Find out how much your current vehicle is worth as a trade — and whether you have positive equity (cash toward your next car) or negative equity (you'd owe the dealer).
Positive equity: trade value > loan payoff. The difference is yours — applied as down payment on a new vehicle, or paid out in cash if you sell privately.
Negative equity: trade value < loan payoff. You owe more than the car is worth. To trade it in, you'd need to bring cash to cover the gap, or "roll" the negative equity into a new loan (which we generally advise against — see below).
Dealer trade-in value is typically 5–15% below what you'd get selling the same car privately. The trade-off: dealer trades are easy and instant; private sales take time and effort but pocket more cash.
For maximum equity, consider selling privately and bringing the cash to a separate vehicle purchase. The downside: you need temporary alternate transportation between sale and purchase.
Some dealers will offer to "pay off your trade no matter what you owe." Mechanically true — they roll the negative equity into your new loan. The result: you start the new loan immediately deep underwater, with a higher monthly payment, paying interest on debt for a car you no longer have.
If you have negative equity and need a different vehicle:
Within 10–15% in most markets. Get a few in-person trade-in offers from dealers (most will quote without requiring a purchase) for a more precise number.
The payoff includes interest accrued from your last payment to the payoff date — typically a few hundred dollars. Always use the lender's official 10-day payoff figure, not your monthly statement balance.
Your insurance pays the actual cash value (which is similar to trade-in value). The negative equity is your responsibility — unless you have GAP insurance, which exists exactly for this scenario.