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USAA Auto Loan Review

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The United Services Automobile Association (USAA) serves military families — to get one of its auto loans, you must be a current or former service member, or have an eligible family member.

USAA offers competitive rates, but the best rates go to those who are willing to car shop through its buying service and automatically draft their car payments through a USAA bank account. Those who already bank at USAA might find it convenient to have their car loan in the same place where they have an account, insurance policy or one of USAA’s other financial products. Keep reading to see if an auto loan from USAA is a good deal for you.

About USAA and its auto loans

USAA was founded in 1922 by 25 Army officers who met in San Antonio, and decided to insure each others’ vehicles. Today, the Texas-based financial company offers banking, insurance, investing, loans and other financial tools. It offers loans for those buying a new or used car or refinancing the one they have as well as financing for other types of vehicles, including motorcycles, boats, recreational and powersports vehicles. For purposes of this review, we’ll focus on traditional auto loans.

USAA auto loans: At a glance

  • APR ranges for financing:
    • New vehicles: As low as 2.74%
    • Used vehicles: As low as 3.24%
  • Terms available: 12 to 84 months
  • Loan amounts between $5,000 and $3,000,000
  • Good credit may be required

USAA offers rates as low as 2.74% for new cars and 3.24% for used cars, but to get those APRs, you must both purchase through USAA’s car-buying portal and set up automatic payments from one of your accounts. If you only set up auto payment, for example, you will only get a 0.25% discount. If you only buy through the car-buying portal, you’ll receive a 0.50% discount. As of Nov. 1, 2019, the maximum APR you could pay is 18.00%, according to a customer service representative.

Auto loans fall into one of three categories for new and used vehicles. They include:

  • Model year 2020-2018
  • Model year 2012-2017
  • Model year 2011 and older

The newer the vehicle, the lower the starting rate. While rates may start at 2.74% (with discounts) for new cars, starting rates for 2011 and older vehicles start at 6.95% (with discounts). As with most lenders, rates are based on your creditworthiness, as well as the amount and length of your loan. If your credit is so poor your APR would be higher than 18.00%, USAA may reject your application. It does not define what credit scores might earn APRs of 18.00%.

Refinance loans

USAA refinances auto loans from other lenders but not its own. Rates vary based on your credit score, the age and mileage on your vehicle, the amount of your loan and your income. You must be a member of USAA to qualify for refinancing and the bank does not disclose refinancing rates on its site.

USAA car-buying service

USAA members can shop for a car directly through the USAA website. Formerly known as USAA AutoCircle, the service is powered by TrueCar, the car-buying website. Here’s how it works: You get a price from one of the certified dealers in the network and can see what others have paid for that same vehicle. If you decide to go forward, you print a certificate that guarantees that price at that dealer and then head to the dealer to complete the transaction.  USAA members may save in one of three ways when using the USAA car-buying service:

  1. USAA trims 0.50% off the loan’s APR when you purchase a car through the service. If you also set up automatic payments, you get an additional 0.25% off the APR.
  2. Receive a bonus cash offer from one of the manufacturers that USAA works with including BMW, Mini, Audi and others.
  3. Dealers may reduce the MSRP, as much as $3,537 off,  according to USAA.

How  to become a USAA member

We can’t emphasize this one enough: The most important thing to know about USAA auto loans is that in order to apply, you must be a USAA member. Membership is restricted to active or retired service members plus separated veterans with an honorable discharge and their eligible family members. Eligible family members include spouses, widows, widowers and unremarried former spouses of USAA members who joined USAA prior to or during the marriage, as well as individuals whose parents joined USAA. Those whose parents are deceased can become members of USAA only if their parents were members while living.

USAA requires a “direct” relationship for membership. This means that if your grandfather was a USAA member, but your father was not, you cannot become a USAA member until your father joins. There are no fees for becoming a member and no requirement to open an account. These memberships are known as dormant and establish the military-affiliated lineage that USAA requires for subsequent members. To prove that you or your family member was or is a part of the military, you may have to provide form DD214 or military orders, forms used to verify military service, to USAA.

How to apply for financing at USAA

Once you are a member, applying for an auto loan from USAA is straightforward. You can begin the process online, apply over the phone or in person, though branches are primarily in communities with a large military installation. You’ll need to provide the following information:

  • Proof of identity and residency
  • Amount of loan and year of car
  • Social Security number
  • Proof of income

If you are applying for refinancing from USAA you’ll need to provide the following information:

  • Your vehicle’s model, age and mileage
  • 10-day payoff amount
  • Current loan APR
  • Loan account number
  • Your employer and income
  • Identification documents (Social Security number, driver’s license)

USAA says that the application process is quick, only a few minutes to know if you are approved. Once you are approved, you can print off loan documents and even the check and head right to the dealer to finish up paperwork or to a private seller, if you choose to buy that way. You can also take your time shopping for an exact car — auto loan offers are good for 45 days

Remember that USAA isn’t your only option. Military families have other choices, including credit unions such as Navy Federal Credit Union, PenFed Credit Union and others. When shopping for a car loan, it’s important to do your homework and compare auto loan rates before you head to the dealership.

The fine print

USAA is relatively transparent about its minimum rates and amounts but finding the maximum rates and amounts requires more digging. Refinancing rates are not available on its website and in order to get them, you need to be a member first.

There are no application fees or prepayment penalties at USAA but, in order to get the best rates, you’ll need to set up an automatic payment plan for your USAA loan through a USAA account and purchase through its car-buying service.

USAA will finance up to 120% of the car’s value but may require a down payment in cases where that is exceeded. It’s important to be aware that borrowing more than a car is worth makes it far easier to get upside down in your auto loan and owe more than the vehicle is worth. Be very careful when deciding to do this kind of transaction.

Pros and cons of financing through USAA

USAA offers competitive financing rates for military families interested in buying a car, but you won’t know what refinance rates you might receive unless you’re already a member.

Highlights of USAA auto loans

  • No fees, including origination fees or prepayment fees.
  • Wide variety of loan terms and amounts.
  • Take your car overseas with options that allow you to continue to make payments and keep your car at an international duty station.
  • Deferred payments for a 60-day period where you don’t have to pay on new auto loans and refinancing.

Lowlights of USAA auto loans

  • Membership required for any auto loan or refinancing.
  • Must call for refinancing rates: You must be a member to see refinancing rates.
  • Discounts can be confusing: To qualify for the best rates you must both have automatic payments set up and buy through USAA’s car-buying portal.
  • Not many physical branches in the middle of the country: Most USAA branches are concentrated on the coasts. If you like to do your banking in person, be sure that there is a branch nearby.

The bottom line: Who is USAA best for?

USAA is best for military members, former members and their families who are looking for good rates, and a variety of term options for an auto loan. It also may be a good fit for military members who might want to purchase other vehicles like boats, ATVs, motorcycles or snowmobiles.


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