Dealer glossary
Trade equity
The difference between what a trade-in is worth and what is still owed on it.
Definition
Also called equity, positive equity
If a customer trade is worth twelve thousand and they owe nine, they have three thousand in equity, and it can go toward the new deal. Equity is one of the most common sources of a down payment.
It works in reverse too. When the payoff exceeds the value, the customer is upside down, and the shortfall has to go somewhere - usually rolled into the new financing, which affects what the lender will approve.
Because the payoff figure comes from the customer lender and the value comes from the appraisal, equity is not known until both are, which is why it is often the step that holds a deal up.
Related terms.
Negative equity →
When a customer owes more on their current vehicle than it is worth.
Appraisal →
Determining what a dealership should pay for a vehicle, whether taken in trade or bought at auction.
Desking →
Structuring a deal - price, trade, down payment, term and rate - into payment options a customer can choose from.
See how this works in one system.
DealersCloud runs inventory, the CRM, desking, the books and your dealer website on the same records - so the things in this glossary stop living in separate places.
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