How does USAA & Pen Fed Work?

[PaHi]

I'm wanting to open my first auto loan; I'm wanting to use either USAA or PenFed... How do they work? What paperwork will be required? Do they put the funds into my checking, to pay cash? Do they cut me a Cashier's Check? What happens? Could someone break both of their process all the way down for me, so it will help me decide which is the easiest of the two? Looking to buy a 2023 Chevrolet Traverse Premier at about $50,000.

[fury1995]

USAA normally pays the dealer with electronic wire.

You as the member are approved "up to" your approval amount (based on your request) then have access to print your approval draft to take to the dealership. You and the dealer will then complete the USAA draft upon purchase. The draft can be verified at the time of purchase ensuring the purchase amount (LTV) and the year make and model (preowned) fit within USAA's loan parameters. The dealer submits to USAA the requested documents along with the completed draft you provided from USAA. USAA then wires electronic payment to the dealer on your behalf.

Penfed pays with a loan proceeds check that can be picked up at a branch, sent to you or sent to the dealer based on your preference.

Penfed will preapprove you (with a rate) for the amount you request. Penfed will ask for a purchase agreement for the total amount due from Penfed and reaffirm the purchase stays withing their lending guidelines and final approval. Penfed will then create a loan proceeds check made to you and the dealership (listed on the purchase agreement) for your endorsement. It will be your responsibility to make sure the check is received by the dealer and endorsed by you. 

[AutisticPretzel]

I just recently made a post on this forum highlighting my personal experience obtaining an auto loan through USAA. If you're looking to purchase via a dealership, they are hands down the best way to go out of the two lenders you mentioned - Rate wise and overall experience/processing wise.

I was able to apply for, sign ALL of my paperwork and submit the required information to the dealership all within a matter of 5 minutes and through the USAA app. No phone or document tag. Just a simple, straightforward, streamlined process. PenFed can be a nightmare to deal with due to their ancient website and unorganized nature at times - At least that's been my experience in the past. They also stopped expediting or overnighting checks a while back, so it can take 5 - 7 business days for you to actually receive the check to pay the dealer which can definitely pose an issue if the dealer isn't satisfied doing some form of a spot delivery.

It is worth noting that USAA tends to use the outdated EX FICO 3 scoring model for auto loan approvals opposed to PenFed's EQ FICO 9. I'd argue that most people's FICO 3 scores tend to be notably lower than their FICO 9 scores, so that's something to keep in mind. A 717 got me within 1.25% of their lowest rates, so I'm willing to wager that a 740+ should be able to net you their lowest rates.

I did notice you said this is your first auto loan - Irrespective of your income and credit, you may have difficulties financing that full $50K, so you may want to curtail your expectations a bit because that's a good chunk of change in this market for a first time buyer (from a lenders perspective). PenFed does do a soft pull pre-qualification, so it may not be a bad idea after all to try them first to get an idea of the max amount of money you'll be able to borrow.

Just some additional things to consider. I wish you the best of luck with whoever you go with!