Unlock Savings with PenFed Auto Loan Options

Company Overview

Pentagon Federal Credit Union, commonly known as PenFed, is a member-based financial institution founded in 1935 in Virginia. Initially established to serve military personnel, they have since expanded their membership to include a broader audience, currently serving over 2 million members across all 50 states and internationally. PenFed aims to provide competitive financial products, including auto loans, while maintaining a commitment to customer service and community support. The credit union has grown significantly and offers various financial services beyond auto loans.

PenFed offers auto loan services, including financing new and used vehicles and refinancing options. Borrowers can access loans up to $150,000 with competitive annual percentage rates (APRs) starting from around 5.24% for new cars and 6.49% for used vehicles when using their car-buying service. 

The application process is designed to be straightforward, allowing potential borrowers to prequalify without impacting their credit scores. This prequalification helps users compare rates and terms before committing to a loan. Notably, PenFed only finances vehicles with fewer than 125,000 miles and requires applicants to have a minimum credit score of around 600.

In terms of compliance, PenFed adheres to standard lending regulations and provides transparency regarding fees associated with their loans, such as late payment charges and lien placement fees. They also offer additional products like extended warranties and debt protection plans that can enhance the borrowing experience. 

The provider has received positive recognition within the financial services industry. Their auto loan offerings boast an overall score of 4.4 out of 5 from Bankrate, indicating strong performance in areas like availability and customer service. The credit union also has an A+ rating from the Better Business Bureau (BBB), demonstrating their dedication to effectively resolving customer complaints, but without an accreditation.

Features & Services

PenFed has multiple and flexible auto financing options, whether for new or used autos; they also have refinancing options with different interest rates depending on the loan amount.

New vehicle auto loans
PenFed offers auto loans for new vehicles, providing a range of terms and rates based on the borrower’s credit profile and the specific vehicle. With options that cater to various financial situations, borrowers can choose a term that balances affordability and the overall cost of the loan. While longer terms might result in lower monthly payments, shorter terms generally offer the benefit of paying less in interest over the life of the loan.

Used vehicle auto loans
They also extend financing options for used vehicles, which can be more budget-friendly but may come with higher interest rates than new cars. Loan terms and rates depend on the age and condition of the car, with more flexibility for vehicles that are only a few years old. However, older cars may have fewer financing options or higher rates. This variety allows borrowers to explore different purchasing options while managing costs.

Auto refinance loans
PenFed offers refinancing options for those with existing auto loans, potentially helping borrowers reduce their monthly payments or secure a lower interest rate. Refinancing can be a practical choice for those whose financial circumstances have improved since they took out their initial loan. However, the benefits of refinancing depend on factors such as the current loan balance, interest rates, and the age of the vehicle.

Financing and prequalification
The company allows potential borrowers to prequalify for an auto loan, which involves submitting basic income and residence information. This step estimates the loan terms available without affecting the applicant’s credit score. The terms offered will vary based on the vehicle’s age and condition. Shorter loan terms are often recommended because they lower overall interest costs. In comparison, longer terms, especially for cars from model years 2016 and newer, can result in higher interest payments. After prequalifying, applicants must join PenFed by opening a savings account with a $5 minimum balance, which is required to finalize the loan process.

Warranty and protection
PenFed provides several additional protection options for borrowers aimed at mitigating the risks associated with vehicle ownership. These options include extended warranties, GAP insurance, and debt protection plans designed to cover unforeseen circumstances.

• Extended warranty: Once the manufacturer’s limited warranty expires, repair costs can become a concern for vehicle owners. PenFed’s extended warranty offers coverage beyond the original warranty, helping to protect against unexpected repair expenses after the initial warranty period ends
• GAP warranty: If a vehicle is totaled or stolen, its market value might be lower than the remaining balance on the loan. PenFed’s GAP warranty covers this difference, providing financial relief in such cases. The coverage is available for new and used vehicles and can be especially useful for cars that depreciate quickly
• Debt protection: Borrowers or their families may struggle to make payments due to unexpected life changes, such as a disability, job loss, or even death. PenFed’s debt protection plans allow for the cancellation of six to 12 payments, depending on the plan, helping borrowers manage financial difficulties without risking default

PenFed car buying services
Through a partnership with TrueCar, PenFed offers access to discounted pricing on new and used cars. Borrowers can compare prices on various makes and models. The company provides tools to calculate monthly payments, interest rates, and total loan amounts based on individual financial factors such as down payments, income, and credit. This service can simplify car-buying by helping borrowers estimate their overall financial commitment before finalizing a purchase.

