use a PenFed auto loan or refinancing loan, there are additional related products, including:

GAP insurance: If your car is declared a total loss in an accident or stolen, you could be on the hook for paying off the loan balance. If you owe more on the loan than the insurance settlement, you’re responsible for the difference. You can add GAP insurance coverage for $525 to your PenFed auto loan to cover the difference. With the GAP coverage, you also get an auto deductible replacement that will pay you up to $500 for any covered loss on your auto insurance policy.

Vehicle protection: PenFed’s vehicle protection plan supplements a new car’s factory warranty or gives you protection on a used car. You get 24-hour roadside assistance, and it may also reimburse you for a rental car when your car is repaired during a covered event. Prices range from $1,245 to $2,995 for vehicle protection. You can add coverage during the loan application process or later on a vehicle financed with PenFed.

Debt protection: In the event of death, disability or unemployment, your monthly loan payment or loan balance could be canceled without penalties or additional interest. Plans range from $0.88 a month per $1,000 of the loan balance to $2.10 per $1,000. You can sign up for debt protection during the application process or the six-month eligibility period.

How to get an auto loan with PenFed

Getting a car loan with PenFed is straightforward, but knowing what to expect could help the process go more smoothly.

Check your budget and credit

Your credit score could mean the difference in whether you can qualify for an affordable car loan, regardless of which lender you choose. Get your free credit score to see if you need to improve your score to get a better rate. Then, use our auto loan calculator to see how a new car could fit into your budget.

Get prequalified

You don’t have to pick out your favorite car to find out how much you can borrow. You can fill out the prequalification form without becoming a member to see the PenFed car loan rates and terms you qualify for. Then you can go shopping to find your new car. Getting prequalified doesn’t impact your credit score, so it’s an easy way to check your loan eligibility.

To apply for prequalification, you will need to provide the following:

• Personal information (name, Social Security number, date of birth)
• Contact information
• Government-issued ID
• Type of loan: purchase or refinance
• Where you will be purchasing the vehicle
• The vehicle you want to purchase or refinance
• The vehicle you’re trading in (if applicable)
• Amount you want to borrow
• Repayment term you’d like
• Employment status
• Gross monthly income
• Other monthly income
• Monthly housing expenses
• Own or rent your home
• Joint borrower information (if you want to add a second person to be responsible for the loan)

Shop for a car

Equipped with your prequalification, it’s time to go car shopping. With the prequalification offer, you can compare loan offers from dealers and other financing options. Don’t forget about the savings opportunities through PenFed’s car buying service.

Join and apply

If you’re not already a PenFed member, you can apply for the loan and membership at the same time. You will need to open a savings account with at least a $5 deposit.

The loan application process is similar to prequalification, but you may have to provide more detailed information about your finances, such as bank statements and proof of income. For the full loan application, PenFed will run a hard credit pull that will temporarily affect your credit score.

An auto refinancing loan follows a similar process. You will also have to provide information on the vehicle and the current lender. You can refinance an existing loan, take a cash-out auto refinance loan of up to 125% of the car’s value or get a car title loan for a paid-off vehicle.

Is a PenFed auto loan right for you?

If the membership requirement isn’t a barrier, a PenFed auto loan may be a great fit — the application seems easy, the car-buying program could save thousands and there’s no penalty for paying off the loan early. Still, it’s a good idea to shop around and compare lenders so you have peace of mind you’re getting a good deal.

If you’re not interested in joining the credit union, you may find better options with other lenders. Don’t rush into financing. Take some time to compare loans to find the one that’s best for you.

How PenFed auto loans compare

PenFed offers competitive car loan rates and flexibility for cash-out auto refinancing if needed. Given the high limit, the maximum loan term may not be long enough for an affordable payment.

Here’s how PenFed compares to some of its competitors on new car loans.

Bank of America offers loans primarily through dealerships, but you can also apply online. Digital Federal Credit Union (DCU) offers the same rate for new and used cars.