REVENUE EARNING EQUIPMENT



	June 30, 2018					December 31, 2017
	Cost		Accumulated Depreciation		Net Book Value ⁽¹⁾	Cost		Accumulated Depreciation		Net Book Value ⁽¹⁾
	(In thousands)
Held for use:
ChoiceLease	$	10,283,609	(3,548,389	)	6,735,220	$	10,002,981	(3,367,431	)	6,635,550
Commercial rental	3,016,416		(1,008,785	)	2,007,631	2,616,706		(1,001,965	)	1,614,741
Held for sale	373,267		(269,322	)	103,945	403,229		(298,258	)	104,971
Total	$	13,673,292	(4,826,496	)	8,846,796	$	13,022,916	(4,667,654	)	8,355,262

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(1)	Revenue earning equipment, net includes vehicles under capital leases of $23 million, less accumulated depreciation of $12 million, at June 30, 2018, and $29 million, less accumulated depreciation of $14 million, at December 31, 2017.

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, 2018 and December 31, 2017, the net investment in direct financing and sales-type leases was $453 million and $447 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 ChoiceLease 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, 2018 and December 31, 2017, 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 sales centers and are presented within “Used vehicle sales, 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. 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.

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⁾
				Three months ended June 30,			Six months ended June 30,
	June 30, 2018		December 31, 2017	2018		2017	2018		2017
	(In thousands)
Assets held for sale:
Revenue earning equipment ⁽¹⁾:
Trucks	$	37,895	33,208	$	10,295	10,927	$	18,896	16,727
Tractors	22,883		27,976	2,101		12,134	5,478		17,317
Trailers	1,478		2,100	1,605		2,605	3,198		3,173
Total assets at fair value	$	62,256	63,284	$	14,001	25,666	$	27,572	37,217

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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 that were less than fair value was $42 million as of June 30, 2018 and December 31, 2017.


(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 three and six months ended June 30, 2018 and 2017, the components of used vehicle sales, net were as follows:



	Three months ended June 30,					Six months ended June 30,
	2018			2017		2018			2017
	(In thousands)
Gains on vehicle sales, net	$	(7,988	)	(10,344	)	$	(14,150	)	(22,675	)
Losses from fair value adjustments	14,001			25,666		27,572			37,217
Used vehicle sales, net	$	6,013		15,322		$	13,422		14,542