PenFed Credit Union Auto Loans Review
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Military members, veterans, and others affiliated with the military should get a low auto loan from Pentagon Federal Credit Union, especially if they have great credit.
9/10
Cost
8.5/10
Features
9/10
Ease of use
9/10
Services
8.5/10
If you’re looking for an auto loan, the lowest interest rate you’ll likely find will be from a lender you may not even think of unless you’re in the military or are a veteran — PenFed Credit Union.
Members of this credit union — formally called Pentagon Federal Credit Union — don’t have to be in the military services or be military spouses. Still, some military relationship is required.
Civilians can qualify for some of the best auto loan rates in the country by joining affiliated advocacy groups, such as the American Red Cross and other associations that support American troops. Donating to an eligible charity can also qualify civilians for membership.
As of April 17, 2024, some new car lenders charged interest rates of 6.84% for a 60-month term, compared to 4.74% through PenFed. The lowest rates usually require having an excellent credit score.
Jump To
What is PenFed Credit Union?
Its full name is Pentagon Federal Credit Union, but it’s commonly called PedFed Credit Union or just PenFed.
The credit union is headquartered in McLean, Virginia, where most branches and ATMs are. It has more than 2.8 million members, and members can live in any state. PenFed also has relationships with other credit unions, and money can be withdrawn at Allpoint ATMs nationwide.
The National Credit Union Administration federally insures PenFed. The NCUA is the credit union equivalent of FDIC, which insures bank deposits up to $250,000.
How does a PenFed auto loan work?
PenFed has some of the lowest auto loan rates in the country, whether you’re buying a used car, a new car, or want to refinance an existing loan.
But before applying for a car loan, you must join the credit union. You can start that process by clicking the blue “Join Now” button on the upper right side of the homepage.
There are three steps to joining:
- Eligibility
- Providing your information, such as contact information
- Opening a savings account with just $5
Click the blue “Become a Member Today” button below those listed steps, and the loan application process begins.
You’ll be taken through four screens to fill out:
- Personal information
- Review and agree
- Funding
- Get online access
In the personal information section, the site asks for your contact information, date of birth, Social Security number, and employment status. It also asks a few questions, such as whether you’ve served in the military.
Once you’re a PenFed member with an account, you can apply for an auto loan. Hover on the “Auto” tab at the top of the homepage, and click “Auto Loan Application.” You can then choose the type of auto loan you want.
You can also do other things on the webpage, such as check loan rates, estimate your loan costs with the site’s calculator, or read about add-on services to your loan, such as gap protection, an extended warranty, and debt protection.
If you click the “Apply Now” button on a new auto loan, you’ll be asked to log in or apply for PenFed membership.
I clicked on applying for a membership and was taken to an auto loan page asking if I wanted to buy or refinance and where I planned on buying a car. I was next asked to enter the total loan amount and the loan term in the online application.
The site then asked me for personal information and how much I wanted to borrow. I was given six loan offers for a $30,000 loan for 60 months on a new car. I gave the site my Social Security number and birthdate, along with permission to run a credit check, and a hard credit check was run to determine my loan options.
After agreeing to the loan terms and conditions, I was told that someone would review my application and get back to me via email. I was never asked for my connection to the military.
Use Quicken Loans to Get a Personal Loan
- If you're tight on cash right now, you may want to consider getting a personal loan. A personal loan is a loan that you can use for just about any purpose like: paying off other debt, renovating your home, or family needs like a wedding or adoption.
- TrustPilot Rating 4.6 out of 5
- Connect with lenders for $0
- 100% online experience.
How much does a PenFed auto loan cost?
The auto loan rates page provides the lowest interest rates for borrowers with an excellent credit history. Not all applicants will qualify for the lowest rate.
A calculator below the listed rates will quickly give you an estimate of your monthly loan payment, including the total amount financed and the total amount of interest you’ll pay over the life of the loan.
