Squats are rather complex failure mechanisms in rails and challenge railway operators all over the world, thus calling for a detailed investigation of squats by means of finite element analysis to locate the initiation and propagating mechanisms. In this work, a cyclic three-dimensional (3D) finite element model of a wheel-rail contact including an initial penny-shaped defect is used. This work presents the implementation of the starting penny-shaped crack in the rail for a wheel-rail simulation by utilising a submodel strategy. Moreover, viable evaluation options are shown. In the future, this set-up will help to assess multiple crack positions and possible squat growth mechanisms.