A buddy and I were discussing a scenario that involved trading a car in the other day, and neither one of us were sure how this would work.

What happens when you trade in a car that you owe slightly more than the trade-in value but you trade it in for a car that is worth less than the trade-in value?

example: Say you owe $20k on a car that has a trade-in value of $18k and you trade it in for a car that is worth $16k. Do you end up paying the difference between what you owe and what the new car is worth (20k-16k = 4k) because the value of the car is covered in the trade-in value?

I've never been involved in any type of trade-in, so i hardly feel like an expert.

 

You are looking at this wrong. You have no equity:

$16,000 for new car
$2,000 to pay off current car
-------------------------------------
$18,000 total loan

 

My mother taught me to say thank you.

 

yeah its not going to fly youre still going to have to pay to get that cheaper car. *** backwards on a car loan ftl