Auto Trade-In & Equity Calculator
Calculate your net vehicle equity and potential sales tax savings.
Calculation Results
Note: You have negative equity (upside down). You may need to pay this amount out of pocket or roll it into your new loan.
How Auto Trade-In Value is Calculated
Trading in a vehicle is one of the most effective ways to lower the cost of your next purchase. However, understanding the actual financial impact requires looking at three distinct factors: the market value, your current debt, and state-specific tax incentives.
1. Determining Net Equity
Equity is the difference between what the car is worth and what you owe on it. If your car is worth $20,000 and you owe $15,000, you have $5,000 in positive equity. If you owe $22,000 on that same car, you have $2,000 in negative equity (often called being "underwater" or "upside down").
2. The Trade-In Tax Advantage
In many U.S. states and Canadian provinces, you only pay sales tax on the "net price" of your new vehicle. This means the trade-in value is subtracted from the new car's price before tax is calculated. For example, if you buy a $40,000 car and trade in a $20,000 car at a 7% tax rate, you save $1,400 in taxes ($20,000 x 0.07) that you would have otherwise paid if you sold the car privately.
3. Realistic Trade-In Example
- New Car Price: $35,000
- Trade-In Offer: $18,000
- Loan Balance: $12,000
- Sales Tax: 8%
In this scenario, your Net Equity is $6,000 ($18k – $12k). Your Tax Savings is $1,440 ($18k x 0.08). The total financial benefit applied toward your new purchase is $7,440.
Factors That Affect Your Offer
Dealers calculate their offer based on the "Wholesale Value," which is what they could buy the car for at an auction. They consider:
- Mileage: High mileage significantly decreases value due to increased wear and tear.
- Condition: Mechanical health, tire tread, and interior/exterior cleanliness.
- Market Demand: Is your car a popular model in your specific geographic area?
- Reconditioning Costs: How much the dealer must spend to make the car "lot-ready."