May 21, 2024Is an Auto Loan Preapproval Necessary?

There is no doubt it can be exciting when it is time to purchase a new car. Your car reflects you and your personality, so exploring different models and features is fun. With all the excitement in the air, it’s easy to be drawn to the dealership to see the vehicles up close and schedule a test drive. However, that’s one of the first and biggest mistakes when it comes to car-buying.  

Dealerships will use every sales trick and tactic they know to close the deal right then – whether you are ready to buy or not. This scenario can cost you significantly if you agree to financing terms that might not be in your favor.  

Before you ever step foot into a dealership, arm yourself with one of the most powerful car-buying tools – a preapproval. 

What Is an Auto Loan Preapproval? 

Today, everything is about convenience. That trend extends to car-buying as well. If you have decent credit, you can likely walk into any dealership and finance a new car. However, while that can save a bit of time, it can also be a costly mistake. 

Preapproval means that you applied for a car loan from the credit union. Our team reviews your application and finances and will work with you one-on-one to get you approved for your loan. Once approved, you will receive a preapproval document.  

Your preapproval document informs the dealership that you are preapproved by the credit union to purchase a vehicle up to a specific amount. When you find a car you like, the dealership will use your preapproval to complete the purchase, and your financing will be set up through the credit union.   

What Makes a Preapproval So Beneficial? 

A preapproval is more than just a buzzword. It’s a powerful tool that ensures your car-buying experience goes smoothly, and there are no surprises regarding your monthly loan payments. 

Here are a few ways that a preapproval can enhance your car-buying experience: 

  • Easier Budget Management:  

Preapprovals empower you to navigate your car-buying journey with a clear understanding of your financial boundaries. By knowing the maximum loan amount you qualify for, you can set realistic expectations and avoid the temptation of overspending. Armed with this knowledge, you can confidently explore vehicles within your budget, ensuring financial stability along the road ahead.  

  • Enhanced Negotiating Power:  

With your preapproval in hand, you wield a powerful bargaining chip. Sellers perceive preapproved buyers as more serious and financially capable, which gives you an instant edge in negotiations. Knowing you have financing locked in allows you to focus on securing the best price for the vehicle without the pressure of arranging funding on the spot at the dealership. Plus, dealers know they cannot sell you more than your preapproved amount, thus eliminating many pricing games along the way. 

  • Streamlined Comparison Shopping:  

Shopping for a car can be overwhelming, with countless makes, models, and financing options vying for your attention. Preapprovals simplify this process by providing a clear framework for comparison. Knowing that you have financing in place, you can instead focus on comparing vehicles based on their distinct features rather than the terms of financing. This streamlined approach saves time and energy, enabling you to make a well-informed decision without feeling rushed or pressured.  

  • Protection From Costly Add-Ons: 

Once you find the car you want and agree to pricing, it can feel like smooth sailing as you head into the financing office. However, that’s where the real deal-making begins. You’ll be persuaded to buy everything from extended warranties and pre-paid maintenance to ding and rust protection. It can be hard to say no to everything; dealerships know this. Luckily, your preapproval can protect you from these expensive add-ons and the headaches this process creates. 

A Few Words of Wisdom: 

A preapproval can help you secure a better deal on your vehicle, avoid costly add-ons, and streamline the car-buying process. However, just because you visit a dealership armed with a preapproval doesn’t mean you’re invincible from games and gimmicks. 

  • Salespeople will often tell you they can secure better financing for you with another lender or through the dealership. These comments are a red flag because it usually means they are trying to lure you into buying a car outside your price range or making room in your budget for costly add-ons. 
  • Research the value of your trade before you visit a dealership. Since your preapproval adds protection against pricing games and add-ons, salespeople will try to make up for it by padding your trade-in value in their favor. Have your trade-in appraised at several dealerships or online before you visit a dealer lot. 

We’re Here to Help! 

Here’s how easy it is to get a preapproval from PEFCU with Express Pay Draft:   

  • Here’s what you’ll need to get started:  
    • Phone number and email for both the applicant and co-applicant (if applicable).  
    • Current Housing, Employment, and Income Information.   
    • If you’re trading in a vehicle, have the title or loan information, as well as registration details ready.  
    • Calculate the total amount you expect to finance, including vehicle purchase price, taxes, tags, title, and warranty costs. Subtract any down payment you plan to make.  
    • Decide on the length (term) of the loan you’re aiming for.  
  • Apply through PEFCUMobile, PEFCUOnline, or at your local branch. 
  • Once preapproved for an auto loan, PEFCU will give you an Express Pay Draft. The draft amount reflects your approved limit, but you’re not obligated to use the entire sum. 
  • Now that you’ve got everything squared away, it’s time to start your hunt for the perfect ride! 
  • Once you’ve found the vehicle that speaks to you, just bring along this draft to any authorized dealership to seal the deal. PEFCU will work directly with the dealership for the final steps of funding, and you’ll be on the road in no time!

By understanding the preapproval process and leveraging its benefits to your advantage, you can embark on your car-buying journey feeling empowered. Whether you’re an experienced buyer or a first-time owner, preapprovals are a powerful tool that allows you to make informed decisions, negotiate with confidence, and ultimately drive away in the car of your dreams at a price well within your budget.  

If you’d like to learn more about our Auto Loan Preapproval process and how we can help you get in the car of your dreams, we’re here to help. Please stop by any of our convenient branch locations or call 800-226-6673 to speak with a loan expert 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.  

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