I have purchased a new car and attempting to set up the loan and an asset account for the car.

mcphailjerry

I have created an asset account for the new car. I posted a transfer from credit card to that asset account for the down payment ($5,000), I also posted transfer (from old asset account for the car I traded in ($26,000)) to close out that account and increase the new asset account That part seems OK.

I set up a loan account for the amount financed ($20,849.85) term (60 months), interest rate (0.9 %), start date (11/22/20) and so on. I want to track principle and interest. The loan payment calculated in Quicken for Mac ($355.51). I edited to reflect 12 cent difference in the payment (My retail installment contract shows a $355.63 payment). Quicken shows it as additional principle, though it actually is interest (daily compound).

Sorry I am long winded. I do not download any transactions and prefer to do manual entries. I haven't had a loan in 20 years. So I am not very experienced in setup.

I plan to do an annual depreciation to the asset account to reduce the value of car or at least that is what I have done in the past.

My questions are:
1. If I setup the way indicated above. Do I merely edit the monthly transaction to reflect the actual breakdown of the split?
2. Can I transfer the principle payment to the new asset account to track my equity change?
3. Am I handling the depreciation correctly?

I have always found the community very helpful and I hope someone can help reassure me I am doing it correct.

John_M

Here is a screenshot of a transaction for a car payment.



There are two split lines in the transaction. The first is the payment to principal. You will note that it is a transfer to the loan account called "2018 Honda Loan." So, it is not an expense category. Each time you make a payment, you will see the loan balance (debt) decrease. The interest expense here is Financial:Car Loan Interest, but for you it would be Loan:Interest or whatever else you want to call it. It will not affect the balance of the loan.

There is no need to add an adjustment to the asset when making a payment. The payment does not change the value of the car. What it does change is the equity you have in the car, which is equal to the current asset value minus the current loan amount.

Note that the loan principal and interest amounts will change each month even though the total payment remains the same. As the loan is amortized (paid down), the amount going to principal each month will increase and the interest amount will decrease. As I stated in my first response, you should be able to see this broken down each month on your lender's website. So after the payment is posted each month, you could go into the transaction and "fix" the two split lines.

One final thing to make sure you have done is create a Bill Reminder if you haven't already. To do this, you will need to go into the loan you created, click on "Edit Loan and Payment Terms" and click on the "Bill Reminder" tab. To track principal and interest, the Reminder Type "Detailed Reminder" should be chosen. Quicken will calculate the amount of principal and interest each month as it changes, but it will probably be off due to the daily interest compounding method used by the bank.

There's a lot here. Hope it helps!

John_M

It sounds like you're on the right track. You've created an asset account equal to the purchase price of the car, which according to your numbers is $51,849.85 ($5,000 credit card payment, $26,000 trade-in, plus $20,849.85 loan).

Car loans are often amortized using daily, rather than monthly interest. Quicken matches my mortgage principal and interest split exactly month, but my car payment never does. Here's what I do:

1. Create a monthly scheduled transaction using the loan in Quicken. It sounds like you've done that. The split should have a payment to principal and another line for interest. The payment to principal reduces your loan amount each month, while the interest is an expense category of your choosing.
2. After your payment is posted at your lender's website each month, go back into your transaction and fix the split between principal and interest. Make sure that your loan balance equals the amount shown by your lender.
3. Periodically update your asset balance for depreciation. Annual is a good choice, although others may do it monthly or quarterly. I use Kelly Blue Book to get values. The values do fluctuate from month to month (sometimes they go up rather than down). When you get your car value, put in a transaction for the amount of the depreciation in your asset account (not the loan). I have an expense category called Automobile:Depreciation, but there may be other ways of doing this. Note that since your car is an asset, the depreciation expense is not included in cash flow reports, but it is in net worth reports.

Feel free to follow up on this, but I think you've got all the pieces set.

mcphailjerry

Thanks for your quick response.
When I make a payment on loan. Could you show what a split would look like.
I know principle on loan $339.69 and Loan Interest $15.94.
What category is principle for loan?
I think the interest would be in my case Loan: Interest.
Would I add a Balance Adjustment to the asset which is equal to the principle payment?
I haven't had a loan in 20 years.
Thanks in advance for your help.
I'm 71 years old and anything new tends to confuse me.

John_M

Here is a screenshot of a transaction for a car payment.



There are two split lines in the transaction. The first is the payment to principal. You will note that it is a transfer to the loan account called "2018 Honda Loan." So, it is not an expense category. Each time you make a payment, you will see the loan balance (debt) decrease. The interest expense here is Financial:Car Loan Interest, but for you it would be Loan:Interest or whatever else you want to call it. It will not affect the balance of the loan.

There is no need to add an adjustment to the asset when making a payment. The payment does not change the value of the car. What it does change is the equity you have in the car, which is equal to the current asset value minus the current loan amount.

Note that the loan principal and interest amounts will change each month even though the total payment remains the same. As the loan is amortized (paid down), the amount going to principal each month will increase and the interest amount will decrease. As I stated in my first response, you should be able to see this broken down each month on your lender's website. So after the payment is posted each month, you could go into the transaction and "fix" the two split lines.

One final thing to make sure you have done is create a Bill Reminder if you haven't already. To do this, you will need to go into the loan you created, click on "Edit Loan and Payment Terms" and click on the "Bill Reminder" tab. To track principal and interest, the Reminder Type "Detailed Reminder" should be chosen. Quicken will calculate the amount of principal and interest each month as it changes, but it will probably be off due to the daily interest compounding method used by the bank.

There's a lot here. Hope it helps!

mcphailjerry

John thanks for all the help, I think I am close.
1st I set up Scheduled Transaction for Payment.
I can then adjust the split after that information from lender.

2nd I set up Scheduled Transaction for Asset Value increase back to the asset account.