Accounting for a car lease final buyout with asset trade in
In 2011 I paid cash ($8573) for a 2005 used Altima and created an asset for it with that value. I just traded it in and got $5000 toward a 3 year lease of a 2019 Tucson. They also applied a $2000 rebate. Then I had to give them an additional $4445.24 cash for:
Capitalized Cost Reduction 9066.50
Sales/Use tax on capitalized cost reduction 284.66
First monthly payment 445.24 (29.13 of which is monthly tax)
Initial license, title & registration fees 188.04
Sales/Use Tax 92.30
Doc fee 1311.50
Tire fee 7.00
Filing 50.00
So total at signing = 11445.24.
So, how do I account for the Altima trade in of $5000 and the asset now being gone. I understand that the lease is just an expense with no asset/liability account involved, but if I buy the car at the end of the lease I want to be able to account for the total I paid for it, including the amount upfront, the 3 years of payments, and the final buyout amount.
Additional info from the paperwork:
Gross Capitalized Cost 37029.00
Residual Value at end of lease 15954.55
Depreciation & any amortized amounts 12007.95
Rent charge 2972.01
Total of base monthly payments 14979.96
Total monthly payment 416.11 + 29.13 tax = 445.24 = 16028.64 over 36 months.
Any assistance you can give for this would be greatly appreciated. Bottom line is I'm trying to keep my net worth as accurate as possible.
Thank you!
Capitalized Cost Reduction 9066.50
Sales/Use tax on capitalized cost reduction 284.66
First monthly payment 445.24 (29.13 of which is monthly tax)
Initial license, title & registration fees 188.04
Sales/Use Tax 92.30
Doc fee 1311.50
Tire fee 7.00
Filing 50.00
So total at signing = 11445.24.
So, how do I account for the Altima trade in of $5000 and the asset now being gone. I understand that the lease is just an expense with no asset/liability account involved, but if I buy the car at the end of the lease I want to be able to account for the total I paid for it, including the amount upfront, the 3 years of payments, and the final buyout amount.
Additional info from the paperwork:
Gross Capitalized Cost 37029.00
Residual Value at end of lease 15954.55
Depreciation & any amortized amounts 12007.95
Rent charge 2972.01
Total of base monthly payments 14979.96
Total monthly payment 416.11 + 29.13 tax = 445.24 = 16028.64 over 36 months.
Any assistance you can give for this would be greatly appreciated. Bottom line is I'm trying to keep my net worth as accurate as possible.
Thank you!
0
Best Answer

Tom Young ✭✭✭✭✭I've always understood that leasing a car is the most expensive way of hauling your butt from point A to point B, ignoring the psychic benefit of driving a "cool/expensive" vehicle. Case in point: "Doc fee" = $1,311.50 = pure dealer profit.If you're trying to keep your net worth "as accurate as possible" then you probably should assume that you're going to buy the car at lease end for the residual value, and establish an asset (cost of the car*) and a liability (present value of the cash flows*) . then split the monthly payments between principal and interest and depreciate the vehicle. I'd probably depreciate the vehicle once a year, at the end of each 12 month period, and instead of some depreciation "convention" I'd shoot for trying to establish the value of the car at some approximation of "fair market value" given its condition and mileage.Understand that most of the numbers you've listed here a made up for purposes of calculating your payment and can be ignored. I'd say that you have a nondeductible "loss" of $3,573, ($8,573  $5,000) on your old car sale.. Record the loss and enter the phantom "cash" value in your new car Account. Calculate a present value using whatever interest rate you think is appropriate of your other cash flows: $4,445.24 at signing, $445.24 monthly for 35 more months and $15,954.55 at lease end. That's your liability. The entry is debit (increase) New Car Account, credit (increase), New Car Lease Liability Account.
* assuming you're not going to deduct for tax purposes ad valorum taxes and sales taxes.
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Answers
* assuming you're not going to deduct for tax purposes ad valorum taxes and sales taxes.