Pros
* Probably spend less overall (less depreciation)
* Save money on interest
* Lower your insurance (possibly drop collision)
* Become accustomed to driving lower cost vehicles
Cons
* If you trade, you're giving away some of the car's value
* An older car has more unknowns and more miles already on it
What you owe vs. what it's worth tells you nothing really about whether it's a good move. The strategic way to do this is to make a spreadsheet showing overall 5 year and 10 year costs.
Include these factors:
* How many miles you drive a year
* How much maintenance each car will cost
* How many more miles before replacing the car
* Difference in insurance (especially if you drop collision)
* Difference in interest costs
* Opportunity cost of invested savings (optional, but eye opening)
* Gas mileage and other operating costs that may change with your car (smaller tires, more confident working on an older car, etc)