Note 7. Equipment on Operating Leases

Operating leases arise primarily from the leasing of John Deere equipment to retail customers. Rental payments applicable to equipment on operating leases are recorded as income on a straight-line method over the lease terms. Operating lease assets are recorded at cost and depreciated to their estimated residual value on a straight-line method over the terms of the leases. Residual values represent estimates of the value of the leased assets at the end of the lease terms. The Company evaluates the carrying value of its operating lease assets and tests for impairment when events or circumstances necessitate the evaluation. Generally, impairment is determined to exist if the undiscounted expected future cash flows from the operating leases are lower than the carrying value of the leased assets. During 2018 and 2017, the Company recorded no impairment losses on operating leases, and $31.1 million in 2016. Operating lease impairments are included in administrative and operating expenses on the statement of consolidated income.

The cost of equipment on operating leases by product category at October 28, 2018 and October 29, 2017 was as follows (in millions of dollars):


	2018		2017
Agriculture and turf	$	4,727.0	$	4,418.6
Construction and forestry		1,592.7		1,364.9
Total		6,319.7		5,783.5
Accumulated depreciation		(1,217.2)		(1,065.2)
Equipment on operating leases – net	$	5,102.5	$	4,718.3

Initial lease terms for equipment on operating leases generally range from 12 months to 60 months. Rental payments for equipment on operating leases at October 28, 2018 and October 29, 2017 were scheduled as follows (in millions of dollars):


	2018		2017
Due in:
0-12 months	$	644.1	$	581.0
13-24 months		414.4		354.4
25-36 months		202.8		165.8
37-48 months		83.8		71.0
Over 48 months		12.4		9.8
Total	$	1,357.5	$	1,182.0

Deposits withheld from John Deere dealers and related credit losses on operating leases are handled in a manner similar to the procedures for retail notes. As with retail notes, there are generally no deposits withheld from dealers on operating leases related to construction and forestry equipment. At October 28, 2018 and October 29, 2017, the Company also had $33.7 million and $51.9 million, respectively, of deposits withheld from John Deere dealers available for potential losses on residual values. In addition, a lease payment discount program, allowing reduced payments over the term of the lease, is administered in a manner similar to finance waivers on retail notes. During 2018, 2017, and 2016, the operating lease revenue earned from John Deere was $39.2 million, $30.9 million, and $28.7 million, respectively.

Equipment returned to the Company upon termination of leases and held for subsequent sale or lease is recorded in other assets at the lower of net book value or estimated fair value of the equipment less cost to sell and is not depreciated. During 2018 and 2017, the Company recorded no impairment losses on matured operating lease inventory, and $28.6 million in 2016. Impairment losses on matured operating lease inventory are included in administrative and operating expenses on the statement of consolidated income.

Past due balances of operating leases represent the total balance held (net book value plus accrued lease payments) and still accruing finance income with any payment amounts 30 days or more past the contractual payment due date. These amounts were $80.0 million and $76.0 million at October 28, 2018 and October 29, 2017, respectively.