Trade-In Value.

In plain English

Trade-in value is what a dealership offers for your current vehicle when you hand it over as part of a new purchase. It is usually lower than what you could get selling the car yourself privately, because the dealer needs to recondition and resell it at a profit. The figure depends on the car's mileage, condition, options, and current market demand. In many states, trading in also lowers the sales tax on your new car, because tax is charged on the price after the trade-in credit is applied. Not every state works this way, so the tax effect depends on where you buy.

01Why it matters

A weak trade-in offer or a number quietly folded into the new-car negotiation can cost you real money, so it pays to know your car's value and negotiate the trade separately.

02The math, step by step

Your used car has a private-sale value around $9,000, but the dealer offers $7,500 as a trade-in for convenience. In states that tax the price after the trade, that $7,500 credit also reduces the sales tax you owe on the new car, but other states tax the full price. Check your state department of revenue or DMV, since trade-in tax treatment varies.

03What this is NOT