The PenFed website has a list of service fees for its many services. No specific fees are listed for auto loans, but it does list four types of fees for loans:
- Returned loan payment, check, or ACH: $30
- Late charge on loans (per payment): $29
- Thrifty Credit Service (each time): $15
- Auto lien placement charge: Actual fee incurred
- Check stop payment: $15
PedFed auto loan features
Low auto loan rates
Low auto loan rates are the best features of getting an auto loan through the Pentagon Federal Credit Union. Its starting APR when buying a new car through PenFed is 4.74% for 36 months.
It’s important to know that these are the lowest rates PenFed offers, and to get the best rates, you must have excellent credit scores of 800 or higher.
Car buying service
To get PenFed’s lowest rate, members need to use the PenFed car buying service and work with certified dealerships that the credit union works with. A new or used car can be financed, and borrowers must be members of PenFed for at least 60 days before buying.
Auto loan rates are as low as 4.74% APR on new cars for 36 months and 6.34% on used cars for a 60-month loan term.
The process, run by TrueCar, looks fairly simple. You search through an online link at PenFed for a car, connect with a certified dealer, and complete a contact form to see your membership pricing.
You apply online and call PenFed when you’ve selected your vehicle and finalized your financing. Once your check and loan documents are sent, you can visit the dealership and test drive your car. If you like it, you can buy it with your approved financing.
Loan add-ons
The PenFed car buying service offers three add-on options to a loan that can protect your car and finances.
Gap protection
If your car is lost or stolen and the amount you owe on your auto loan is higher than the total cash value of the car, the difference isn’t usually covered by your insurance plan. Buying additional insurance, called guaranteed asset protection or gap insurance, covers the difference.
For example, if your insurance settlement is $10,000 for a totaled or damaged car with an outstanding loan balance of $15,000, you must pay the $5,000 difference yourself. Car values depreciate quickly, so your car may be worth less than the loan amount you still owe.
PenFed sells gap insurance for $449, which covers gap losses of up to $50,000.
Extended warranty
PenFed sells extended warranties that cover repair costs after your warranty expires. It also provides towing, rental reimbursement, and roadside assistance.
It has three types of warranties, depending on your car’s age, mileage, and coverage term. Rates range from $1,245 to $1,745 for a standard vehicle to $2,995 for premium and hybrid vehicles.
Debt protection
If you die, are disabled, or are involuntarily unemployed, PenFed sells three debt protection plans that cancel six to 12 auto loan payments.
For all three scenarios, the cost is $2.10 for every $1,000 monthly loan balance. For loss of life and disability, the cost is $1.20 per $1,000; for loss of life, it costs 88 cents per $1,000 of the monthly loan balance.
Use Quicken Loans to Get a Personal Loan
- If you're tight on cash right now, you may want to consider getting a personal loan. A personal loan is a loan that you can use for just about any purpose like: paying off other debt, renovating your home, or family needs like a wedding or adoption.
- TrustPilot Rating 4.6 out of 5
- Connect with lenders for $0
- 100% online experience.
Who is a PenFed auto loan best for?
Military affiliation
Military members and people who join associations affiliated with the military, such as the Military Officer’s Association of America and the Marine Corps League. Donating to an eligible charity can also allow you to become a PenFed member. When I got preapproval for my auto loan, PenFed didn’t ask for my military affiliation.
Excellent credit
If you have an excellent credit score, you may qualify for the lowest auto loan rates that PenFed offers. PenFed’s interest rates are lower compared to other major lenders. A 36-month term is where you’ll find the best auto loan rates, though the monthly payments will likely be high with such a short loan.
Who shouldn’t use PenFed auto loans?
Your credit history isn’t great
PenFed requires a minimum credit score of 610 to qualify for a car loan. That’s considered bad credit by some lenders and can mean paying the highest interest rates it charges.
You may be better off shopping elsewhere. Or you may want to wait until your credit score improves and you have time to pay down your credit cards and repair your credit history.
Pros and cons
Pros
- PenFed has some of the lowest auto loan rates around.
- Military membership or affiliation is needed to join the PenFed Credit Union, though civilians may easily join groups associated with the military.
- PenFed offers many types of daily banking services, including checking and savings accounts, credit cards, home loans, personal loans, and student loans.
