PenFed Auto Purchase and Refinance Loans: 2023 Review

PenFed is a Virginia-based credit union that makes auto loans nationwide. Because of its open charter, anyone can apply for a PenFed auto loan.
By Shannon Bradley 

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Auto loan reviews

PenFed Credit Union
  • New auto purchase loan

  • Used auto purchase loan

  • Auto loan refinancing

The bottom line:

Best for borrowers wanting to see pre-qualified auto loan offers without impacting their credit scores.

New auto purchase loan review

PenFed Credit Union
PenFed Credit Union - New car purchase loan

Not yet rated

Est. APR
4.89-10.19%
Loan amount
$500-$100,000
Min. credit score
Did not disclose

Pros

  • Provides up to six pre-qualified offers with rate and payment amount for various terms using a soft credit check.

  • Pre-qualified offers stay the same through preapproval and approval (unless the selected vehicle changes).

  • Offers online car buying service with possible rate reductions or cash bonus offers.

  • Application process can be 100% online.

  • Customer service available seven days a week.

Cons

  • Credit union membership required to get a loan.

  • Does not offer rate discounts for automatic payments.

  • Social Security number required with initial application.

Best for applicants who use the PenFed online car buying service for potential rate discounts or cash bonus offers.

Full Review

Pentagon Federal Credit Union, also known as PenFed, offers new and used car purchase loans and refinance loans. Credit union membership is required, but individuals can join after receiving auto loan approval as part of the loan process. Typically, members are required to open a primary savings account with a $5 deposit, but PenFed pays this $5 for auto loan applicants.

Auto loan applications can be submitted online, by phone or in any PenFed branch, although the branch network is somewhat limited. Applicants receive up to six pre-qualified loan offers showing the rate and payment amount for various terms. Pre-qualification is done using a soft credit check, which will not affect an applicant’s credit scores. A hard credit inquiry occurs only after an applicant moves forward with a loan offer. According to PenFed, information captured with the initial application usually enables borrowers to move quickly to final approval, without providing additional information.

Unlike many other credit unions and banks, PenFed’s potential rate discount is not tied to setting up automatic payment. Instead, rate discounts or cash bonuses may be offered when a vehicle is purchased through PenFed’s online car buying service. Current “as low as” rates — typically only available to borrowers with excellent credit — are provided on the PenFed website.

When using the car buying service, an applicant can find a car online, contact a dealer for member pricing, apply for the loan online and get approval before heading to a dealership. Another interesting perk included for those who use the car buying service is reimbursement of any car insurance deductible up to $500 twice a year when filing a claim. It’s worth noting that requesting information through the car buying service can result in multiple calls and emails from participating dealers.

PenFed may be a good fit for those who:

  • Find a car to buy through PenFed's auto buying service. Using this online service, applicants can find a car, apply for a loan and get approved financing before going to the dealership.

  • Want to compare loan terms. Applicants receive up to six pre-qualified offers that show the rate and payment amount for various terms. Rates and terms at pre-qualification stay the same through preapproval and approval (unless the selected vehicle changes).

  • Want the benefits of credit union membership. Getting an auto loan through PenFed requires opening a savings account there, which opens the door to using other credit union services. Borrowers can manage their loan along with other accounts through online banking and a mobile app.

PenFed at a glance

Application process
  • Origination fee: None.

  • Personal information needed: Social Security number or ITIN, address, phone, email, birthdate, employment status, employer name, housing payment amount.

  • Pre-qualification available: Yes. Provides up to six offers (showing payment amount with various terms) based on a soft credit check. Loan offers are good for 30 days.

  • Online, in-person or both: By phone, in branch or 100% online, including document upload.

  • Approval speed: Within 10 minutes if automated decisioning is used. Approval could take 24-48 hours if manual decision is required.

  • Funding: One day or less after loan closing.

  • Minimum FICO credit score: Did not disclose.

  • Minimum credit history: None.

  • Minimum annual gross income: None.

  • Maximum debt-to-income ratio: Relies on PTI (payment to income) ratio for approvals, but did not disclose ratio.

  • Bankruptcy restrictions: Applicants with a bankruptcy in the past two years will not qualify.

  • States covered: All 50 states.

  • Membership: Military service not required. PenFed has an open charter, meaning anyone with a valid Social Security number or ITIN can join.

  • Maximum vehicle age: New vehicles must be untitled, have less than 7,501 miles and be plus or minus one model year from the current calendar year. No maximum age for used vehicles.

  • Maximum vehicle mileage: 125,000.

  • Other vehicle restrictions: No commercial or business vehicles. Used vehicles can be purchased from a franchised dealer, independent dealer, online retailer or private party.

  • Loan amount minimum: $500.

  • Loan amount maximum: $150,000.

  • Refinancing time restrictions: Borrowers can refinance as soon as the previous loan's paperwork is complete and the title can be transferred. Borrowers must have at least $10,000 remaining on their current loan to refinance it. PenFed offers lower rates for a new auto finance, defined as a car having less than 7,501 miles and no older than the previous model year.

  • Loan terms: 36-84 months for new purchase loan; 36-72 months for used purchase and refinancing.

  • Rate discount: No rate discount for automatic payment. A discount or cash bonus may be available when a vehicle is purchased through PenFed’s car buying service.

