[guided]The point of this step is to check compatibility of the local models. A collection of bijections to $V_i\times\mathbb R^r$ gives a smooth vector bundle atlas only if the coordinate changes are smooth and fiberwise linear. Recall that the pulled-back local map is
\begin{align*}
\Psi_i:\rho^{-1}(V_i) &\to V_i\times\mathbb R^r, \qquad (n,e)\mapsto (n,\operatorname{pr}_2(\varphi_i(e))).
\end{align*}
Fix two indices $i,j\in I$. Their overlap in the base $N$ is
\begin{align*}
V_{ij}:=V_i\cap V_j=f^{-1}(U_i\cap U_j).
\end{align*}
The original bundle $E\to M$ has smooth transition functions. Concretely, there is a smooth map
\begin{align*}
g_{ji}:U_i\cap U_j &\to GL_r(\mathbb R)
\end{align*}
such that for every $m\in U_i\cap U_j$ and every $v\in\mathbb R^r$,
\begin{align*}
\varphi_j(\varphi_i^{-1}(m,v))=(m,g_{ji}(m)v).
\end{align*}
This formula says that changing from the $i$-trivialisation to the $j$-trivialisation leaves the base point $m$ unchanged and acts on the fiber coordinate by the invertible matrix $g_{ji}(m)$.
Now compute the corresponding change of coordinates for $f^*E$. Start with $(n,v)\in V_{ij}\times\mathbb R^r$. Applying $\Psi_i^{-1}$ gives
\begin{align*}
\Psi_i^{-1}(n,v)=(n,\varphi_i^{-1}(f(n),v)).
\end{align*}
Applying $\Psi_j$ to this pair means taking the second component of $\varphi_j$ applied to $\varphi_i^{-1}(f(n),v)$. Since $f(n)\in U_i\cap U_j$, the transition formula for $E$ applies with $m=f(n)$, giving
\begin{align*}
\varphi_j(\varphi_i^{-1}(f(n),v))=(f(n),g_{ji}(f(n))v).
\end{align*}
Therefore
\begin{align*}
\Psi_j\circ\Psi_i^{-1}(n,v)=(n,g_{ji}(f(n))v).
\end{align*}
This formula is smooth for two reasons. First, $f|_{V_{ij}}:V_{ij}\to U_i\cap U_j$ is smooth because $f$ is smooth and $V_{ij}$ is an open submanifold of $N$. Second, $g_{ji}:U_i\cap U_j\to GL_r(\mathbb R)$ is smooth by the definition of a smooth vector bundle atlas. Thus $g_{ji}\circ f|_{V_{ij}}$ is a smooth $GL_r(\mathbb R)$-valued map. Composing it with the smooth matrix action
\begin{align*}
GL_r(\mathbb R)\times\mathbb R^r &\to \mathbb R^r, \qquad (A,v)\mapsto Av
\end{align*}
shows that
\begin{align*}
(n,v)\mapsto(n,g_{ji}(f(n))v)
\end{align*}
is a smooth map from $V_{ij}\times\mathbb R^r$ to itself. The same formula also shows fiberwise linearity, because for each fixed $n$, the map $v\mapsto g_{ji}(f(n))v$ is linear.[/guided]