How to enter a car lease on your balance sheet?


The execution of the task of entering a car lease on your net worth balance sheet is rather simple. You take the monthly payment on your car lease, multiply it by the number of months left on your car lease and enter it on the liabilities side of your balance sheet.

There is no entry on the assets side as you do not own the car...the end. To the next question that is entering your mind the answer is Yes, a car lease adds nothing to your personal net worth. In fact it subtracts 100% of the amount of the lease to offsetting the value of some asset that you do own. If push comes to shove you would have to sell your good asset to pay off the car lease liability. You still wouldn't own your car and then would not own the other asset.

If you actually buy the vehicle, at least you own an asset. The liability of your car loan may offset the value of the asset (car) but at least the net result to your balance sheet is in zero one way or the other. Eventually you may pay off your car loan when it is 5 years old and the car may still have some value. Then you have an asset on your balance sheet and no corresponding loan. That is equity in your car. That means that it adds to your net worth. That value either adds directly to the positive value of your net worth or offsets some other debt you may have. No matter what total ownership of a vehicle adds to your net worth.

If you take this one step further and look at the influence on your budget. Car leasing goes on forever and you never ever own a car. If you own a car the cash flow hemorrhage stops. Then you can save that money and build a savings asset that will also contribute to your net worth in a positive way.

In reference to the grammar in the question...Hey I don't ask the questions I just answer them.