A trade in is treated as a sale of the vehicle. The amount that you sold it for is the trade in value that you received. If you fully depreciated the vehicle prior to trading it in then the value it has on your books is $0. So anything that you receive as a trade in value means that you received a profit. You sold something worth zero dollars for any amount then you profited that amount.
It sounds like your problem here is with the data entry for setting up the asset. If the system is saying that you're not allowed a deduction then there is a reason. Dispose of the vehicle as a proper sale and then set up the new vehicle (lemon or not) as another asset and enter the total amount that you paid for it (including the trade in) and start depreciating that. That should fix your issues.
@Bill S62
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