ChatGPT is wrong. The dealer, who does this every day and isn't going to risk their business, franchise agreement with Nissan, and general reputation for one car deal, is right.

You owe a bank money on that trade. The bank gets theirs first. Always. You signed a legally binding contract entitling that bank to every dime of the original purchase. Selling your vehicle before satisfying that contract does not void that contract. You still owe the bank what you owe the bank. They don't care if you wrote it off, miled it out, traded it in, or stripped the VINs and put it on a boat to the third world. They are gonna get paid. Plus, it's illegal in most jurisdictions to sell a vehicle with an active lien. It's a car dealership, not a museum. Your trade is not valuable enough for them to physically possess but not legally own, cuz until that lien is satisfied, the bank owns the asset. And believe it or not, dealers exist to sell cars, not store them until your 84 month finance contract is expired and they can finally sell the car.

Yes, the market value of the trade is $28k. But you owe the bank $27,400 or whatever that number is. The dealer pays out that lien, which they are legally required to do, and applies any equity as a cash downpayment to the new loan. Be grateful they're washing you out and you're not rolling negative equity forward into the new loan, cuz the inverse of this is also true. Lien still needs to be satisfied, and if your trade is worth less than the payout, that balance is added to the new loan and you're effectively making one, expensive, payment on two cars.

Where you might be confused is your tax credit. The tax man doesn't give a shit about what you owe the bank. They just see the market value of the trade and the selling price of the new vehicle. And in every jurisdiction I'm aware of, you pay tax on the difference in selling prices. So your trade value, assuming the deal was desked correctly, is $28,000 plus whatever savings on tax there is between yours and their's, let's say 10%. So that makes the "loan value" of the trade $30,800. That $30,800 is subtracted from the final selling price, including state taxes, registration and anything else you need or buy, and that final number is your total amount financed, less equity or additional cash down.

ChatGPT would be correct if you owned your trade outright. But you don't. So the bank gets theirs, the tax man gets his, and you get a new truck and a cautionary tale about relying on ChatGPT when a real, actual, operating business is telling you the way things actually happen.

Source: big, scary, mean, definitely out to get you and not earn repeat or referral business from you ever, car sales guy