How to record Car Loan Payoff with Trade-In towards New Car Loan

drew2u
drew2u Quicken Windows Subscription Member ✭✭✭
edited January 5 in Registers & Transactions (Windows)

I just purchased a new car and traded-in my old car, and the trade-in amount will payoff the loan on the old car and also be used as a down payment on the new car.

I also put a cash down payment on the new car.

I'm confusing myself on how to capture all of this in Quicken to close out my prior car loan account, and to start a loan account for the new car.

Keeping it simple...

OLD CAR
$4,900 == Loan Balance as shown in Quicken
$100 == interest due at payoff
$5,000 == total bal due for old car loan payoff

OLD CAR TRADE-IN
$25,000 == trade-in value of old car; will payoff prior car loan balance ($5,000) and be down payment ($20,000) on new car

NEW CAR
$55,000 new car
-20,000 net trade-in
-5,000 cash down
===========
$30,000 financed

TRANSACTIONS
In the old car loan I can enter a manual transaction for the interest, bringing the balance up to $5,000 but I can't determine the "source" to use for the transaction that will decrease the balance by $5,000 (the total payoff amount) to zero out the account.

For the new car loan the $5,000 cash deposit will be a transfer, reflected as a debit in checking. But I'm not clear how to reflect the trade-in that reduces the new car loan.

I don't have an asset account for the prior car, so should I create that first, or just use "misc" categories to keep it simple in the old and new car accounts?

Appreciate any tips for managing these seemingly simple transactions and set up/close out of the new/old loans.

Thanks.

Tagged:

Best Answer

  • Tom Young
    Tom Young Quicken Windows Subscription SuperUser ✭✭✭✭✭
    Answer ✓

    Since you don't have the old car as an asset in your Quicken file, you only have the loan balance for the car - an "incorrect" accounting of the situation - I'd probably make a "one-sided" ("self-referential") entry in an "Old Car" asset Account with the trade in value of the car at the $25,000 figure.

    So the next entry in that Old Car Account would be a reduction of of that $25K with a split entry: a Transfer to the old loan of $4,900, eliminating the loan, a $100 expense category for the interest, and a $20K Transfer to the "New Car" asset Account you've previously established.

    Then take $5K out of the bank Account, Transferred to the New Car Account.

    Then establish the new loan of $20K. Quicken will make that a "one-sided" ("self-referential") entry in the new loan Account. You can then delete the entry and make it again on the same date as a $20K loan established as a Transfer to the New Car Account.

Answers

  • Tom Young
    Tom Young Quicken Windows Subscription SuperUser ✭✭✭✭✭
    Answer ✓

    Since you don't have the old car as an asset in your Quicken file, you only have the loan balance for the car - an "incorrect" accounting of the situation - I'd probably make a "one-sided" ("self-referential") entry in an "Old Car" asset Account with the trade in value of the car at the $25,000 figure.

    So the next entry in that Old Car Account would be a reduction of of that $25K with a split entry: a Transfer to the old loan of $4,900, eliminating the loan, a $100 expense category for the interest, and a $20K Transfer to the "New Car" asset Account you've previously established.

    Then take $5K out of the bank Account, Transferred to the New Car Account.

    Then establish the new loan of $20K. Quicken will make that a "one-sided" ("self-referential") entry in the new loan Account. You can then delete the entry and make it again on the same date as a $20K loan established as a Transfer to the New Car Account.

  • drew2u
    drew2u Quicken Windows Subscription Member ✭✭✭
    https://community.quicken.com/discussion/comment/20530835#Comment_20530835

    Thank you Tom! I've been looking at this for three days and there are so many strategies people have used, but I ultimately came up with something close to your - however, your approach is better in how you're handling the interest and updating the loan opening transaction after it's created.

    I'm also going to create an asset account for the new car, but will exclude it from net worth as I don't plan to track depreciation.

    Thank you again!

Categories