Trade-in equity calculator
Find out if you owe more than your car is worth, and what rolling that into a new loan does to your payment.
Use the payoff amount from your lender, not the statement balance, and the trade-in offer you actually have.
The tax rule differs by state: check your state's revenue department. The rate and amounts here are examples.
What equity means
Equity is the difference between what the car is worth and what you still owe on it: trade-in value minus the loan payoff. When it is positive, the extra money acts like a down payment on the next car. When it is negative, you must cover the gap before the dealer can pay off your old loan and take the car. The usual ways to cover it are to pay cash, or to let the dealer add the balance to the new loan, which the FTC calls rolling it over.
How the calculator works
Equity = trade-in value − payoff. The amount due on the new purchase is the car's price, plus sales tax, plus fees, minus your equity (or plus your negative equity), minus any cash down. Sales tax is computed on the price less the trade-in value if your state gives that credit, and on the full price if it does not. The amount financed is what is left. The monthly payment uses the standard fixed-rate formula, payment = P · r ÷ (1 − (1 + r)−n), where P is the amount financed, r the monthly rate (APR ÷ 12) and n the number of months. With a 0% rate it is simply P ÷ n. Loan-to-value is the amount financed divided by the price of the car; lenders may compare it to a book value of their own, which is not the price.
Worked example
The FTC's own example is a car worth $15,000 with an $18,000 balance, which is −$3,000 of equity. Say you buy a $30,000 car with 6% sales tax, no fees and no cash down, financed at 7% for 60 months. With the tax credit, tax applies to $15,000 and comes to $900. The amount due is $30,900, and adding the $3,000 you owe makes the loan $33,900: a payment of $671.26 a month and a loan-to-value of 113%. Without the old debt the loan would be $30,900 and the payment $611.86, so the rolled-in balance costs $59.40 a month and about $564 of extra interest over the five years. If instead the payoff were $10,000, you would have $5,000 of positive equity and the loan would be $25,900, a payment of $512.85.
The same trade in a state with no tax credit would be taxed on the full $30,000 and the loan would be $900 larger. That is why the Yes/No choice matters more than it looks.
Limits and common mistakes
First, the payoff is not your statement balance. The CFPB notes that the payoff amount can differ because of interest and other charges, so ask your lender for a payoff quote good through the day the dealer will send the check. After a trade, the CFPB recommends waiting about a week and then confirming with the old lender that the loan is paid off; if it is not, contact the new lender.
Second, a dealer promise is not a contract term. The FTC says a dealer who says it will pay off your old loan but rolls the cost into the new one is breaking the law, and tells you to look at the down payment and amount financed in the disclosures before you sign, doing the math if you have to. Third, the model assumes one fixed rate and term, and the same rate on the rolled balance. A dealer may price a loan with a large balance at a higher rate, which the calculator does not do. Fourth, trade-in values move: a quote from a dealer is not the same as a private sale. For a payment without the equity part, the auto loan calculator; for the loan-to-value of a house, the loan-to-value calculator; for how fast a car loses value, the depreciation calculator.
Frequently asked questions
What is negative equity?
You have negative equity when you owe more on the car loan than the car is worth. The FTC explains that cars lose value as they age, and an accident or damage lowers it further. If the car is worth $15,000 and the loan balance is $18,000, you have $3,000 of negative equity, and you must pay it to trade the car in.
How do I find my payoff amount?
Ask your lender for the payoff amount, which can differ from the balance on your statement. The CFPB says the payoff is what remains on your loan and can include interest to the payoff date and other charges. For the car's value, compare trade-in offers: the FTC suggests checking NADA Guides, Edmunds and Kelley Blue Book, and a private sale may bring more than a dealer's offer.
What happens if the dealer rolls my negative equity into the new loan?
The balance you still owe is added to the new loan, so you finance the new car and the old debt together. In the example above, $3,000 of negative equity on a $30,000 car takes the amount financed from $30,900 to $33,900 (this includes sales tax). At 7% for 60 months the payment rises by $59.40 a month and the extra interest on that $3,000 is $564. The CFPB warns that doing this will make the new loan more expensive.
Is sales tax charged on the trade-in value?
It depends on the state. California taxes the full price and gives no credit for a trade-in: the CDTFA example taxes a $20,000 sale with a $4,000 trade-in on the full $20,000. Texas lets the buyer subtract the trade-in value from the price. Choose Yes or No in the calculator to match your state's rule; with 6% tax, the example loan is $900 larger without the credit.
Does the credit use my equity or the trade-in value?
The trade-in value. Texas guidance says the deduction uses the value of the traded vehicle, not the owner's equity. The calculator reduces the taxable price by the whole trade-in value, whatever you still owe, when you choose Yes.
Can a shorter loan help with negative equity?
The FTC advises choosing the shortest loan term you can afford, especially when negative equity is rolled in, because a longer term delays the point of positive equity and increases total interest. For the example, 48 months costs $811.78 a month with $5,065 of total interest; 72 months costs $577.96 with $7,713.
What are other options besides trading in?
The FTC lists waiting until you have positive equity by making extra principal-only payments, selling the car yourself, and asking the dealer in writing how it will handle the negative equity. It also says to make sure any oral promises are included in the contract. A dealer who promises to pay off your loan but actually rolls the cost into your loan is breaking the law, according to the FTC; you can report it at ReportFraud.ftc.gov.
Estimates for planning only — not financial, tax or legal advice. Your lender's and dealer's figures and your state's tax rules decide. Sources: Federal Trade Commission, Auto Trade-Ins and Negative Equity (September 2023); Consumer Financial Protection Bureau, Should I trade in my car if it's not paid off? (reviewed September 12, 2023); California CDTFA, Applying Tax to Your Sales and Purchases; Texas Comptroller, Tax Publication 96-254, Trade-ins. How we check our calculators.