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How to Record a Vehicle Purchase in Quickbooks

February 5, 2020 by Bstar0306 16 Comments

There are two parts to purchasing any vehicle. The first part is recording the asset and the second part is recording the liability (if there is a loan on the vehicle).

If there is no loan and the vehicle was purchased in cash then you can skip the second part.

A Fixed Asset is anything purchased for long-term use (usually anything that will last more than a year). This is usually equipment, machinery, land and cars.

To properly record purchased vehicle or any other fixed asset, follow the steps provided below:

I. Creating a Fixed Asset Account for Vehicles

  1. Go to Chart of Accounts
  2. Click on New
  3. Select Fixed Assets from the categories provided.
  4. Enter the name and description for the account
  5. Select the Detail Type

II. Adding the Purchased Vehicle

To record the purchase of the vehicle, simply record a purchase and link it to the Fixed Asset Account that you created by following the steps provided above.

III. Setting Up Liability Account

A purchase of a fixed asset may come with associated liabilities like loans and EMI payments. To properly record the entire transaction, the user must enter and track the liability. The liability account will be a Long Term Liability Account. To set up such an account, follow these steps:

  1. Go to the Chart of Accounts
  2. Select New.
  3. Click on Long Term Liability from the provided options and click on Next
  4. Enter the details for the account such as name
  5. Click on Save

At this point, you should leave Unpaid Balance field blank as we’ll be handling that later and note that we are still not yet done with “how to record a vehicle purchase in QuickBooks”. Here we need to pass the loan entry

To record the loan amount, follow the steps provided below:

  1. Click on the Create Button
  2. Select Journal Entry
  3. Click on the Account Dropdown options and Select Liability Account
  4. Enter the total amount for the loan on the Credit side
  5. Select the Asset Account that you want the loan amount to be linked with
  6. Enter loan amount again but this time on the Debit side

You should also record every payment made for the loan. This can be done by entering checks and linking them to the loan.

Let me know if you have any questions or would like a video to go with this in the comments.

Filed Under: Blog Tagged With: bookkeeping, car, quickbooks

Comments

  1. Wendy Ellis says

    September 3, 2020 at 7:32 pm

    We received a government grant to purchase a new vehicle. We are paying 25% to the dealership and the DOT is paying the remaining balance directly to the dealership. How do I enter this? I want the full value of the vehicle to show on the balance sheet but not on the profit and loss.

    Reply
  2. Curtis Wilson says

    November 13, 2020 at 6:25 pm

    Thank you, this helped me so much! I wasn’t sure how to set it up with having a loan etc.

    Reply
  3. Rachel Voigt says

    November 25, 2020 at 1:46 pm

    This was the simplest instruction I have ever run across! Thank you!

    Reply
  4. James S Sneed says

    January 17, 2021 at 5:12 pm

    This is very helpful. In addition, how do I record a vehicle purchase with a trade. Example: Truck purchased for $40,000.00 with a truck traded in for $10,000.00.

    Reply
  5. Katherine says

    February 2, 2021 at 4:25 pm

    How would I record the purchase without touching my bank account? I am setting up a new set of books starting 1/1/21, and the vehicle was purchased in Dec prior to entering the opening bank balance.

    Reply
  6. Noelle says

    February 10, 2021 at 6:09 pm

    When creating the journal entry, I need clarification on the following;
    We put an 8K cash down payment plus a 1K check down payment. How are those number included? Do I enter the total financed amount or total sale price?
    Total sale price is 41,514.24
    Down payment 8,000.00 cash plus 1,000.00 check plus 3,000.00 Manufacturers Rebate
    Amount financed 24,883.01
    Total payments 29,514.24

    Reply
  7. Christen says

    April 5, 2021 at 4:06 pm

    When writing the check for the loan payment what do I put the account under? The long term liability or fixed asset? I know this is probably a dumb question but this is my 1st loan I am setting up! Thank you for your help!

    Reply
    • Bstar0306 says

      April 12, 2021 at 1:07 am

      When you make the payments you will have to split the payment between the long term liability this will show the loan being paid down and the interest paid as that is a separate expense. So if your paying is $500 with $400 going to principle and $100 going to Interest you will split the payment like this:

      4/11/2021 Toyota
      Car Loan Liability $400
      Interest Paid Expense $100

      Hope that helps!

      Reply
  8. Kathryn says

    June 15, 2021 at 8:39 pm

    This has been very helpful!
    I’m having a harder time understanding the asset account side of it. I have a few questions still.
    1. Does the down payment on the vehicle not impact the liability account, but goes directly to the fixed asset account?
    2a.For every single loan payment (monthly), should there also be a journal entry that adds value to the asset account?
    2b. The fixed asset account doesn’t have the full value of the vehicle up front, but grows with every loan payment, correct?

    I hope this makes sense. Thanks again for posting!

    Reply
  9. Frank says

    February 1, 2022 at 1:21 am

    How do I set up new vehicle purchase (Corp. purchase at $40,000 + HST with no financing) in my Capital Cost Allowance schedule in Quickbooks? I understand the CCA limit for class 10.1 assets is $30,000 plus HST. I am just not sure what happens to the other $10,000 or where to record the difference as the Fixed Asset amount and opening CCA amount will differ by the $10,000 plus HST?

    This leads to my second question – how to fill out the Details by Class (S8Class) on my T2 return? I did claim the $5,200.00 ITC (HST on $40,000) on my HST return.

    Reply
  10. Mary Spaid says

    April 18, 2022 at 5:00 pm

    Thank you so much, your article has been a world of help.

    Reply
    • Bstar0306 says

      April 19, 2022 at 7:07 pm

      Thank you! Make sure to sign up for my email list to get more tips!

      Reply
  11. Hollie says

    August 17, 2022 at 5:33 pm

    Thank you for the explanation. This issue I run into is that the company often purchases vehicle financed over 72 months but they often pay them off in 24 months. On the Bill of Sale it lists the total cost of the vehicle if payments are made each month for the 72 months. If I list that amount as the total cost under Fixed Assets and Liabilities but the company pays the vehicle off early, how do I adjust for the savings in interest by not carrying the loan the full 72 months?

    Reply
    • Bstar0306 says

      September 16, 2022 at 12:33 am

      You should be able to reconcile the loan account to the ending statement so it zero’s out.

      Reply
  12. Trish says

    October 17, 2022 at 11:05 pm

    Can you please provide me with a video?

    Reply
  13. Gelna paroli says

    February 14, 2023 at 4:57 am

    Hi, I have recently purchased a new work truck on finance.
    I’m entering in the initial deposit, made to truck. What account category do I apply the stamp duty?
    Also there is a third party insurance fee and registration, do they just get posted to registration and insurances expense account? Out of scope for gst?

    Reply

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