If you owe less than the car is worth, you have positive equity. When you trade in the car, you can apply that difference to your new car. For example, if you still owe $6,000 but your car is worth $14,000, then the dealership can apply that $8,000 difference towards the purchase of a new car.
If you owe more than the car is worth, you have negative equity. Here are your trade-in options: