When buying a car, many customers are confused when presented numbers that have the phrase "Trade Difference" attached to them. I will break the phrase Trade Difference down so you can negotiate with the best of them.
Trade Difference is used by many dealerships so that you can avoid the "Your Upside Down" term. Many customers owe more on their trade than what it's worth, but this is just life. Car Salesman are upside down on their trades as well so don't feel bad.
If you are buying a $20,000 car and your trade in is worth $10,000--just to make math easy. You would have a Trade Difference of $10,000, plus tax, title, tag, and payoff. Guess what, many are confused by this and think this is the amount they will be financing. Lets say you owe $15,000 on your trade for simplicity again. Now, you take the trade difference of $10,000 plus your payoff of $15,000 and your new balance is $25,000 plus tax, title, license of course.
In most states if not all, you only pay tax on Trade Difference. So in the above case, you would pay tax on $10,000. You already payed tax on the car you are trading so it only makes since to pay on the difference, but many are not aware of this. Hope this helps to explain "Trade Difference" in a car deal, but if you have any questions please feel free to email me at the email address at the top of the page.
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