How do I calculate negative equity on a car trade-in?

Subtract what you still owe on your current loan from the trade-in value the dealer offers. If the trade-in value is lower than the payoff, the difference is negative equity. Example: you owe $22,000 and the dealer offers $17,500, so you are $4,500 underwater. That $4,500 either gets paid in cash or rolled into the next loan.

Can I trade in a car with money still owing on it in Ontario?

Yes. The dealer pays out your existing loan as part of the deal. If your trade is worth more than the payoff, the surplus reduces the price of the next vehicle. If it is worth less, the shortfall is typically added to the new loan, which raises the amount financed and the payment. Ontario dealers must disclose negative equity being carried into a new contract.

Is it a bad idea to roll negative equity into a new car loan?

It is expensive and it compounds: roughly 26% of trade-ins carried negative equity in 2025, and J.D. Power data suggests 96-month borrowers can be around $9,000 underwater by year 4. Rolling a small amount into a shorter loan on a cheaper vehicle can be defensible if the current car is failing. Rolling a large amount to get into a more expensive car usually deepens the hole.

Tools & Calculators

Trading in with money owing? Run this first.

This negative equity calculator shows where you actually stand: your equity position, what gets rolled into the next loan, the new payment, and how much of every payment is still servicing the old car.

Your trade-in numbers

What you still owe on the current loan ($)

Use the payout figure from your lender, not the balance on your last statement. Payouts can include fees.

Trade-in value offered ($)

The dealer's appraisal, before any "we'll pay off your loan no matter what" framing. In 2025, about 26% of trade-ins carried negative equity, per industry reporting.

Price of the next vehicle ($)

For context: the average used-vehicle price in Canada ended 2025 at $35,201, per the AutoTrader Price Index.

Annual interest rate, APR (%)

Federal law caps consumer loans at 35% APR (since Jan 1, 2025). Typical ranges: prime ~5 to 9%, near-prime ~9 to 15%, subprime ~11 to 30%+.

Term (months)

Runs on this page only. Nothing is sent anywhere. No sign-up needed.

Your result

$0 equity

Equity position: $0
Rolled-over amount (old loan carried forward): $0
New amount financed: $0
New monthly payment: $0 / month
Accelerated bi-weekly payment: $0 / two weeks

The bi-weekly figure is true accelerated bi-weekly: half the monthly payment paid every two weeks. That makes 26 half-payments a year, the equivalent of 13 monthly payments instead of 12, which pays the loan down faster. A "bi-weekly" plan that just splits 12 payments into 24 saves you nothing.

Estimates only. Actual payoff amounts, trade values, taxes, and fees vary by lender and dealer. HST treatment of trade-ins is not included here. This tool is general information, not financial advice.

Want the full picture before you sign? Read how negative equity car loans work in Ontario, see the rest of The Real Math, or run the plain payment and total-cost calculator on the new loan alone.

Trading in with money owing? Run this first.

Your trade-in numbers

Your result

You'd be rolling negative equity into the new loan

Underwater and not sure what a lender would say?