The "pay off" is the amount of money remaining on YOUR
car loan!
This is money that YOU owe! The car
dealer doesn't owe it! You do!
So, when you trade in your vehicle, the "payoff"
balance must be paid off, or the bank will not
release the title to the car dealer you're trading with!
This is done by adding your "payoff" to the bottom line of the total amount of the new loan on the car that you are buying.
In other words you take the price of the car you are buying, subtract the trade-in allowance they are giving you, then add tax and title fees then add your payoff to that total. This is the amount you'll be financing on the new car loan.
If that's not complicated enough for you, in some states you have to take the price of the car you are buying, then add tax and title fees, then subtract your trade-in allowance and then add your payoff. This will give you the total amount you need to come up with to buy the new car!
And remember....Your payoff may be more or less than the trade-in allowance that you actually received! There's no correlation between the two! In fact, in most cases you will owe more on your car than the car dealer is willing to give you for it!
