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Pentagon Federal Credit Union

Shop for your car where you shop for your car loan — PenFed offers a one-stop-shop for car buying.

New Car APR: 

Loan Amount: $500 – $100K

Terms: 36 – 72 months 

Our Two Cents: Membership is strict with PenFed loan products — if you aren’t part of its membership base, you can’t sit with them. 

There’s a lot to like about PedFed auto loans. Founded in 1935, PenFed Credit Union serves over 1.2 million members and manages $16 billion in assets today. Its auto loan rates are some of the most competitive on the market, and it has lending products to cover new purchases, used vehicles and refinancing. Offering some of the best personal loans and auto loans around, PenFed is definitely worth considering — if you’re eligible for membership.

PenFed at a glance

See attached. Source for table

What we like about it

PenFed auto loans rates are some of the lowest on the market for both new purchases and refinancing. Loan options are extensive — borrow to buy a new or used vehicle, or refinance an existing auto loan. Terms range from 36 to 84 months, and you can take out anything from $500 to $100,000, up to 110% of the purchase price.

PenFed offers a car-buying service, meaning you can shop for your vehicle and arrange your financing in one place. Buying this way could even get you additional discounts and lower APRs.

PenFed’s hardship assistance program is useful In the current economic climate. What’s more, PenFed is light on fees with no application, origination or prepayment fee.

Things to consider

An obvious consideration coming up time after time in PenFed reviews is that you need to be a member to apply for a loan. Membership is limited to military service members, their families and employees or volunteers of certain organizations. There are other ways to gain membership such as living with a qualified member. Once you become a member, you have to wait 90 days before you qualify to apply for preapproval.

While the PenFed auto loan rates are low, you’ll need excellent credit to qualify for them. If your credit is less-than-perfect, take a look at our review of the best auto loans for bad credit.

As PenFed doesn’t have a strong brick-and-mortar presence across the country, you’ll need to do most things online.

What you need to know

You can borrow as little as $500, or up to $100,000 depending on the product you choose. Longer terms come with higher borrowing minimums. For a new vehicle auto loan or refinancing, loan terms range from 36 to 84 months and APR can be as low as 2.14%. For a used vehicle auto loan or refinancing, loan terms range from 36 to 72 months, and APR starts at 2.99%.

PenFed auto loan rates can be even lower if you purchase through its car buying service, with the APR starting at 1.14% for a new vehicle and 1.99% for a used vehicle. Using its car buying service could also land you special discounts and offers on specific brands.

PenFed auto loans offer payment saver loans, too. These allow you to make lower monthly payments throughout your loan, but you’ll have to make a balloon payment at the end. Borrowing minimums start at $10,000 and go up to $100,000, with loan terms between 24 to 60 months. APRs start at 2.99% for a new vehicle and 3.74% for a used vehicle.

In terms of fees, PenFed charges up to $29 for late payments. Membership comes with a share/savings account which requires a $5 deposit.

You can apply for an auto loan online, through the mail or by fax. Here is the step-by-step application process if you’re applying online:

  1. Pick the type of loan you would like and click “Apply Now.”
  2. If you’re an existing PenFed member, log in. If you’re not a member, you can continue the application process then become a member after.
  3. You’ll need to fill out the online form with loan details such as the borrowing amount and preferred term. You’ll also have to provide information such as your name, date of birth, residence and contact details, as well as income and employment information.

Criteria and eligibility

Remember, you have to be a member to be considered for PenFed auto loans. Membership requires you to be a current, retired or honorably discharged military personnel or work for or are a member of a qualifying organization. You could qualify based on where you live or by donating to an eligible charity, too.

Your actual APR depends on a number of factors, including your credit history or credit score. That means you won’t get the advertised auto loan rates unless you have excellent credit.

For used vehicle auto loans, you can only get a loan term of 61 to 72 months for model years 2015 to 2020. Other restrictions including vehicle and mileage limitations may apply. Keep in mind, you can’t refinance an existing PenFed auto loan.

PenFed vs. USAA

USAA is another lender catering to military personnel and there are great things about its auto loans — expect no application or prepayment fees, an easy application through your mobile phone and loan offers that are good for 45 days.

However, PenFed ratings would be higher in our minds because it offers lower APRs and has less restrictions. For example, USAA APRs for new auto loans start from 2.59% but you’ll have to enroll in automatic payments and purchase through its car buying service for 2019 models or newer. USAA APRs are just as competitive as PenFed for used car loans and can be as low as 2.99%, but again, you’ll need to purchase through its car buying service for those rates.

PenFed vs. Bank of America

If you don’t want to join a credit union to access decent rates, then Bank of America is a good alternative. With 2.69% APR for new auto loans and 2.99% APR for used auto loans, Bank of America rates are relatively competitive. What’s more, if you already have an account with Bank of America and are enrolled in its Preferred Rewards program, you can get an interest rate discount of 0.25% to 0.50% depending on your membership status.

Most applications are decided within 60 seconds. Apart from new and used auto loans, you can refinance, buy from a private dealer, buy out your lease and finance specialized vehicles like accessible or small business vehicles.

Too long, didn’t read?

PenFed auto loans are great if you’re already a member or qualify for membership because its starting APRs are hard to beat. Its products are straightforward with plenty of loan options. But bear in mind you’ll need excellent credit to qualify for its lowest rates, and you’ll also need to be prepared to do most things online.

Meta description: PenFed auto loans come with low starting rates and plenty of borrowing options — if you qualify for membership.

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