March 29, 2024Why You Need a Preapproval

One of the most powerful tools when it comes to buying a new or pre-owned vehicle is a preapproval. With a preapproval, you’ll have the upper hand when it comes to negotiating with dealerships, you will be protected against unnecessary add-ons, and you will stay within your budget. 

What Is a Preapproval? 

Nowadays, you can stop by practically any dealership and buy a vehicle without applying at your financial institution first. While this might be more convenient for some people, it could also cost you quite a bit of money. 

To get preapproved, all you have to do is apply at or visit any of our branches BEFORE you go shopping for your new vehicle. Once you’re approved, your preapproval letter will tell you exactly how much you’re approved to borrow and at what rate and terms. 

Staying Within Your Budget 

Too often, people focus solely on how much they can afford each month as a payment. There are many tricks dealerships can use to make a more expensive vehicle still fit within your current monthly budget (i.e., extending loan terms). A preapproval prevents this from happening.  

When we preapprove you for your new vehicle, we’ll review your current financial situation with you. How much debt do you currently have? What types of debt? What is your current income? We’ll help you determine exactly what you can afford to spend so you can stay within your unique budget. 

Negotiating Power 

With a preapproval, you’re in the driver’s seat when it comes to negotiating. You know exactly how much your approval limit is, which stops dealerships from putting you in a more expensive vehicle or adding on unnecessary features. 

Dealerships want to sell vehicles. Many have quotas they sell monthly. While it’s not guaranteed, many times dealerships will drop prices to meet your preapproved limit just to sell the vehicle. Remember – dealerships would rather sell a car than lose your business over a few hundred dollars. 

Extra Protection 

When you stop by for your preapproval, we’ll provide you with options, including GAP (Guaranteed Asset Protection) and Extended Warranties—the same programs dealerships will often offer you, only up to 50%! 

Plus, preapproval protects you from a bunch of extra add-ons dealerships try to use in the finance department. Since you cannot go over your preapproved amount, they won’t try to sell you any unnecessary services. 


Remember, a preapproval keeps you in your budget, gives you the upper hand with negotiating, and protects you from unnecessary extra expenses. So, dealerships will try to get you not to use this powerful too, of course!  

They will say they can get you a better deal with their financing or another institution’ or entice you with a vehicle priced more than your preapproved limit so you can ditch your preapproval. Be prepared for these attempts. They are just strategies meant to get more money out of you.  

We’re Here to Help! 

If you’re ready to go car shopping, get your most powerful car-buying tool from us first! It doesn’t take long to get preapproved, and it could save you a bundle! Simply apply at or give us a call at 800-226-6673.


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.  

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