REVENUE EARNING EQUIPMENT



	Estimated Useful Lives	December 31, 2017					December 31, 2016
	Estimated Useful Lives	Cost		Accumulated Depreciation		Net ⁽¹⁾	Cost	Accumulated Depreciation		Net ⁽¹⁾
	(In years)	(In thousands)
Held for use:
ChoiceLease	3 — 12	$	10,002,981	(3,367,431	)	6,635,550	9,486,977	(3,031,937	)	6,455,040
Commercial rental	4.5 — 12	2,616,706		(1,001,965	)	1,614,741	2,499,010	(935,346	)	1,563,664
Held for sale		403,229		(298,258	)	104,971	494,355	(365,337	)	129,018
Total		$	13,022,916	(4,667,654	)	8,355,262	12,480,342	(4,332,620	)	8,147,722

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(1)	Revenue earning equipment, net includes vehicles under capital leases of $29 million, less accumulated depreciation of $14 million, at December 31, 2017 and $43 million, less accumulated depreciation of $22 million, at December 31, 2016.

Depreciation expense was $1.16 billion, $1.10 billion and $1.04 billion in 2017, 2016 and 2015, respectively.

In 2017, based on current and expected market conditions, we accelerated depreciation on certain classes of vehicles expected to be made available for sale through June 2019. The impact of the change increased depreciation by $21 million in 2017.

In 2016, based on current and expected market conditions, we accelerated depreciation on certain classes of vehicles expected to be made available for sale through June 2018. The impact of the change increased depreciation by $10 million in 2016.

Revenue earning equipment held for sale is stated at the lower of net book value 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 "Used vehicle sales, net" in the Consolidated 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 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. Expected declines in market prices were also considered when valuing the vehicles held for sale. These vehicles held for sale were classified within Level 3 of the fair value hierarchy. During 2017, 2016, and 2015, we recognized losses to reflect changes in fair value of $58 million, $67 million and $18 million, respectively.

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



				Total Losses ⁽²⁾
	December 31,			Year ended December 31,
	2017		2016	2017		2016
Assets held for sale:	(In thousands)			(In thousands)
Revenue earning equipment: ⁽¹⁾
Trucks	$	33,208	24,178	$	30,812	14,645
Tractors	27,976		57,348	21,261		47,597
Trailers	2,100		2,532	5,992		5,173
Total assets at fair value	$	63,284	84,058	$	58,065	67,415

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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 net book values exceeded fair values and fair value adjustments were recorded. The net book value of assets held for sale not exceeding fair value was $42 million and $45 million as of December 31, 2017 and 2016, respectively. We have revised prior year amounts to reflect only the portion of revenue earning equipment held for sale where fair value adjustments were recorded.


(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 net book value.

For the twelve months ended December 31, 2017, the components of used vehicle sales, net were as follows:



	Twelve months ended December 31,
	2017			2016		2015
	(In thousands)
Gains on vehicle sales, net	$	(40,824	)	(68,387	)	(117,809	)
Losses from fair value adjustments	58,065			67,415		17,956
Used vehicle sales, net	$	17,241		(972	)	(99,853	)