Car loan not calculating right

Unknown

I just got quicken and a new car. I'm trying to set up the car loan for it but Quicken isn't calculating properly. I plug all the info in and it gives me a payment amount that's $0.04 over, not a big deal, but the principal and interest payments are wrong. I have the receipt of my first payment and they don't even come close to lining up.

Quicken says:
Principal: $182.06
Interest: $45.94

My receipt says:
Principal: $203.87
Interest: $24.13

I'm worried this is going to screw up the calculations of when the car will be paid off. Any ideas how to fix this? Is it an issue at all?

John_M

Geoff,

I also have a car payment where the amortization schedule on Quicken doesn't line up with what the bank's website says every month for P&I. I think the variance is due more due to the bank than to Quicken. My mortgage payment matches to the penny every month, so I trust Quicken.

My advice is to just live with it. Whenever my monthly car payment is processed, I go out to the bank's website to figure out how they split the payment (and to fix the total amount too, which is slightly different). It's not going to change the length of your loan – that's stated in your loan paperwork.

Unknown

I'm not worried about the loan taking too long, just Quicken telling me it's going to take longer than it actually will. Right now it's telling me that my 6 year loan will take 10 years to pay off.

How are you fixing the numbers inside Quicken? I tried to go into the payment itself and adjust it but Quicken won't let me. It's making the balance wrong which is also bugging me.

splasher

While lots of folks wish Quicken worked better with car loans, it just doesn't.

Car loans are weird.  Typically, they sign you up to a loan that the first payment doesn't start right at 30 days (they say they are being nice to you, that is BS), more like 45 days.  Well, the extra 15 days aren't free, they charge you interest on them and it gets spread out over the length of the loan, something that Quicken just can't handle.

Back in 2013 I bought a new car and took the loan just to get an extra $1000 off the price.  I went around in circles trying to get Quicken to model it properly and the closest I could get was taking what Quicken suggested if I falsified the start date to ignore the 15 days and then add an extra split line of $.15 to make up for the extra interest they charged.  It was close, but not exact.

Quicken does mortgages great, not so great for cars.

NotACPA

splasher said:

While lots of folks wish Quicken worked better with car loans, it just doesn't.

Car loans are weird.  Typically, they sign you up to a loan that the first payment doesn't start right at 30 days (they say they are being nice to you, that is BS), more like 45 days.  Well, the extra 15 days aren't free, they charge you interest on them and it gets spread out over the length of the loan, something that Quicken just can't handle.

Back in 2013 I bought a new car and took the loan just to get an extra $1000 off the price.  I went around in circles trying to get Quicken to model it properly and the closest I could get was taking what Quicken suggested if I falsified the start date to ignore the 15 days and then add an extra split line of $.15 to make up for the extra interest they charged.  It was close, but not exact.

Quicken does mortgages great, not so great for cars.

The other big difference between mortgage loans and non-mortgage loans (car loans,  personal loans, etc)  is that mortgage loans are almost ALWAYS a predetermined, and easily calculated) amount that follows regular rules of "monthly interest" amortization.  And the amortization period is always 30 days ... no matter when you make your mortgage payment, the 1st,or the 15th (as long as it's not late).

Non-mortgage loans are almost always 'daily interest' loans, where the interest that you pay with your next payment is entirely dependent upon what day you made this payment.  If you pay on the 1st, the next payment will have less interest that if you make this months payment on the 15th ... because the interest is calculated daily.

Q simply can't handle that sort of variation in the payment schedule.  It has no way of knowing WHEN your payment was received by the lender.  Did you mail it?  Did you walk into a branch during regular business hours?  Or during "extended" hours ... which are actually logged as the next business day?

John_M

Geoff Loudermilk said:

I'm not worried about the loan taking too long, just Quicken telling me it's going to take longer than it actually will. Right now it's telling me that my 6 year loan will take 10 years to pay off.

How are you fixing the numbers inside Quicken? I tried to go into the payment itself and adjust it but Quicken won't let me. It's making the balance wrong which is also bugging me.

Geoff – to fix the split between principal and interest, you need to go to the register you made the payment from (usually your checking account). Just edit the split to match what the bank says and it will make the balance of the loan correct.

jacobs

splasher said:

While lots of folks wish Quicken worked better with car loans, it just doesn't.

Car loans are weird.  Typically, they sign you up to a loan that the first payment doesn't start right at 30 days (they say they are being nice to you, that is BS), more like 45 days.  Well, the extra 15 days aren't free, they charge you interest on them and it gets spread out over the length of the loan, something that Quicken just can't handle.

Back in 2013 I bought a new car and took the loan just to get an extra $1000 off the price.  I went around in circles trying to get Quicken to model it properly and the closest I could get was taking what Quicken suggested if I falsified the start date to ignore the 15 days and then add an extra split line of $.15 to make up for the extra interest they charged.  It was close, but not exact.

Quicken does mortgages great, not so great for cars.

For the aforementioned reasons, you may find it easier to do your car loan manually in Quicken rather than trying to use the Loan feature and fighting to get the numbers correct.

To do this, you'd create a new Liability account for the amount of your loan. You'd enter the first month's payment in your checking account as a split transaction: one split being a transfer to reduce the Liability account, the other split being Interest Expense. Presumably, you can see these values if you log into your account with your lender. Then you can make that payment in your checking account a recurring monthly transaction for the amount of your monthly payment. But isn't the split between interest and principle different each month? Yes. So monthly (or less frequently if you prefer), you need to click on your payment transactions to adjust the split values to match what your lender actually did. It just takes a few seconds to increase one split amount and decrease the other.

It ain't slick and automated, but it takes very little time to manage, gets you correct numbers at the end of the year, and shows your balance due -- within a few cents or dollars -- at any time. If you don't like doing it this way, that's fine; it's just an option, if you find you're frustrating with trying to get Quicken to calculate each month correctly (which, for the reasons @NotACPA cites, you may never achieve anyway).

smayer97

splasher said:

While lots of folks wish Quicken worked better with car loans, it just doesn't.

Car loans are weird.  Typically, they sign you up to a loan that the first payment doesn't start right at 30 days (they say they are being nice to you, that is BS), more like 45 days.  Well, the extra 15 days aren't free, they charge you interest on them and it gets spread out over the length of the loan, something that Quicken just can't handle.

Back in 2013 I bought a new car and took the loan just to get an extra $1000 off the price.  I went around in circles trying to get Quicken to model it properly and the closest I could get was taking what Quicken suggested if I falsified the start date to ignore the 15 days and then add an extra split line of $.15 to make up for the extra interest they charged.  It was close, but not exact.

Quicken does mortgages great, not so great for cars.

And yet another approach is to use the Loan feature, let Quicken make its own calculations, then periodically (every 6 months, 1 year, etc), enter an adjustment entry for the difference in the principal and interest paid to date since any previous adjustment. 
I do that with my mortgages because Quicken bases calculations on US rules and CDN rules are slightly different, so there is often a difference, though in my case, it is small relative to the outstanding balance.

(If you find this reply helpful, please be sure to click "Like", so others will know, thanks.)