Trade-In Tax Savings and Negative Equity
Understand why trade tax allowance, loan payoff and net equity are three different values.
Positive equity example
A $15,000 allowance with a $9,000 payoff creates $6,000 of positive equity. The qualifying trade allowance may still reduce the taxable amount by the gross $15,000 under the selected state path.
Negative equity example
A $12,000 allowance with a $16,000 payoff creates $4,000 of negative equity. That difference can be added to the new financing, increasing total debt.
Do not judge the trade alone
Compare the replacement vehicle's OTD price, trade allowance and payoff together. A dealer can offset a generous trade offer with a higher vehicle price or more add-ons.
Rates and fees can change. State-specific calculators identify their source date and separate fixed source-backed amounts from user-entered or location-dependent estimates.
Review official sources