PenFed automobile deductible reimbursement
PenFed also offers an automobile deductible reimbursement program, which covers the cost of your insurance deductible if you need to file a claim for vehicle repairs. This service can help reduce the out-of-pocket expenses for repairs, making it easier to manage the financial impact of an accident or other covered event. It adds a layer of protection that can be beneficial for managing unexpected vehicle costs.

Pricing & Plans

PenFed Credit Union offers competitive auto financing options for new, used, and refinance auto loans. Here’s a breakdown of the costs and fees associated with their financing:

New auto loans:

• APR: Starting at 5.44% for loan terms between 36 and 84 months
• Loan Amounts: Up to $150,000. There are no upfront or application fees, but the interest rate you receive depends on your creditworthiness and the loan term you choose

Used auto loans:

• APR: Starting at 6.19% for the same loan terms (36 to 84 months) and loan amounts up to $150,000. PenFed allows financing up to 125% of the vehicle’s value, which can help cover additional costs such as taxes, title transfers, and vehicle customizations

Refinance auto loans:

• APR: Starting at 5.94%, with terms ranging from 36 to 84 months and loan amounts up to $150,000. Refinancing allows you to lower your rate or monthly payment depending on current loan conditions and credit qualifications

Additional fees:
PenFed does not charge membership fees for auto loan applicants, though you must open a savings account with a minimum $5 deposit (often waived for loan customers). Although there are no explicitly stated administrative or dealer-specific fees, factors like your credit score, the value of the vehicle, and whether you take advantage of dealer discounts through their TrueCar car-buying service may affect the overall loan cost.

They offer auto loans with specific eligibility requirements for car owners. The vehicle must have fewer than 125,000 miles to qualify for a purchase loan. This requirement ensures that the loan is available for relatively newer or well-maintained vehicles, offering car owners an opportunity to finance a dependable car.

Advantages 

100% online loan application process
The loan application process is fully digital, allowing users to complete their applications online. This approach eliminates the need for physical paperwork or in-person visits, simplifying the process for those who prefer to handle their financial tasks remotely. Applicants can submit required documents and track the progress of their application through a user-friendly online platform. This method generally speeds up the approval process and offers greater convenience for managing loan applications from home.

Flexible loan terms
Loan terms are designed to be flexible, accommodating various financial needs and preferences. Borrowers can choose from different term lengths, which affect both the size of monthly payments and the total interest paid over the life of the loan. Shorter terms typically result in higher monthly payments but lower overall interest costs, while longer terms can reduce monthly payments but may increase the total interest paid. This flexibility allows individuals to select terms that best align with their financial situation and long-term goals.

Handy auto loan calculator tool
An auto loan calculator tool is available online on their website. It estimates monthly payments and overall loan costs. Users can see how these factors impact their payments by entering details such as the loan amount, interest rate, and term length. This tool helps in budgeting and planning, offering a clearer understanding of financial commitments before applying for a loan. It helps evaluate different loan scenarios and make informed decisions based on projected payment amounts.

Mobile app
A mobile app can manage the loan process and explore vehicle options. Users can browse various car makes and models through the app, selecting a make to view available models. This feature supports vehicle selection by providing mobile device users access to various options.  Additionally, the app allows users to track their application status, manage payments, and access support services, enhancing convenience and accessibility for loan management tasks.

Potential Drawbacks

Credit union membership required
Before accessing their auto loans, borrowers must first become members of PenFed, which may involve meeting specific eligibility criteria, such as working in a qualifying organization. For some potential borrowers, this could add an extra step to the process and might be seen as a barrier to obtaining an auto loan, especially for those who prefer the ease of working with a traditional bank or lender without additional membership requirements.

Vehicle restrictions
There are restrictions on the types of vehicles eligible for financing; specifically, PenFed does not finance vehicles with over 125,000 miles. This limitation could exclude many used cars from being eligible for loans.

Limited physical branches
PenFed has fewer physical branch locations as a credit union than national banks. This could be inconvenient for borrowers who prefer in-person service or need face-to-face assistance during the loan application process.

Customer Reviews

There are many mixed reviews about this provider online. On the Better Business Bureau (BBB) they have an A+ rating with no accreditation on their business profile, with a 1.2 out of 5-star rating based on 269 customer reviews. However, on Trustpilot, they have a 4.1 out of 5 rating based on 1400 customer reviews.

Positive reviews
On the positive side, many customers have praised PenFed title services, particularly in auto loans. One reviewer appreciated the easy application process and quick response, noting the high quality of the PenFed online system and customer service. Another customer, a disabled veteran, highlighted PenFed’s supportive ethos and best rates, expressing gratitude for their assistance and recommending them for their excellent loan, credit card, and savings products. They also appreciated the transparency in disclosing the affiliate business arrangement, which clearly outlined the partnership between PenFed and other businesses.

