Car loan - help appreciated
Jon Lapham
lapham at jandr.org
Tue Sep 28 09:51:11 EDT 2004
BruceG wrote:
> Hey all,
>
> I am trying to set up a car loan in GnuCash, and would like some help. My
> first payment was 6/19/2002, but I would prefer to start recording payments
> as of 1/19/2004 (I have my checking and credit card data from January
> forward, so would like to do the same with loans).
>
> The Original loan was for 12,527.40 @ 7.99% APR starting on 6/19/2002. As of
> December 2003 it looked like this:
>
> 8,892.00, loan amount owed
> 7.99% apr
> 40 payments left
> payment amount = 253.95 per month
>
> The bank had a skip a payment month in January (not really a favor, I think
> that just piles on interest), so to record payments in GnuCash I would record
> payments of 253.95 on 2/12, 3/11, 4/12, 5/10, 6/11, 7/12, 8/19, 9/17.
>
> I think I would do the following, but am not sure:
> Set up a fixed asset = Toyota Corolla (with 0 value? or blue book value? The
> amount I owe is pretty close to it's blue book - so they wash each other
> out).
Really, this all depends on what level of detail you want to track your
assets, and there is more than one way to do this. You can add the tax
details in later if you want.
Account setup. You need a liability account entitled "Toyota Corolla"
under a liability account with the name of your bank. You need an asset
account entitled "Toyota Corolla", and an asset account where you
initial money was.
Something like this:
-Assets
-My Bank
-Savings
-Cars
-Toyota Corolla
-Liabilities
-My Bank
-Toyota Corolla
-Expenses
-Loan Interest
-Car Depreciation
Assuming you paid $15000 for the car, $2500 from your bank account and
$12500 from the loan. In a split transaction dated 6/19/2002 you
transfer $2500 from Assets::My Bank::Savings to Assets::Cars::Toyota
Corolla and $12500 from Liabilities::My Bank::Toyota Corolla to
Assets::Cars::Toyota Corolla.
Your car asset should be now valued at the purchase price, $15000.
Keeping track of how much you owe the bank, and keeping track of the
value of you asset are now 2 separate operations.
Tracking the loan:
Every month when you make a payment to the bank for the car loan, you
transfer money from Assets::My Bank::Savings in a split transaction to
Liabilities::My Bank::Toyota Corolla *and* Expenses::Loan Interest, with
values divided appropriately. How do you calculate how much of the
payment is interest and how much is principal? Well, hopefully you bank
tells you this information in your payment book somewhere. If not, you
have to get out the calculator.
For the lovely "skip month" your bank so generously allows you, you
simply transfer directly from the Expense::Loan Interest to the
Liability::My Bank::Toyota Corolla account.
Tracking the asset value:
This is really a personal taste issue, but in general the information
*you want to know* is much money you could get for the car if you sold
it. So, maybe use the blue book value. Every year, transfer from
Asset::Cars::Toyota Corolla the depreciation amount as calculated by the
blue book. So, yearly, your car asset value goes down because car
values depreciate. (a house, incidently, usually does the opposite).
********
Note: you could set things up a bit differently than I have here. You
could monthly transfer from the Expense::Loan Interest to the
Liability::My Bank::Toyota Corolla account. Then, your entire monthly
payment would go into the Liability::My Bank::Toyota Corolla account.
But, I prefer the way I describe above because you can see the
interest/principal split in your bank account transaction.
********
You have a complication in that your loan goes back in time from when
you started using GnuCash. I would recommend that you recreate your
transactions for the car loan starting from 6/2002. If you do not want
to put every monthly transaction in from 6/2002, you could use yearly
summary transactions. But, I think it is important to try to recreate
reality as much as possible.
> Set up a liability account? This would be my BB&T loan noted above
Yes.
> I would not record the down payment, as that was in 6/2002 (and blue book is
> the same as amount owed).
No. You should record things exactly as they happened. Your GnuCash
account should describe exactly what happened, so your loan on 6/2002
should be initially for the actual amount you borrowed. You can then
add transactions to get the current value to be correct.
> Payments - would they get credited to BB&T loan?
Partially, only the amount of the payment that goes towards the
principal. The part that goes toward interest is credited to the
Expense::Loan Interest account.
> Interest - would that be a separate expense account?
Yes.
> Amortization - would that go towards the asset?
Amortization is the payment schedule that allows you to payoff the loan
in a fixed period of time, so really that has nothing to do with this,
other than determining your payment amount. Your payments (which are
the quantum of the Amortization Schedule) are already dealt with above.
> And would I set up a split payment of interest / amortization - or does the
> druid handle that?
Ah, I see the confusion, "amortization" is not the amount that goes to
payoff principal.
Anyway, you split the payment into interest and principal. There is no
druid to handle this.
> I tried following through the Druid, but must have missed a step somewhere.
> Any help would be appreciated.
Let me know how things go.
--
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Jon Lapham <lapham at jandr.org> Rio de Janeiro, Brasil
Personal: http://www.jandr.org/
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