it's like this, if the car you bought is 17000 and you still got 15000 left; you go trade your car in for a 12000 car and they buy yours for 12000; they'll add that 3000 from your car that you still owe to the car your getting; so pretty much the car your trading in for will be 15000+tax,title,etc. correct me if i'm wrong but that's what i know from a guy that told me how it works
yup you're on the money
maybe if i put it an equation, its easier to understand
example:
current car and still owe = 20,000
trade in value = 15,000
---------------------------------
what you will owe = 5,000
cost of new car = 25,000
what you owe from trade = 5,000
---------------------------------
actual cost of new car = 30,000
this is called, being "upside-down" on your loan
on the other hand, if the trade in value is higher than what you owe, they will deduct it from the cost of the new car.
does that make better sense to you?