Trade-In Equity Calculator

How it works

Trade-in equity is the dealer's offer for your car minus what you still owe on it. If the offer is larger you have positive equity, which works like a down payment on the next car. If you owe more than the offer, the difference is negative equity: the dealer pays off your loan, and the shortfall is paid in cash or added to the new loan.

If you know your payoff amount, enter it; a lender's payoff quote also includes interest accrued since the last payment. Otherwise the calculator works it out from the original loan: the balance after a number of payments is the present value, at the loan rate, of the payments still to come.

The new loan is the new car's price, including tax and fees, less your cash down, less positive equity or plus negative equity. Because a loan payment is proportional to the amount borrowed, the calculator can show exactly how much of the new payment, and of the interest, comes from carrying the old car's shortfall.

Formula

payoff (from terms) = M × (1 − (1 + r₀)^−(N − k)) ÷ r₀,   M = original payment, k = payments made
equity = trade-in offer − payoff
new amount financed = new price − cash down − equity
new payment = A × r ÷ (1 − (1 + r)^−n),   r = new APR ÷ 12
monthly cost of shortfall = negative equity × r ÷ (1 − (1 + r)^−n)
interest on shortfall = monthly cost × n − negative equity

Example

A $30,000 loan at 7% for 72 months has a payment of $511.47. After 24 payments the payoff is the present value of the 48 payments left: $21,359.10. With a $15,000 trade-in offer that is $6,359.10 of negative equity.

Rolled into a $35,000 car with $2,000 down at 7% for 72 months, the new loan is $35,000 − $2,000 + $6,359.10 = $39,359.10 and the payment $671.03, against $562.62 without the shortfall. The old car's shortfall costs $108.42 a month and $1,446.88 in interest over the new loan.

Assumptions and limitations

• Computed payoffs assume a fixed-rate, simple-interest loan with every payment made on time and none extra. A lender's payoff quote includes per-day interest since the last payment and governs.
• The new car price is entered with tax and fees included. How a trade-in affects sales tax depends on the state; see the out-the-door price calculator.
• The trade-in offer is the figure the dealer gives you; no market valuation is made.
• This is an estimate, not financial advice.

Frequently asked questions