  • Greater-than-minimum payments: Accepted and can be made by automatic payment. Is automatically applied as paid-ahead status (to the next due payment). Surplus is applied to the principal as designated by the member on each payment.

  • Biweekly payments: Accepted and can be made by automatic payment.

  • Late payment fee: Yes, $29 with a five-day grace period.

  • Prepayment penalty: None.

  • Co-applicants allowed: Allows co-borrowers but not co-signers. Co-applicants can apply at the same time.

  • Payment options: Mailed-in check, phone, mobile app, online banking, ACH (electronic bank-to-bank and in person.

  • Selected payment due date: Borrowers can request a new payment due date any time during the loan term. This change can be requested by phone or in a branch.

  • Cash-out refinancing: Yes, within maximum loan-to-value ratio of 125%.

  • Hardship plans: Yes. It may include skipped payments and an extended loan term. A financial hardship center is available on the PenFed website.

  • Existing loan payoff: Funds are only provided to the borrower, who must then pay off the previous loan.

  • Assistance provided: PenFed team assists applicants throughout the loan process.

  • Availability: Monday-Friday 7 a.m.-11 p.m., Saturday 8 a.m.-11 p.m., Sunday 9 a.m.-5:30 p.m. EST.

  • Contact options: Phone, email, chat through website or online banking, website form or visit a location.

How does this loan compare?

Consumers Credit Union
RefiJet
Tresl
Est. APR

5.74-18.54%

Est. APR

3.39-22.00%

Est. APR

1.49-17.99%

Loan amount

$7,500-$500,000

Loan amount

$5,000-$100,000

Loan amount

$5,000-$100,000

Min. credit score

620

Min. credit score

550

Min. credit score

580

Used auto purchase loan review

PenFed Credit Union
PenFed Credit Union - Used car purchase loan

Not yet rated

Est. APR
5.54-11.34%
Loan amount
$500-$100,000
Min. credit score
Did not disclose

Pros

  • Provides up to six pre-qualified offers with rate and payment amount for various terms using a soft credit check.

  • Pre-qualified offers stay the same through preapproval and approval (unless the selected vehicle changes).

  • Offers online car buying service with possible rate reductions or cash bonus offers.

  • Application process can be 100% online.

  • Customer service available seven days a week.

  • Minimum loan amount is lower than other lenders.

Cons

  • Credit union membership is required, but it can be set up after applying for a loan.

  • Does not offer rate discounts for automatic payments.

  • Social Security number required with initial application.

Best for applicants who use the PenFed online car buying service for potential rate discounts or cash bonus offers.

Auto loan refinancing review

PenFed Credit Union
PenFed Credit Union - Refinance loan

Not yet rated

Est. APR
4.89-11.34%
Loan amount
$10,000-$100,000
Min. credit score
Did not disclose

Pros

  • Provides up to six pre-qualified offers with rate and payment amount for various terms using a soft credit check.

  • Customer service available seven days a week.

  • Application process can be 100% online.

  • Offers lower refinance rates for newer-model cars with less than 7,501 miles.

Cons

  • Credit union membership is required, but it can be set up after applying for a loan.

  • Does not offer rate discounts for automatic payments.

  • Minimum refinance loan amount is higher than other lenders.

  • Social Security number required with initial application.

Best for applicants wanting fast, preapproved offers to determine if they would benefit from refinancing.

PenFed offers cash-out refinancing, meaning borrowers with vehicle equity may be able to receive cash up to 125% of the vehicle’s value with their refinance loan. Borrowers should weigh the pros and cons of cash-out auto refinancing.

More from PenFed

Established in 1935, PenFed is one of the largest credit unions in the U.S., with more than $25 billion in assets. Headquartered in Tysons, Virginia, PenFed serves more than 2 million members worldwide with a range of financial services including checking accounts, loans and credit cards.

In addition to auto loans, PenFed offers gap protection, an extended warranty and debt protection that can be rolled into the loan. The PenFed website offers many self-serve options, such as educational articles and downloadable forms related to car buying and financing.

Although military service is not required to join PenFed, the credit union remains a strong supporter of the military and veterans. The PenFed Foundation has helped more than 140,000 military families. This assistance includes temporary emergency financial assistance for car payments, rent, mortgages or utilities.

PenFed auto loan rates

Credit requirements vary by auto lender, but PenFed’s lowest rates are typically available only to borrowers with good or excellent credit (a FICO score of 670 and above). With fair or bad credit you won’t get the lowest interest rates, which means your monthly payment and total interest paid will be more. You can check your credit score before applying for a car loan.

Loan example: According to NerdWallet's auto loan calculator that uses the VantageScore credit model, a borrower with a credit score of 300-499 (considered deep subprime), a $20,000 used car loan, repayment term of 72 months, interest rate of 18% APR and $0 down payment would have monthly payments of $456. One year later, if all payments were made on time, the borrower will have paid the loan down to a balance of $17,963. If the borrower is able to then refinance at 12% APR for the remaining 60 months, the payment would drop to $399 and result in interest savings of $3,394 over the life of the loan.

To review PenFed, NerdWallet sent a survey to PenFed requesting more than 60 data points and followed up with company representatives. The information was compared with other lenders that seek the same customer or offer a similar product.

Frequently asked questions