State Farm Bank: Auto Loan Review 2020
Point of Interest: State Farm Bank Auto Loans
State Farm Bank offers free GAP coverage to its customers when they refinance or finance a new car through its auto loan program. The Payment Protector feature is automatically added on to the customer’s loan and will protect them if the car is totaled or stolen.
While State Farm is well-known as an insurance company, it also has a bank that provides checking accounts, savings accounts, mortgages and loans. If you’re in the market to purchase a car, it would be worthwhile to look into the advantages of a State Farm auto loan.
State Farm Bank offers a wide variety of vehicle loans plus it has a few features that set it apart from the competition; furthermore, State Farm auto loan rates are competitive with other lenders.
How State Farm Bank Stacks Up
- Payment Protector feature
- Loyalty discounts
- High maximum loan amount
- Must apply with an agent
- Mileage restrictions
- Prepayment penalty
|Lender||New Car APR||Used Car APR||Refi APR||Loan Amount||Terms|
|State Farm||Starts at 3.69%||Starts at 3.89%*||Not specified||$5,000 – $250,000||12 – 84 months|
What’s interesting about State Farm Bank
State Farm Bank auto loans have several attractive features. Rates are competitive with other lenders and discounts are available for auto-pay and borrowers who already have an account with State Farm Bank. Additionally, State Farm Bank’s Payoff Protector feature financially protects car owners if their vehicle is stolen or totaled and the insurance settlement doesn’t cover the rest of the loan.
Unlike many other lenders, State Farm will finance vehicles purchased from private parties; so customers can go to any seller to find a new set of wheels.
Things to consider
Unless you already have an account with State Farm Bank or a State Farm insurance policy, you’ll have to make your application through a local State Farm agent. New customers cannot make an application online. In today’s tech-savvy world, this can be inconvenient for those who are used to handling financial affairs online from the comfort of their homes.
While you can get preliminary approval for an auto loan with State Farm Bank, the exact terms of the loan will not be available until the submission of a specific car as collateral and receipt of a firm approval from State Farm. This could lead to some surprises about an unexpected down payment or a higher interest rate than expected.
State Farm also places a 150,000 mileage restriction on the purchase of used cars. Let’s say you’re trying to buy a good used car for less than $10,000, like a 2013 Toyota Camry, because you want to keep monthly payments low and within your budget. Cars like the Camry are known to last upwards of 200,000 to 300,000 miles, and you might find one with high mileage at a good price, but not be able to finance it through State Farm.
Unlike many other banks with online application availability, you must apply in person through a State Farm agent unless you already have a State Farm Bank account or policy. This can take some time to contact an agent and set up an appointment. State Farm states the approval process only takes a day to evaluate and underwrite, but the total time to locate and meet with an agent can add up to several days.
State Farm Bank finances new cars starting at 3.69% between $5,000 and $250,000 on terms from 12 to 84 months and used autos starting at 3.89% on terms from 12 to 72 months. However, it will not finance used vehicles with more than 150,000 miles or driven more than 50,000 annually. The bank offers a pre-qualification process, but final approval depends on the specific vehicle being purchased and underwriting authorization.
Down payments are determined on an individual basis based on the type of vehicle and the borrower’s credit score and income.
Not only will State Farm Bank finance lease buyouts, but it will also provide loans to buy from private parties. You’re not limited to choosing from a dealer network.
A significant advantage of State Farm loans is its Payback Protector feature, which is essentially GAP insurance for which customers would normally have to pay an additional fee, but State Farm Bank provides it for free.
Auto loan refinancing
State Farm Bank offers refinancing on auto loans; the rates are competitive with other lenders, and no application fee is required. In some cases, you may be able to refinance with longer terms and better rates to lower your monthly payments.
As an added feature, State Farm refinancing loans also include Payoff Protector coverage at no charge.
State Farm Bank vs. Capital One
With State Farm, you can finance just about any car you want. You can buy from any dealer you choose or, if your neighbor down the street offers you a good price on a low-mileage car, State Farm will finance that one too.
Capital One, on the other hand, restricts you to buying a new or used car through one of its 12,000 participating dealers. Now, that’s a lot of dealers to choose from, but State Farm doesn’t have this restriction, so you have more choices.
For people who prefer to do everything online, Capital One is the way to go. You can search for the make and model of the car you want, make an application and head to the dealer to close the deal. State Farm is not quite so easy since you have to physically go to a State Farm agent to apply and close the deal.
A nice feature from State Farm is the Payment Protector program. It’s like free gap insurance, but Capital One does not offer this type of coverage; you would have to purchase it separately.
State Farm Bank vs. U.S. Bank
Auto loans from State Farm Bank and U.S. Bank are similar. Both companies will finance purchases from almost any dealer, plus purchases from private parties. Even the rates are comparable.
However, U.S. Bank will add 0.50% to your rate if you don’t open an account with them and set up automatic payments. It’ll add another 1.0% if your used car is more than seven years old and yet another 0.5% if you buy it from a third party. You have to consider the whole package to see which bank gives you the best deal.
And don’t forget the Payment Protector program from State Farm that U.S Bank doesn’t have.
State Farm Bank vs. Bank of America
Unlike State Farm Bank, Bank of America does not have any penalties for prepaying your loan. So, if there’s a chance of a cash windfall that will allow you to pay off an auto loan early, then Bank of America would be a wise choice.
Both Bank of America and State Farm Bank offer to finance new cars, used cars, lease buyouts, refinancing and purchases from private parties. Rates between the two are similar, but Bank of America offers a rate discount of 0.25% to 0.50% for customers who are enrolled in the Preferred Rewards or Banking Rewards for Wealth Management Programs.