Automobile Leases

acs2 · August 27

How does one set up an an account for an auto lease where there is a total amount owed and 36 equal monthly payments?

Boatnmaniac · August 27

Simply setting up a Bill Reminder to use a lease payment category (subcategory under "Auto"?) for the lease payments is perhaps the easiest way to do it. And it can easily be included in Cash Flow, Spending, Expense and Projected Balances reports as well as in Budgets.

Another good option would be to set up an offline credit card account. What's nice about this option is that it will capture the lease as a firm debt (which it is) which will then be properly captured in Net Worth and it very easily lets you see what the remaining balance is in the Account Bar on the left, something that would not be captured with the first option listed here.:

Set the opening balance of the credit card account as the total amount of the lease.
Set up a recurring Bill Reminder for the monthly payments transferring the funds from your checking account (or whatever payment account you will be using) to the offline credit card account.
The Bill Reminder can be set to expire after 36 payments. At that point the offline credit card account should have a $0 balance.

I personally would not set up an Auto Loan nor an Asset account for the car because a lease is not a loan and the car is not your asset. But I think either of the 1st two options listed here are good ways to manage it. I think if I were to do it I would go the route of option #2.

Tom Young · August 27

I wouldn't necessarily create a new Account here. You could simply create a Reminder for a payment to the leasing company in your Checking Account on the due date with some Category you'd create as the offsetting expense, like "Auto Lease" or similar.

If you really want to see some sort of "liability" Account for the lease on your balance sheet, then you're pretty much forced to create an offsetting "asset" Account as a form of "prepaid" expense, even though you'll be "running down" that "prepaid" Account over time with your monthly payments. That is:

Establish a new generic "liability" Account with an Opening Balance that's the sum of the 36 payments.
Establish a new generic "asset" Account with an Opening Balance that's the sum of the 36 payments
Set up a Reminder for the 36 payments - as of the due date for the payment - that reduces your Checking Account and reduces the liability Account.
Set up a Reminder for the 36 payments - as of the due date for the payment - that reduces your asset Account with the offsetting amount going to a Category you create, something along the lines of Auto Lease expense, or similar.

The 2nd Reminder acts as a form of "depreciation" for the expense of using the car.

Of course all the above assumes that the lease you're entering into is exactly as you've stated: 36 monthly payments for the use of the car and then you hand the car back to the leasing company. If the lease is more along the lines of a typical auto lease - a residual value (estimated end-of-lease value), capitalized cost (negotiated vehicle price), a money factor (interest rate), monthly payments, drive-off fees (upfront costs), an acquisition fee, a disposition fee (end-of-lease fee), then the accounting gets really complicated. 😂

acs2 · August 27

Thank you very much for this thorough explanation. I'll do option1 > no new account or Option2

NotACPA · August 27

My inclination would be to NOT create an account … and simply treat the monthly payments as expenses.

Boatnmaniac · August 27

Simply setting up a Bill Reminder to use a lease payment category (subcategory under "Auto"?) for the lease payments is perhaps the easiest way to do it. And it can easily be included in Cash Flow, Spending, Expense and Projected Balances reports as well as in Budgets.

Another good option would be to set up an offline credit card account. What's nice about this option is that it will capture the lease as a firm debt (which it is) which will then be properly captured in Net Worth and it very easily lets you see what the remaining balance is in the Account Bar on the left, something that would not be captured with the first option listed here.:

Set the opening balance of the credit card account as the total amount of the lease.
Set up a recurring Bill Reminder for the monthly payments transferring the funds from your checking account (or whatever payment account you will be using) to the offline credit card account.
The Bill Reminder can be set to expire after 36 payments. At that point the offline credit card account should have a $0 balance.

I personally would not set up an Auto Loan nor an Asset account for the car because a lease is not a loan and the car is not your asset. But I think either of the 1st two options listed here are good ways to manage it. I think if I were to do it I would go the route of option #2.

acs2 · August 27

I like the idea of an offline CC. Simple and it reflects the remaining debt

thx

NotACPA · August 27

https://community.quicken.com/discussion/comment/20506481#Comment_20506481

But unless that offline cc is marked "Separate" it will reduce your Net Worth without reflecting that you've got the use of the car (if not ownership).

Extending your thinking, would you also include the rent of an apartment as a card/liability? I doubt anyone else would.

Chris_QPW · August 27

https://community.quicken.com/discussion/comment/20506520#Comment_20506520

Even though I have a lease and just treat it as an expense, I can see @acs2 point.

If that car gets totaled, he/she will still be obligated to pay off the rest of lease (and then some). So, this isn't really like a monthly rent. Now if the "rent" was a 6-month lease contract, then it would be similar.

Boatnmaniac · August 27

https://community.quicken.com/discussion/comment/20506520#Comment_20506520

They said it was a total amount owed that gets paid off in equal payments over 36 months. That's much like credit card debt that gets paid off over time. As such I think it should impact net worth just like credit card debt should impact net worth. It is primarily for this reason that setting up a manual credit card for the lease debt is most likely how I would do it.

I also think this is a much different situation than apartment rent which is truly rent since apartment rent is not for a fixed debt amount that gets paid off over time. When you move out of an apartment the expense stops but with the car lease if you want out of the lease you need to pay it off, first.

However, expensing the car lease against a category is also a valid option just not the one I would choose for these reasons.

Tom Young · August 28

". As such I think it should impact net worth just like credit card debt should impact net worth. It is primarily for this reason that setting up a manual credit card for the lease debt is most likely how I would do it."

Using only a liability Account (assumed to be setup as a "one-sided" entry) without setting up the balancing asset Account does mean though that the monthly payments will never show up on a standard Income and Expense Report since the payments - payments that I expect most people do view as a form of "expense" - will simply be balance sheet Transfers.

Boatnmaniac · August 28

https://community.quicken.com/discussion/comment/20506588#Comment_20506588

Yes, I should have mentioned that. Thanks for doing so.

In the end this is just another instance of user's choice as to which will work best for them

One thing that you touched on earlier but has not been discussed further:

One could set up an offline Loan account for the lease which will then show up as a liability with the current balance in the Account Bar on the left. Set it up with the total debt obligation being the total amount of the 36 payments, set the interest rate as 0% and the term for 36 months. And if the calculated payment amount does not come out exactly to the actual monthly payment amount it can be manually edited in the Loan account set up process.
You will be asked if there is an asset that should be linked to the Loan account but you can opt not to do that making it an unsecured "loan"….which would be appropriate since the car is not an asset of the lessee.
This will set up a Loan Reminder that will categorize the payments correctly for the various standard reports.
Do not mark the Loan account as "Separate" if you wish for the Loan account to be reflected in Net Worth or other standard reports (which would be my recommendation). But you could mark it as "Separate" if you do not want it included in any of the standard reports.

Ah, so many choices, so many decisions to make! 😏

acs2 · August 31

I chose to set up the lease of my car as a credit car with the initial amount of the lease as a debt. It was simple and provides the information I need. I'll see if any issues arise

thanks all for your thoughts

Automobile Leases

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