Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.
Trying to find financing for that car you’ve been eyeing, but aren’t sure where to look? You might not want to finance with the dealer, as credit unions offer some of the best loans out there. PenFed Credit Union is no exception with rates starting as low as 2.99% for new cars, and 3.99% for used cars.
PenFed Auto Loan Details
You can finance $500 - $100,000 with a PenFed credit union auto loan, and you can finance up to 110% of the MSRP on a new vehicle. Be aware there are minimum loan amounts based on the term you finance under.
APRs on new vehicles start at 2.99% – 17.99% for 36 to 84 months. “New vehicles” are the current and previous model year – you must be the original owner.
On used vehicles, the APR 3.99% to 17.99% for 36 to 72 months. PenFed uses the National Automobile Dealers Association (NADA) value to determine the maximum amount of financing available, as financing on used vehicles can’t exceed 110% of the NADA average retail value.
Unfortunately, there’s no APR range – a representative we spoke with said a maximum APR doesn’t exist. Loan officers haven’t seen rates exceed 5 – 6%.
How to Apply for an Auto Loan With PenFed
PenFed provides preapproved auto drafts for qualified borrowers (you need to have a good credit score), and you may get an instant decision after applying. Otherwise, applications are typically processed within 24 hours on business days.
You need to be a member of PenFed before you apply for a loan, so you’ll have to create an account if you’re interested. See below for membership eligibility.
The application can be filled out online or you can apply by speaking with a member representative over the phone.
Having a credit score of 700 or above will get you the best rates, which are listed above. If your credit score is below 700, PenFed can still process the loan, but it will go through LendPro. LendPro doesn’t offer preapprovals as it needs the vehicle information to process the application.
Documents and Information Needed to Apply
PenFed needs borrowers to provide their contact information, vehicle information, income and expenses, and employment information and salary to apply.
For vehicle information, make sure you know the exact make and model, year, and have the VIN.
The Fine Print
There is no origination fee associated with this loan. Rates are determined based on your credit and how much you’re looking to finance. For example, if you’re looking to finance $25,000 and the vehicle costs $25,000, your rate will be higher than someone who is only financing $15,000 for a $25,000 vehicle.
Pros and Cons of PenFed’s Auto Loan
Pro: After making 12 payments, you might qualify to extend your loan, which lowers your monthly payment. While we don’t recommend doing this unless you’ve hit a rough financial spot, it’s good to have the option available.
Con: It’s a little difficult to figure out how to contact PenFed if you have a question (and aren’t a customer). On the auto loan page, there’s a link to apply for the loan, but no phone number is listed. You can call the main customer service line to get assistance.
Pro: APRs aren’t very high when compared with other lenders, such as Navy Federal Credit Union. Even the “max” of 5 – 6% is fairly low.
Con: Those that have a credit score under 700 have less of a chance of being approved for financing. PenFed typically targets consumers with excellent credit.
Con: As with any credit union, you need to be a member before applying. Opening another account just to get access to this auto loan might not appeal to you.
Membership Requirements for PenFed
There are several ways you can become a member of PenFed Credit Union. If you’re a member of the United States military or Uniformed Services, work for the U.S. government, or are related to someone who is, you’re eligible to join.
If you’re not eligible through those avenues, you can still join by donating $14 toward Voices for America’s Troops or $15 toward the National Military Family Association. These are two charities PenFed supports, and all money goes directly to them.
Lastly, if you’re creating a new PenFed account, you’ll be required to make a $5 deposit in a Share Account to represent your ownership in PenFed.
Other Auto Loan Alternatives
Credit unions offer some of the best auto loans, but if you don’t qualify for membership with PenFed and don’t want to make a donation, you should look at your local credit unions. Most require that you live or work in the area to be eligible for membership. Otherwise, you can check out these alternatives:
LendingTree: There are hundreds of lenders on LendingTree ready to compete for your business. You just have to fill out a short online form, which LendingTree may use to try to match you with lenders. If you receive a lender match, you may then see real interest rates and approval information. Some lenders will do a hard pull on your credit. Keep in mind that multiple hard pulls only count as one pull, so it is smart to have all your hard pulls done at once.
Capital One: If you’re looking to finance a vehicle under $40,000, Capital One offers terms of 36 to 84 months, with APRs starting at 3.39% for new cars, and 3.39% for used cars. This is similar to PenFed, and Capital One offers online preapproval.
LightStream: You can finance $5,000 - $100,000 on terms of 24 to 84 months. APRs on new cars range from 3.99% – 10.84% with autopay, and APRs on used cars range from 3.99% – 10.84% with autopay.
Neither lender charges an origination fee.
Be Sure to Shop Around
With so many options available, it would be foolish not to shop around and find the best auto loan for you. You can apply online with most lenders and receive an answer back within one to two days. As long as you apply to multiple lenders within a 30-day period, your credit won’t take a huge hit. This is because all inquiries made within that time period count as one inquiry. Take advantage and find the auto loan that will cost you the least.