Lease Commitments (Notes)

12 Months Ended

Dec. 31, 2023

We lease land, dealership facilities, offices, distribution centers, warehouses, and equipment under agreements with contractual periods ranging from less than one year to 40 years. Many of our leases contain one or more options to extend. In certain dealership lease agreements, we are the tenant and we sublease the site to a dealer. In the event the sublease is terminated, we have the option to terminate the head lease. We include options that we are reasonably certain to exercise in our evaluation of the lease term after considering all relevant economic and financial factors.

Leases that are economically similar to the purchase of an asset are classified as finance leases. The leased (“right-of-use”) assets in finance lease arrangements are reported in Net property on our consolidated balance sheets. Otherwise, the leases are classified as operating leases and reported in Other assets in the non-current assets section of our consolidated balance sheets. We have also entered into manufacturing contracts where Ford’s portion of the output is expected to be significant. As a result, there are embedded leases, and related liabilities, that are reported as part of our financial statements, typically upon commencement of production.

For the majority of our leases, we do not separate the non-lease components (e.g., maintenance and operating services) from the lease components to which they relate. Instead, non-lease components are included in the measurement of the lease liabilities. However, we do separate lease and non-lease components for contracts containing a significant service component (e.g., energy performance contracts). We calculate the initial lease liability as the present value of fixed payments not yet paid and variable payments that are based on a market rate or an index (e.g., CPI), measured at commencement. The majority of our leases are discounted using our incremental borrowing rate because the rate implicit in the lease is not readily determinable. All other variable payments are expensed as incurred.

NOTE 18. LEASE COMMITMENTS (Continued)

Lease right-of-use assets and liabilities at December 31 were as follows (in millions):


	2022		2023
Operating leases
Other assets, non-current	$	1,447	$	1,833

Other liabilities and deferred revenue, current	$	404	$	481
Other liabilities and deferred revenue, non-current	1,101		1,395
Total operating lease liabilities	$	1,505	$	1,876

Finance leases
Property and equipment, gross	$	791	$	897
Accumulated depreciation	(109)		(114)
Property and equipment, net	$	682	$	783

Company excluding Ford Credit debt payable within one year	$	86	$	32
Company excluding Ford Credit long-term debt	488		606
Total finance lease liabilities	$	574	$	638

The amounts contractually due on our lease liabilities as of December 31, 2023 were as follows (in millions):


	Operating Leases (a)		Finance Leases
2024	$	558	$	67
2025	457		102
2026	346		81
2027	264		76
2028	176		68
Thereafter	335		498
Total	2,136		892
Less: Present value discount	260		254
Total lease liabilities	$	1,876	$	638

__________

(a) Excludes approximately $449 million in future lease payments for various leases commencing in future periods.

NOTE 18. LEASE COMMITMENTS (Continued)

Supplemental cash flow information related to leases for the years ended December 31 was as follows (in millions):


	2021		2022		2023
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	424	$	459	$	581
Operating cash flows from finance leases	14		22		32
Financing cash flows from finance leases	52		83		91
Right-of-use assets obtained in exchange for lease liabilities
Operating leases	$	441	$	528	$	889
Finance leases	192		95		165

The components of lease expense for the years ended December 31 were as follows (in millions):


	2021		2022		2023
Operating lease expense	$	444	$	463	$	580
Variable lease expense	49		62		109
Sublease income	(16)		(15)		(18)
Finance lease expense
Amortization of right-of-use assets	34		60		64
Interest on lease liabilities	14		22		32
Total lease expense	$	525	$	592	$	767

The weighted-average remaining lease term and weighted-average discount rate at December 31 were as follows:


	2021		2022		2023
Weighted-average remaining lease term (in years)
Operating leases	6.0		5.5		5.4
Finance leases	12.1		12.2		11.9
Weighted-average discount rate
Operating leases	3.3	%	3.7	%	4.7	%
Finance leases	3.3		3.9		5.3