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Is an automobile loan payment an expense?

Author:
Harold Averkamp, CPA, MBA

Only the interest portion of an automobile loan payment is an expense. The principal portion of the loan payment is a reduction of the loan balance, which is reported as a Note Payable or Loan Payable in the liability section of the balance sheet.

Expressed another way, an automobile loan payment consists of two components: an interest payment and a principal payment. While the loan payment is a cash outflow or an expenditure, only the interest portion is an expense that will be reported on a company’s income statement.

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About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

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