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.
