Go to Carmax and they will appraise your vehicle for free - the value they give you will be about what you're going to get at any other dealership. If you like their price you can always sell it to them even if you don't buy something new.

Why is negative equity such a "dangerous" thing? I'm sure it's not bad from the name but why dangerous?

Negative equity is where basically you owe more on a vehicle than you are getting back in trade. SO...if you have a vehicle that you owe $10,000 on, but the dealership only gives you $6,000 in trade, even though retail is $12,000, you will still owe $4,000 on it ($10,000 owed minus $6,000 paid in trade. $10,000 - $6,000 = $4,000. Your new car loan is say $15,000 (the new car is maybe $21,000 in price w/taxes, license and other fees thrown in, minus the $6,000 they gave you in trade, as downpayment). So your new loan is $15,000 PLUS the $4,000 you still owe on the older trade in. Now you have a loan for $19,000 on a car where the dotted line said $21,000, which will probably be worth about $16-17,000 in a month.

You owe more on the new car than it's worth now.

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This difference may not seem like much, but doing it for 2-3 cars in a row and you can easily rack up a difference of 10k or more between what the car is worth and what you owe.

When I was working in auto sales I ended up helping a couple in that situation. They were "upside down" (owed more than the vehical was worth) by $15,000! They had a payment that was killing them, gas prices were just starting to go up, and really had no way out. We at the time had 2 new suvs in the old bodystyle that were discounted heavily.. (newspaper ad, combined with major rebates). In fact, with all the rebates and incentives they were eligable for, the suv ended up being $16,000 less than MSRP. When the couple walked away from the dealership they ended up having a loan for almost MSRP on a new suv... and were able to drop their APR by several points (one of the incentives), and lowered their payment as well. Within a couple weeks of driving I am sure they were upside down again, as that always happens with new cars.. but at least it was no where near the 15k they were before.

Owing more than the car is worth is dangerous because if you are ever in a situation where you need to sell, you will need to come up with difference. Which would be very difficult, because I would venture a guess that in most cases, if you needed to sell your car it was because you were broke and needed to pay other bills.

After working in the industry I have vowed to never buy a new car for MSRP. In fact, I will probably never buy another new car again, and go with a nice used one that I can pay cash for. The only way I would consider getting a loan for a car is if the APR was at 0% and my money could be sitting in my savings account growing interest during the payment process.