September 14, 2023Rev Up Your Car-Buying Strategy: Navigating Rising Interest Rates

Navigating between rising interest rates and higher car prices can feel like driving on winding roads. While the current market conditions might not seem ideal for purchasing a new car, there are many ways to make your hard-earned dollars go further.  

So, buckle up and enjoy a few savvy tips that will help save you money and steer you toward an excellent car-buying experience.  

Do Your Research First 

The last thing you want to do is walk mindlessly onto a dealer lot, especially as prices and financing costs are rising. Spending a few hours researching could save you hundreds, or even thousands, on your new car. 

Here are a few tips to get started: 

  • Start Your Search Online: It’s much easier to browse vehicles online without a salesperson following you around. Once you determine the car you want, explore the different models, and choose which best fits your needs. 
  • Expand Your Search Area: While your local dealership might be convenient, dealers a bit further away might have better pricing or more selection. Again, put the Internet to work for you and include dealers 20+ miles outside your immediate area. 
  • Compare Incentives: Car makers and dealerships regularly run promotions. Identify all the incentives available at various dealerships. Then, determine if there are any restrictions or requirements tied to those deals. 
  • Obtain Quotes: Again, there’s a lot less pressure obtaining quotes online than in-person. Request a few quotes from different dealerships. This will help you determine a price range and identify any additional fees added to the car purchase. 

Focus on Your Credit Score 

If you’re just beginning your new car search, use the next few weeks or months to improve your credit score. Even minor improvements can lead to significant financial savings.  

Each lender will have their own pricing tiers, which will affect how your credit score impacts the interest rate you will receive.   

If your score is on the border between two tiers, small adjustments could help significantly. For example, if your credit score is a few points away from being an A-rating, a 5-point boost could place you into the (A) category and knock an additional percentage off your loan rate. 

To improve your credit score quickly, ensure you make all payments on time and focus on reducing unsecured debt, such as credit card balances. 

Obtain a Pre-Qualification 

A pre-qualification is a document stating that your lender has approved you to borrow a specific amount to purchase a new car. It’s one of the most powerful tools when it comes to car buying.  

To obtain a pre-qualification, you’ll want to apply for an auto loan with PEFCU* prior to visiting a dealership. Once you have your pre-qualification, you’ll experience a slew of perks. 

  • How Much You Can Afford: PEFCU will review your current finances and help you determine a reasonable amount you can afford to spend on a new car. This step will also aid you in narrowing down your new car search by price. 
  • Negotiating Power: Dealerships know they cannot sell you a car for over your pre-qualified amount. Consequently, they will often make concessions or avoid pricing games altogether if you have your pre-qualification in hand.
  • Prevents Costly Add-Ons: Because you cannot finance more than your pre-qualified amount, costly add-ons, like extended warranties, are easily avoidable.  

Pre-qualifications are very powerful tools when purchasing a new or pre-owned car. If you’re at a dealership and they try to convince you to finance elsewhere, that’s a clear sign they are trying to get you to spend more money. 

Know Your Trade-in Value 

Pre-owned car prices remain high, and dealerships are aggressively pursuing trade-in vehicles. If you have a car to trade in, you can maximize your trade-in value with a little extra effort. 

  • Value Your Trade Online: Begin by obtaining online estimates of your trade’s worth. Both Kelley Blue Book ( and NADA ( are good starting points. Use these values as benchmarks in your research. 
  • Obtain Appraisals: Next, visit local dealerships to obtain a trade-in appraisal or purchase price (many dealerships will buy your car even if you don’t buy from them). Use these written appraisals to determine the realistic value of your trade. 
  • Negotiate: Finally, when you head to the dealership to purchase your new car, bring your written appraisals to help negotiate your trade’s value. Appraisals from other dealers will prevent salespeople from undervaluing your trade-in.  

BONUS TIP: Negotiate the price of the vehicle you plan to purchase first. Then, mention you have a trade-in. This step prevents the dealer from tying your trade to the new car’s price – helping them to pocket more money. 

Make a Down Payment 

Even if you have a car to trade in, consider making an additional down payment on your new vehicle. With interest rates inching higher, any amount you can put down is less money you need to borrow.  

Between your trade-in and down payment, you should aim to put down between 10% to 20% of the new car’s price.  

We’re Here to Help! 

While interest rates continue to rise with the economy, there are still many ways to save money on your new car. Obtaining your pre-approval is a great first step. It lets you know how much you can afford and puts you in the driver’s seat regarding price negotiations. 

If you’re ready to get pre-approved for your next car, we’re here to help. Please stop by any of our convenient branch locations or call 800-226-6673 to speak with a Member Advocate today. 


Each individual’s financial situation is unique, and readers are encouraged to contact PEFCU when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.  

*Approval based on creditworthiness 

Federally Insured by NCUA 

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