Definition
Trade-in value is the amount a dealer credits you for your current vehicle when you purchase a new one. It reduces the purchase price of your new car, lowering the amount you need to finance. Trade-in value is typically less than the private sale value of the vehicle.
Example
You're buying a $32,000 car and have a trade-in worth $8,000. After applying the trade-in, your loan amount drops to $24,000. At 6% APR over 60 months, that reduces your monthly payment from $618 to $464 — a savings of $154 per month and about $1,280 in total interest.
How It's Calculated
Loan Amount = Vehicle Price − Down Payment − Trade-In Value. Trade-in value is determined by factors including the vehicle's year, make, model, mileage, and condition. Resources like Kelley Blue Book or Edmunds provide estimates.
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