Another satisfied customer described their experience with PenFed as “smooth and efficient,” particularly valuing the quick and easy online application process. They utilized the car affordability calculator to determine their budget. They appreciated the competitive rates and variety of loan options, securing one of the lowest rates on a PenFed auto loan. Similarly, a reviewer mentioned that the preapproval process was straightforward and didn’t require a hard credit pull, praising PenFed for helping them secure a loan when other lenders could not.

Many customers also commended PenFed for their responsiveness and ease of managing loans. Positive feedback frequently mentioned the credit union’s supportive attitude, helpful service, and quick decision-making process. 

Negative reviews
Several customers have had negative experiences with PenFed auto loan services. One customer encountered issues with payment discrepancies after PenFed acquired their previous credit union's loan. Despite their loan officer and customer service assurances, loan payments were incorrectly applied to interest rather than principal, leading to significant overpayments. Efforts to resolve the issue with PenFed’s supervisor through multiple channels, including fax and phone number, proved unsatisfactory.

Another customer reported problems with loan balance records after PenFed took over their loan from a previous credit union. They struggled to get satisfactory explanations or corrections. Their hardship application was denied despite the documentation being provided. The customer faced increased loan amounts due to additional insurance policy charges and extended loan terms.

A different complaint involved difficulties setting up external payments for a credit card, for which PenFed’s customer service was reportedly unhelpful. This led to missed payments, affecting the customer's personal information and causing a hard credit pull. As a result, this negatively impacted their credit score, with potential threats of legal action.

Additionally, a customer experienced inaccuracies in their credit report, with PenFed reporting conflicting loan payment statuses. Despite multiple attempts to correct the issue and provide proof of discrepancies, PenFed’s reporting remained unchanged, causing ongoing frustration and issues with collateral agreements related to the loan.

Company response
PenFed has consistently responded to customer feedback with a commitment to improve and provide transparency regarding their practices. They take a proactive approach to addressing concerns, mainly when members express dissatisfaction. For example, PenFed often acknowledges delays in communication or discrepancies in loan processes and apologizes for any inconvenience caused, as mentioned by some customers in their reviews. Their disclosures, including the affiliate business arrangement disclosure, outline key processes that inform customers about partnerships affecting their loan options.

In cases where customers raise concerns about interest rates, fees, or communication breakdowns, PenFed typically responds by reviewing the situation, offering an apology, and ensuring the issue is addressed. They also assure members that the feedback will improve internal processes, such as handling final approval, loan disbursement, and ensuring bank statements reflect accurate information. They emphasize their ongoing effort to improve personal information handling and customer service, offering more flexibility with rate discounts and perks for those with excellent credit.

Customer Support

You can contact the company via phone for direct assistance, email for more detailed inquiries, or explore their extensive library of articles and guides for self-service options. These resources are designed to provide comprehensive support, making it easier for members to find solutions quickly.

Are They the Right Provider for You?

PenFed Credit Union stands out as a robust option for auto loan financing and refinancing, catering to a wide range of borrowers with flexible terms and competitive rates. Their appeal extends beyond traditional banking, as they offer loans for new and used vehicles that can prequalify without impacting credit scores. 

With the additional benefit of no fees for early repayment and the opportunity to secure loans for up to $150,000, PenFed's auto loan services cater to diverse financial needs. Their digital application process simplifies loan management, providing convenience for borrowers who prefer to handle transactions remotely.

One of the standout features is PenFed’s partnership with TrueCar, which offers members exclusive discounts and cash bonuses through the credit union’s car-buying service. This feature helps borrowers save money and streamlines the vehicle purchasing experience by providing tools for calculating monthly payments, interest rates, and total loan amounts. Additionally, PenFed's optional protections, such as extended warranties and GAP insurance, give borrowers extra peace of mind, safeguarding against unforeseen vehicle costs and loan balance discrepancies in the event of a total loss or theft.

Despite their many advantages, potential borrowers should be aware of certain limitations, such as PenFed's requirement to become a member by opening a savings account. Additionally, restrictions on vehicle eligibility, particularly with used cars, may impact some applicants. 

Nevertheless, PenFed remains a solid choice for those seeking flexible auto financing options, offering a blend of competitive rates, exclusive services, and member-focused support. Whether purchasing a new vehicle, refinancing an existing loan, or taking advantage of their car-buying service, PenFed might provide a comprehensive solution for auto financing needs.

If you are still unsure about this provider, visit our website and read our auto loan company reviews. Our blog posts also provide more information about the industry and how it could help you financially. Our comparisons help you weigh your options before making the final decision.