Both credit unions like PenFed and banks like U.S. Bank are good places to look for an auto loan. In many cases, they will be able to offer you lower rates than you’d find through dealer financing no matter where you live.

But there are key differences between the two. Pentagon Federal Credit Union, or PenFed, was established in 1935 and is the second-largest credit union in the country. You must be a member to qualify for one of its auto loans. That means opening an account with an initial $5 deposit.

U.S. Bank does not require you to have an account to qualify. However, you will need an account if you want to take advantage of its autopay rate discount. And while it does have slightly higher starting rates than PenFed, U.S. Bank’s shorter loan terms can help you save more on interest.

PenFed Credit Union vs. U.S. Bank at a glance

PenFed offers its auto loans throughout the country and has some of the lowest rates on the market. But if you’re looking for a short loan term to minimize cost, U.S. Bank may be the better choice.


U.S. Bank

Bankrate score 4.4 3.8
Better for
  • Competitive rates
  • Car-buying service
  • Shorter loan terms
  • Those who want in-person service
Loans offered New and used financing, auto refinancing New and used financing, auto refinancing, lease buyout
Loan amounts Up to $150,000 $5,000 to $100,000
APRs Starts at 5.24% Starts at 7.26%
Loan term lengths 36 to 84 months 12 to 72 months
Fees Late fees and returned payment fees Late fees, returned payment fees and prepayment penalties
Minimum credit score Not specified Not specified
State footprint All states All states (new and used loans); 26 states (refinancing)
Time to funding Not specified Not specified
Autopay discount? Not specified 0.5%
Refinancing restrictions Must have fewer than 125,000 miles Not specified

PenFed auto loans

PenFed offers both new and used auto loans and refinancing. Its maximum amount exceeds what most lenders will finance, though its loan terms are standard. It also has late fees and returned check fees, which are common — and something you will pay with U.S. Bank, too.

PenFed works with TrueCar to help you find and finance your next ride. Its lowest rates are only available if you go this route. However, you may still be able to score a low rate if you go outside of the TrueCar network and shop with other dealers.

In most cases, lenders set a maximum of 100,000 miles and require the car to be younger than 10 model years if you plan on refinancing. PenFed has less-strict criteria. As long as your vehicle has less than 125,000 miles on it, you may be eligible. This can be helpful if you need to change your monthly payment or want to see if you can spend less on interest but don’t qualify with other lenders.


  • Competitive starting rates
  • No prepayment penalty
  • 24/7 customer service


  • Must have PenFed account
  • No autopay discount
  • Lowest rates reserved for TrueCar purchases

U.S. Bank auto loans

U.S. Bank’s autopay discount is much higher than competitors offer — if they offer a discount at all. Knocking 0.5 percent off your APR may not seem like much, but it can add up to hundreds of dollars in savings over the life of the loan.

However, U.S. Bank’s starting rate is higher than PenFed’s and the national average APR of 7.03 percent. In order to qualify for its lowest APR, you will need to meet several criteria, including a credit score of 800 or higher.

In addition to new and used auto loans and loan refinancing, U.S. Bank also offers lease buyouts. If you’ve grown attached to a leased car, you can purchase it. Since PenFed doesn’t have this option, U.S. Bank should be your choice if you want to buy your leased car.


  • Autopay discount of 0.5%
  • U.S. Bank account not required
  • Lease buyouts available


  • Prepayment penalty within first year
  • Strict requirements for low rates
  • Refinance limited to select states

How to choose between PenFed and U.S. Bank

PenFed is the better choice if you are confident you can qualify for its low starting rate. Otherwise, U.S. Bank may be a better choice, so you can take advantage of its rate discount — a unique feature not offered by many lenders.

Choose PenFed for competitive rates

PenFed advertises one of the lowest starting rates on the market. While you may not be able to qualify for it — PenFed doesn’t specify exact requirements — federal credit unions are limited to charging 18 percent on their loans. Since U.S. Bank doesn’t have to abide by the National Credit Union Administration’s rate ceiling, it may charge rates higher than this. If you have fair credit, PenFed will likely be the better choice.

However, PenFed doesn’t appear to offer a rate discount for using autopay. Some other credit unions, like Consumers Credit Union, do have rate discounts. So if you want to stick with a credit union and still get a rate discount, there may be more options to consider.

But overall, PenFed is a good choice for low rates. With no prepayment penalty, you are able to pay off your loan as soon as you are able. This can help cut on interest even if you start with a longer term of 36 months.

Choose U.S. Bank for shorter loan terms

One of U.S. Bank’s major drawbacks is its prepayment penalty — also called an early closure fee. If you pay off your car within the first year, you will face a fee equal to 1 percent of your original loan amount, with the maximum fee set at $100. This is an uncommon fee for auto loans, which means U.S. Bank is one of the few lenders where you have to worry about it.

It may not be an issue if you don’t plan on paying your loan off within the first year. And if you want to maximize your interest savings, the 12-month minimum term offered by U.S. Bank is better than PenFed’s 36-month minimum. While monthly payments will be higher, interest has less time to accrue. Combined with its rate discount, U.S. Bank is a good choice if you want to be done paying off your loan within a year or two.

Additionally, if you want to take out your loan and make payments in person, you’re more likely to find a U.S. Bank location close to home than a PenFed branch. U.S. Bank has many more branch locations in many more states than PenFed does.

Compare more lenders before applying

PenFed has lower rates and more flexible terms than U.S. Bank. If you want to be a member of a credit union, borrowing an auto loan with PenFed may be a good starting point.

If you want to take advantage of one of the better autopay discounts on the market, go with U.S. Bank. While it has slightly higher starting rates, you may find that it is still competitive with PenFed once the discount is applied.

As always, compare both lenders to other auto loans to ensure you are getting the best deal for your budget and financial needs.