How to find your number, what a dealer does with the difference, what it costs, and your options. Last checked 2026-10-27.
Short answer: if your loan payoff is higher than your car's trade-in value, the difference (called negative equity) doesn't go away when you trade. The dealer pays off your old loan and either adds the difference to your new loan, takes it out of your down payment, or both. Added to a loan at the average terms for these loans, $3,000 costs about $52 a month and $3,770 in all. You can avoid that by paying it in cash, waiting until you owe less, or selling the car yourself.
You need two numbers:
Payoff minus trade-in value is your negative equity. Enter your payoff under "Still making payments?" on your result and we do the math for your car.
The Federal Trade Commission's example: your car is worth $15,000 and you owe $18,000, so you have $3,000 in negative equity. The dealer can add the $3,000 to your new loan, take it out of your down payment, or do both. Either way you pay it, and if it's financed you pay interest on it (FTC).
Some dealers advertise that they'll pay off your loan "no matter how much you owe." The FTC warns that these promises may be misleading, because the balance often just moves into your new loan. If a dealer promises to cover it, check that the amount isn't in the new financing or the final contract (CFPB).
Added to your next loan at 7.7% for 73 months (the average for loans that carried a trade-in balance in the CFPB's data):
| Rolled into the loan | Adds per month | Total you repay | Interest |
|---|---|---|---|
| $2,000 | $34 | $2,510 | $510 |
| $3,284 | $56 | $4,120 | $836 |
| $5,073 | $87 | $6,370 | $1,297 |
| $8,000 | $138 | $10,040 | $2,040 |
This is an example, not a quote: your rate and term will differ. A shorter loan costs less interest; a longer one keeps you owing more than the car is worth for longer.
What the federal data shows (CFPB, Negative Equity in Auto Lending, June 2024, loans made 2018 to 2022; report):
From the FTC's and CFPB's consumer advice:
What happens if I owe more than my car is worth and trade it in? The dealer pays off your old loan, and the difference between what you owed and the trade-in value is added to your new loan, taken from your down payment, or both. You still pay it, with interest if it's financed. The FTC's example: a car worth $15,000 with $18,000 owed leaves $3,000 to cover.
How much does rolling negative equity into a new loan cost? At 7.7% for 73 months, the average for these loans in CFPB data, $3,000 adds about $52 a month and about $3,770 in total payments. Your rate and term will differ.
Is my loan balance the same as my payoff amount? No. The payoff amount includes interest through the day the loan is paid off and any unpaid fees, so it's usually a little higher than the balance on your statement. Ask your lender for a payoff quote good through the date you plan to trade.
Can a dealer really pay off my car no matter how much I owe? The dealer can pay the old lender, but the FTC warns that these ads may be misleading: the balance is often added to your new loan, so you still pay it. Check that it isn't in the new financing or the final contract.
How do I get out of negative equity? Pay the difference in cash when you trade, keep the car and pay extra toward the loan until you owe less than it's worth, or sell it yourself, which can bring more than a trade-in. If you roll it in anyway, keep the new loan as short as you can afford.
Do I get my GAP insurance money back when I trade in? You may. The CFPB says you may be entitled to a refund of GAP if you sell, refinance or pay off the loan early. Ask your lender, the GAP provider or the dealer that sold it.
General information from federal consumer agencies, not financial advice. How we estimate your trade-in value.
How we calculate it · Trade-in tax by state · What dealers make · Trade in or sell? · What dealers check · Owe more than it's worth? · When to sell · Selling a car by state · Stop calls & texts