Key points
- Trade-in value and payoff are different numbers.
- Positive equity can reduce the new transaction balance.
- Negative equity may be rolled into the next loan.
- Get the current payoff directly from the lender.
Positive and negative equity
Positive equity exists when the trade-in value is higher than the payoff. Negative equity exists when the payoff is higher than the vehicle's trade-in value. The difference affects the next amount financed.
Why negative equity needs careful review
Rolling negative equity into another loan means financing part of the previous vehicle along with the next one. This can increase the payment, total interest, and risk of remaining upside down.
How to compare a trade-in offer
- Obtain more than one appraisal when possible.
- Use the lender's current payoff amount.
- Check whether any tax credit applies in your state.
- Negotiate the next vehicle price separately.
Verify the buyer's order
The buyer's order should show trade-in allowance, payoff, and resulting equity clearly. Confirm that the same figures appear in the final financing documents.