Use Trade Equity vs Keep Cash

Why this comes up

You traded in a vehicle with real positive equity, and now that equity is proceeds you get to direct: apply it to the new loan, or take it as cash and keep it invested. This is a different decision than what to put down before you'd even shopped for a trade, it's about what to do with money you already have in hand from the deal.

How we calculated this

We compare a loan with the equity applied against an identical loan without it, at the same price, APR, and term. The difference in total interest is the guaranteed saving from using the equity. Separately, we project the same equity compounding at your assumed return to get the retained-cash gain, and solve the break-even return.

Worked example, using this page's own defaults ($4,000 equity, $30,000 price, $2,000 planned down, 6% APR, 60 months, 5% assumed return): using the equity avoids a real amount of guaranteed interest, run the calculator above to see which side wins with your own numbers.

What this means

• Trade equity is a real financing lever, applying it reduces your loan guaranteed, at the loan's own rate, not an assumed one.
• Keeping it as cash protects your liquidity, useful if you don't have much of an emergency fund left after the trade.
• If you'd rather confirm the equity figure itself first, see Trade-In Equity Calculator for the net number behind this decision.

Limitations

The retained-cash return is an assumption you entered, not a promised or historical rate; this does not model investment risk or taxes on any gain. See Methodology.

Methodology

This engine combines Vehicle Economics' fixed-rate amortization model (the standard loan-payment formula run out as a full month-by-month schedule) and break-even search model (a closed-form solve where one exists, otherwise a bounded search over a stated plausible range). See Methodology for the full detail.

Next decision

• Trade-In Equity CalculatorConfirm this equity figure against an actual trade offer.