Leases

12 Months Ended

Dec. 31, 2019

Text Block [Abstract]

Leases

  NOTE 6   Leases

The Company, as a lessor, originates retail and commercial leases either directly to the consumer or indirectly through dealer networks. Retail leases consist primarily of automobiles, whilecommercial leases may include high dollar assets such as aircraft or lower cost items such as office equipment.

The components of the net investment in sales-type and direct financing leases, at December 31, were as follows:

(Dollars in Millions)	2019		2018
Lease receivables	$	12,324	$	12,207
Unguaranteed residual values accruing to the lessor’s benefit		1,834		1,877
Total net investment in sales-type and direct financing leases	$	14,158	$	14,084

The Company, as a lessor, recorded $996 million of revenue on its Consolidated Statement of Income for the year ended December 31, 2019, primarily consisting of interest income on sales-type and direct financing leases.

The contractual future lease payments to be received by the Company, at December 31, 2019, were as follows:

(Dollars in Millions)	Sales-type and direct financing leases			Operating leases
2020	$	4,755		$	176
2021		3,729			142
2022		2,766			103
2023		1,248			69
2024		382			50
Thereafter		483			52
Total lease payments		13,363		$	592
Amounts representing interest		(1,039	)
Lease receivables	$	12,324

The Company, as lessee, leases certain assets for use in its operations. Leased assets primarily include retail branches, operations centers and other corporate locations, and, to a lesser extent, office and computer equipment. For each lease with an original term greater than 12 months, the Company records a lease liability and a corresponding right of use (“ROU”) asset. At December 31, 2019, the Company’s ROU assets included in premises and equipment and lease liabilities included in long-term

debt and other liabilities, were $1.3 billion and $1.4 billion, respectively.

Total costs incurred by the Company, as a lessee, were $394 million for the year ended December 31, 2019, and principally related to contractual lease payments on operating leases. The Company’s leases do not impose significant covenants or other restrictions on the Company.

The following table presents amounts relevant to the Company’s assets leased for use in its operations for the year ended December 31, 2019:

(Dollars in Millions)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	302
Operating cash flows from finance leases		7
Financing cash flows from finance leases		10
Right of use assets obtained in exchange for new operating lease liabilities		134
Right of use assets obtained in exchange for new finance lease liabilities		10

The following table presents the weighted-average remaining lease terms and discount rates of the Company’s assets leased for use in its operations at December 31, 2019:

Weighted-average remaining lease term of operating leases (in years)	7.4
Weighted-average remaining lease term of finance leases (in years)	10.7
Weighted-average discount rate of operating leases	3.2	%
Weighted-average discount rate of finance leases	14.3	%

The contractual future lease obligations of the Company at December 31, 2019, were as follows:

(Dollars in Millions)	Operating leases			Finance leases
2020	$	296		$	17
2021		267			15
2022		226			13
2023		180			12
2024		132			10
Thereafter		391			38
Total lease payments		1,492			105
Amounts representing interest		(150	)		(31	)
Lease liabilities	$	1,342		$	74