Trade-In Equity Guide: Positive Equity Credits vs Underwater Rollovers
Understand vehicle trade-in values, positive equity down payment credits, negative equity loan rollovers, and trade-in sales tax savings.
By Sarah Jenkins, CFA
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Reviewed by David Vance, CFP
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5 min read
Positive Equity vs Negative Equity
- Positive Equity: Occurs when your vehicle's current market value exceeds your remaining loan balance ($18,000 value - $12,000 loan = $6,000 positive equity). This acts as a direct down payment credit.
- Negative Equity ("Underwater"): Occurs when your remaining loan balance exceeds the vehicle's market value ($15,000 loan - $10,000 value = $5,000 negative equity). If rolled into a new car loan, your new LTV and monthly payments increase significantly.