Auto Lease categorized as an expense or a loan

JOe's Avatar


17 Sep, 2009 03:23 AM

It seems that Auto leases are looked at as a loan to you from the Leasing company - according to Equifax credit reports.
I leased a car. It costs $500 per month for 36 months. I owe the leasing company $500x36=$18,000.
Equifax shows that I have a debt of $18,000. No matter what I do, drive the car or not, I owe $18,000.
I am treating this as a loan account to be paid down until I reach the end of my lease.


  1. 1 Posted by Ben Spencer on 18 Sep, 2009 12:42 PM

    Ben Spencer's Avatar

    Hi Joe

    Thats a good question. There is nothing built into the Moneydance software that can facilitate the tracking of a lease. The way I understand it a lease is not a loan. A lease does not involve you borrowing money from an institution and paying it back in installments at interest. And therefor should not be accounted for as a Loan (liability). I do not believe it is the case that you owe a chunk of money to your auto dealer, rather that you have agreed to pay them a fixed amount each month for a service (i.e. the use of their car) Therefor it is my belief that the lease payments should be accounted for as transactions to an expense category.

    This is a very important distinction if this is a for a business. A lease can be claimed entirely as a deduction where as only a portion of a loan can be claimed as a tax deduction. I am not sure how this works with individual taxes.


    Ben Spencer

  2. 2 Posted by jrdweck on 18 Sep, 2009 01:12 PM

    jrdweck's Avatar


    I understood a lease to be the same- fixed monthly payments as an expense.

    However, when applying for another loan, I discovered the remaining amount of my leases on my credit report. It is reported as a loan to me from the leasing company. It is a long term liability or loan.

    I am obligated to pay the total amount, it's a 12,000 obligation that gets paid down every month. It feels like a loan to me. I like to look at it as that.

    Another question. On the home screen, you show liabilities amounts in red, with a minus sign. I know that liabilites as a whole are a minus, but when I see the amounts with a minus, I think its a negative liability!

    I am using the software to track my wife's jewelry business. Is there an add-on for running a POS terminal?? Sales, returns, inventory, etc??

    Thanks for the help

    ------Original Message------
    From: Ben Spencer
    To: Joey Dweck
    ReplyTo: [email blocked]
    Subject: Re: Auto Lease categorized as an expense or a loan [Questions]
    Sent: Sep 18, 2009 8:42 AM

  3. 3 Posted by Ben Spencer on 18 Sep, 2009 02:03 PM

    Ben Spencer's Avatar

    Hi Joe

    I did a little research in order to try and get a more complet understanding on how this should be accounted for and what I have learned is that there are essentually two type of lease. An "operating lease" and a "capital lease". an operating lease is for something that does not significantly reduce in value over the life of the lease, such as renting an office building. An operating lease is not accounted for as a liability (loan) it is considered an expense. A capital lease is for a item that essentially reduces in value completely over the life of the lease. Such as a five year lease on a computer. A capital lease should be accounted for as a liability (loan). Here are the rules for determining if your lease is a capital lease:

    1) The lease conveys ownership to the lessee at the end of the lease term; 2) The lessee has an option to purchase the asset at a bargain price at the end of the lease term 3) The term of the lease is 75% or more of the economic life of the asset. 4) The present value of the rents, using the lessee's incremental borrowing rate, is 90% or more of the fair market value of the asset.

    If you want to read more go here:

    Moneydance does not have any POS or sales, return or inventory management. Moneydance is specifically designed for personal finance management and not business management.


    Ben Spencer

  4. Angie Rauscher closed this discussion on 24 Jul, 2011 07:00 PM.

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