If you’ve fallen in love with a vehicle, securing vehicle financing is the next step to making it yours. But with interest rates averaging almost 7 percent for new vehicles in 2023’s first quarter, according to Experian, it’s wise to look for ways to save.

One potential money-saving route is to secure an auto loan through a credit union rather than those offered by the dealership or bank. Credit unions often boast lower interest rates and a personalized customer service experience. Those financing a new vehicle with a 60-month term secured a rate averaging 0.68 percent lower than banks provided, according to the National Credit Union Administration.

With this in mind, consider the differences between a loan with Skyla Credit Union, formally known as Parsons Federal Credit Union, and Penfed Credit Union. Skyla is ideal for those who would benefit from advanced underwriting criteria, while PenFed is better suited for extended loan terms.

Skyla vs. PenFed at a glance

Skyla

PenFed
Bankrate score 4.1 4.3
Better for
  • Flexible underwriting criteria
  • Minimal fees
  • Car-buying service
  • 24/7 customer support
Loans offered New and used financing, auto refinancing New and used financing, auto refinancing
Loan amounts $3,000-$150,000 Up to $150,000
APRs 4.99%-16.99% Starting at 5.24%
Loan term lengths 48-72 months 36-84 months
Fees No fees Late fees and returned payment fees
Minimum credit score No minimum Not specified
State footprint All states All states
Time to funding Not specified Not specified
Autopay discount? No Not specified
Refinancing restrictions Max vehicle age 15 years Must have fewer than 125,000 miles

Skyla auto loans

In early August, Parsons FCU completed its merger with the North Carolina-based federal credit union Skyla. Skyla now boasts expanded benefits for borrowers, including 24/7 customer service and more brick-and-mortar locations. Anyone interested can join Skyla through the American Credit Council.

Pros

  • High loan maximum. Borrowers can finance a vehicle for up to $150,000.
  • Competitive interest rates. A starting APR below 5 percent is hard to find in this credit environment.
  • 24/7 support. The credit union offers around-the-clock support for its consumers via 24/7 phone support.

Cons

  • Small maximum term. Most lenders, including PenFed, offer financing terms up to 84 months, but Skyla only allows borrowers to finance up to 72 months.
  • Unspecified refinancing requirements. Lenders usually share several requirements to qualify for refinancing, but all Skyla shares is a maximum vehicle age. If you are planning to refinance your vehicle with Skyla, you may have to apply and go through a hard credit check to judge your eligibility.
  • No option to prequalify. Prequalifying for your auto loan helps provide an estimate of what you will be expected to pay without taking a credit score hit — a perk not offered by Skyla.   

PenFed auto loans

Formally known as Pentagon Federal Credit Union, PenFed offers borrowers loans for new and used cars along with refinancing loans. The Virginia-based institution serves all 50 states, and its membership fee is waived for those applying for auto loans. It is an especially strong option for drivers shopping for a new car, as its car-buying service can help the buying process go more smoothly.

Pros

  • Vehicle shopping assistance. The PenFed car-buying service powered by TrueCar has an extensive inventory of new and used cars to assist in shopping.
  • Prequalification. An estimated rate can allow you to compare many loan options simultaneously and have the upper hand in negotiation.
  • Refinance up to 125 percent. Those refinancing their current loan can receive up to 125 percent financing on the current loan balance. Cash-out auto refinancing can help you pay off high-interest debt or cover emergency funding needs.

Cons

  • Traditional underwriting criteria. PenFed uses credit score as the main determinant of risk when considering applicants.
  • Several expected fees. The credit union enforces both a late fee and a returned payment fee — plus additional potential charges.
  • No autopay discount. Unlike some lenders that offer discounts for those who sign up for automatic payments, PenFed does not offer that incentive. Neither does Skyla.

How to choose between Skyla and PenFed

Both Skyla and PenFed offer similar loan products. Each offers the ease of an online application and the option of in-person branch support. Skyla primarily serves the southeast, while PenFed has more branch locations outside that region. If you want to manage your auto loan in person, consider choosing the credit union with branches in your area.

The application process for both lenders is comparable, but PenFed does carry the added perk of its car-buying program. WSkyla has a slightly lower minimum rate of 4.99 percent, though PenFed has a wider range of repayment terms. A longer loan term decreases your monthly payment, making PenFed more appealing for some borrowers.

Choose Skyla for flexible underwriting criteria

Most lenders use your credit score as the main way they determine loan approval and rates. Those with poor credit tend to see more rejections and higher rates. Skyla handles requirements with a slightly different approach. According to its site, the credit union considers a borrower’s employment, income and other financial assets along with their credit score.

This can dramatically help those without a lengthy credit history secure competitive financing rates. While buyers with a low credit score are unlikely to get the best possible rates, even Skyla’s highest rates (16.50 percent for new and 16.99 percent for used cars) are far lower than the highest out there.

Choose PenFed if you want to extend your loan term

The choice to secure a longer-term auto loan comes with the perk of a less expensive monthly payment. But it means you will be stuck with a vehicle longer, and you will pay more in interest throughout the loan. If monthly cost is your main consideration, PenFed has the edge.

The credit union advertises a minimum 7.49 percent APR for an 84-month loan for borrowers that use the institution’s car-buying service. If you bought a $40,000 car with a $2,000 down payment, using that rate and term, you’d have a $579 monthly payment. A 72-month loan for the same vehicle and down payment will cost $637 per month, even with a slightly lower advertised APR of 6.39 percent. A car loan calculator can help you weigh the monthly cost against the greater cost in interest.

Compare more lenders before applying

Skyla offers a friendly underwriting process for borrowers who might struggle to qualify elsewhere. PenFed is great for someone looking to extend their loan terms. But before signing off on either loan, compare more auto loans to see how these lenders compare.