Cons
- To qualify for PenFed’s lowest interest rates, you’ll probably have to have excellent credit.
- Unless you live in Virginia, you won’t find a PenFed branch if you decide to do other banking business with the credit union.
- Loan add-ons such as gap insurance and extended warranties may be worth the cost, but car buyers should shop around for the best prices on such services before adding them on through PenFed.
Use Quicken Loans to Get a Personal Loan
- If you're tight on cash right now, you may want to consider getting a personal loan. A personal loan is a loan that you can use for just about any purpose like: paying off other debt, renovating your home, or family needs like a wedding or adoption.
- TrustPilot Rating 4.6 out of 5
- Connect with lenders for $0
- 100% online experience.
PenFed vs. competitors
How does PenFed stack up against Navy Federal Credit Union and Service Federal Credit Union?
Credit union | Lowest loan rate |
PenFed | 4.74% |
Navy Federal | 4.54% |
Service Federal | 6.49% |
Navy Federal Credit Union
Navy Federal Credit Union allows members of any military branch to join, along with veterans and their families. It has over 300 branches and a network of over 30,000 fee-free ATMs.
It offers new car loans at interest rates as low as 4.54% APR for 36 months, late-model used vehicles at 4.54% and used vehicles at 5.44%. It also has discounts when buying through TrueCar.
Related: Navy Federal Credit Union Review
Service Federal Credit Union
Service Federal Credit Union finances all kinds of vehicle loans. Auto loans start at 6.49%. It also finances motorcycles, RVs, boats, ATVs, and snowmobiles, from 8.84% to 12.24%.
The credit union was started in 1957 to support military personnel and their families at Pease Air Force Base in New Hampshire. It now serves members worldwide.
FAQs
Why should I get a car loan from a credit union instead of a bank?
Car loans are usually cheaper at credit unions than banks and other financial institutions. Why? Because credit unions don’t exist to make profits but to serve their members. Credit unions don’t need to charge high interest rates without the need for profits. They’re also taxed at a lower rate than banks and can pass those savings on to their members at lower rates and fees.
How can I lower my monthly payment?
The best way to lower your monthly payments on a car loan is to start with as low of an interest rate as you can get. Buyers with excellent credit on their credit report usually get the best loan terms. Another way to lower monthly payments is to have a longer loan, such as a 60-month term instead of 36 months. You’ll pay more interest because it will take longer to repay the loan, but the monthly payment should be lower. You can also make a more significant down payment and trade-in your old car for money to put toward the down payment, which will lower monthly payments. A used car is often cheaper than a new car, so buying a used car can lower the loan.
Why are new cars cheaper to finance?
Buying a car from the newest model year will do more than give you the smell of a new car. It should also be cheaper to finance, with interest rates lower for new vehicles than used ones. This is partly because new cars have the most updated safety features, new cars cost more, so dealers profit from them, and borrowers are likely to keep a new car that doesn’t break down and pay off the loan. Car dealers often have good financing deals for new cars if you have good credit, enticing you to buy a new car.
Use Quicken Loans to Get a Personal Loan
- If you're tight on cash right now, you may want to consider getting a personal loan. A personal loan is a loan that you can use for just about any purpose like: paying off other debt, renovating your home, or family needs like a wedding or adoption.
- TrustPilot Rating 4.6 out of 5
- Connect with lenders for $0
- 100% online experience.
The bottom line
Military members, veterans, and others affiliated with the military should get a low auto loan from the Pentagon Federal Credit Union, especially if they have great credit. Civilians who aren’t related to the military should still be able to join PenFed through a group associated with the military or by donating to a charity tied to the military. PenFed has some of the lowest car loan rates and is an excellent place to start any car shopping trip.
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Writer
Aaron Crowe is a freelance journalist who specializes in personal finance writing and editing. He has worked at newspapers, where he won a Pulitzer Prize, and has written for numerous online publications. These include AOL, US News & World Report, WiseBread, Bankrate, AARP, and many websites focusing on housing, credit and insurance. He lives in California with his wife and daughter.
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