Car option
Trade-in
A trade-in applies the value of an existing vehicle toward the next vehicle purchase or lease.
What this page covers
This explainer is designed to show what the option is, how the basic mechanics work, and which details people commonly compare before looking at providers, products, or tools.
- Plain-English steps for how trade-in works.
- A simple example that shows the moving parts without selecting a product.
- Comparison factors, calculators, and source links for deeper research.
How it works
1
A dealer estimates the current vehicle’s trade-in value.
2
Any loan payoff on the current vehicle is compared with the trade-in value.
3
Positive equity can reduce the next amount financed.
4
Negative equity may be paid separately or rolled into the next loan, depending on lender approval.
Simple example
A buyer trades in a car worth $9,000 with a $6,000 loan payoff.
Trade value$9,000
Loan payoff$6,000
Positive equity$3,000
UseReduces next cost
Trade-in values, payoff timing, taxes, and dealer terms can affect the final transaction.