REVENUE EARNING EQUIPMENT



	June 30, 2016					December 31, 2015
	Cost		Accumulated Depreciation		Net Book Value⁽¹⁾	Cost		Accumulated Depreciation		Net Book Value⁽¹⁾
	(In thousands)
Held for use:
Full service lease	$	9,239,442	(2,838,897	)	6,400,545	$	8,839,941	(2,723,605	)	6,116,336
Commercial rental	2,589,646		(874,713	)	1,714,933	2,811,715		(907,412	)	1,904,303
Held for sale	576,449		(391,819	)	184,630	496,634		(332,538	)	164,096
Total	$	12,405,537	(4,105,429	)	8,300,108	$	12,148,290	(3,963,555	)	8,184,735

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(1)	Revenue earning equipment, net includes vehicles acquired under capital leases of $43.9 million, less accumulated depreciation of $21.1 million, at June 30, 2016, and $47.5 million, less accumulated depreciation of $22.2 million, at December 31, 2015.

We lease revenue earning equipment to customers for periods typically ranging from three to seven years for trucks and tractors and up to ten years for trailers. The majority of our leases are classified as operating leases. However, some of our revenue earning equipment leases are classified as direct financing leases and, to a lesser extent, sales-type leases. As of June 30, 2016 and December 31, 2015, the net investment in direct financing and sales-type leases was $431 million and $438 million, respectively. Our direct financing lease customers operate in a wide variety of industries, and we have no significant customer concentrations in any one industry. We assess credit risk for all of our customers including those who lease equipment under direct financing leases prior to signing a full service lease contract. For those customers who are designated as high risk, we typically require deposits to be paid in advance in order to mitigate our credit risk. Additionally, our receivables are collateralized by the vehicles which further mitigates our credit risk.

As of June 30, 2016 and December 31, 2015, the amount of direct financing lease receivables past due was not significant, and there were no impaired receivables. Accordingly, we do not believe there is a material risk of default with respect to the direct financing lease receivables.

Revenue earning equipment held for sale is stated at the lower of carrying amount or fair value less costs to sell. Losses on vehicles held for sale for which carrying values exceeded fair value are recognized at the time they arrive at our used truck centers and are presented within “Gains on used vehicles, net ” in the Consolidated Condensed Statements of Earnings. For revenue earning equipment held for sale, we stratify our fleet by vehicle type (trucks, tractors and trailers), weight class, age and other relevant characteristics and create classes of similar assets for analysis purposes. For a certain population of our revenue earning equipment held for sale, fair value was determined based upon recent market prices obtained from our own sales experience for sales of each class of similar assets and vehicle condition. These vehicles held for sale were classified within Level 3 of the fair value hierarchy.

The following table presents our assets held for sale that are measured at fair value on a nonrecurring basis and considered a Level 3 fair value measurement:



				Total Losses ⁽²⁾
	June 30,			Three months ended June 30,			Six months ended June 30,
	2016		2015	2016		2015	2016		2015
	(In thousands)
Assets held for sale:
Revenue earning equipment ⁽¹⁾:
Trucks	$	13,749	6,805	$	2,570	1,515	$	4,314	2,743
Tractors	51,795		7,389	9,206		1,081	14,088		1,908
Trailers	3,015		1,625	775		656	1,437		972

Total assets at fair value	$	68,559	15,819	$	12,551	3,252	$	19,839	5,623

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(1)	Assets held for sale in the above table only include the portion of revenue earning equipment held for sale where carrying value exceeded fair value.


(2)	Total losses represent fair value adjustments for all vehicles reclassified to held for sale throughout the period for which fair value was less than carrying value.

For the three and six months ended June 30, 2016 and 2015, the components of gains on used vehicles, net were as follows:



	Three months ended June 30,					Six months ended June 30,
	2016			2015		2016			2015
	(In thousands)
Gains on vehicle sales, net	$	(24,551	)	(33,237	)	$	(50,968	)	(62,816	)
Losses from fair value adjustments	12,551			3,252		19,839			5,623
Gains on used vehicles, net	$	(12,000	)	(29,985	)	$	(31,129	)	(57,193	)