TRADE EQUITY GUIDE

What does negative equity do to a car deal?

Negative equity is the amount by which the payoff on your current loan exceeds the trade allowance. When that difference is rolled into a new deal, you may finance part of the old vehicle along with the new one.

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SIMPLE EXAMPLE

A $20,000 payoff and $16,000 allowance creates $4,000 of negative equity.

If the lender and deal structure allow it, that $4,000 can be added to the new balance. It can raise the amount financed, payment, and interest paid even when the new vehicle price stays the same.

Get the current payoff

Use a current lender payoff, not only the remaining balance shown on an older statement.

Find the written allowance

The trade allowance should be visible separately from the selling price and other credits.

Calculate the difference

Payoff minus allowance equals negative equity when the result is above zero.

Verify where it went

Ask the dealer to identify the exact worksheet or contract line containing the carried balance.

FICTIONAL WORKED EXAMPLE

$4,000 from the old loan follows the new deal

The fictional trade is worth less than its payoff. If allowed and approved, the difference may be carried into the new balance.

ILLUSTRATIVE WORKSHEETNot a customer document

Current-loan payoff: $20,000
Trade allowance: −$16,000
Negative equity: $4,000
New deal before old balance: $29,500
Balance after carried equity: $33,500

Ask: Where is the $4,000 shown, and what would the new balance be without rolling it in?

ASK BEFORE SIGNING

“What are my trade allowance, payoff, and net equity—and where is that difference shown?”

PencilProof can help organize the written figures, but your lender and signed contract determine the final financing.

Check the written numbers