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

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.

Best Answer

Answers

  • John_M
    John_M Member ✭✭✭✭
    edited October 2020
    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
    mcphailjerry Member ✭✭
    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.
  • mcphailjerry
    mcphailjerry Member ✭✭
    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.
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