How this number is made
Equity in a trade is the offer minus the payoff. Negative equity gets rolled into the next loan unless you pay it in cash. Tax on the trade is state-specific and not computed.
- The offer is the dealer’s number, not the private-party listing you saw.
- Still owed is the payoff, which is a bit more than last month’s balance.
Formula
Equity = trade offer − payoff. Amount to finance = price − equity − cash down.
Worked example
With the figures already in the form, equity in the trade is $3,000.
Questions
What if equity is negative?
The amount to finance is larger than the price. You are paying off the old vehicle inside the new loan. That is how people stay upside down.
Who taxes the trade?
Many states tax the price minus the trade. Some tax the full price. This page does not add tax.