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Vehicle Finance (Interest Free) and Xero!

  • Member
  • 9 posts
  • # 118359



Don't know if I'm having a brain fog moment or overthinking as it's been a long time since I did an asset purchase.  My employer has just purchased a vehicle, paid a deposit and the rest will be paid by 36 monthly payments.  It is an interest free loan and we will own the vehicle at the end of the installments.


Vehicle cost inc VAT £37703.71

Tax and first reg fee £315

Total £38018.71


Deposit paid £11405.61

then 36 monthly payments of £739.25


Do I account for all the VAT first? (I think I do, but this is where I think I'm overthinking things!)

Secondly, how do I account for all this in Xero - I can't do a manual journal from the bank account! Xero said to set up a loan account which I have done but then I can't account for the deposit being paid from the bank and set up a recurring journal for the monthly repayments.


Any help gratefully received!

  • Member PM.Dip
  • Practice Licence
  • 29 posts
  • # 118360



Just post the bill normally, pay the deposit amount which leaves the outstanding balance to be paid over 36 months. The tricky bit with Xero not seeming to allow you make a journal from Account Payable. Issue a credit note to the supplier using the Hire Purchase Account which will move the outstanding balance to Hire Purchase from Account Payable which is where it should be. Then anytime a payment is made just use the spend money option from the bank account again made to Hire Purchase , the effect being to reduce the Hire Purchase Liability over the 36 months that the agreement exist.


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