REVENUE EARNING EQUIPMENT, NET

9 Months Ended

Sep. 30, 2022

Revenue Earning Equipment [Abstract]


	Estimated Useful Lives (In Years)	September 30, 2022						December 31, 2021
(Dollars in thousands)		Cost		Accumulated Depreciation		Net		Cost		Accumulated Depreciation		Net

Held for use:
Trucks	3 — 7	$	5,320,696	$	(2,095,515)	$	3,225,181	$	5,223,127	$	(2,055,135)	$	3,167,992
Tractors	4 — 7.5	7,213,401		(3,171,471)		4,041,930		7,256,002		(3,059,206)		4,196,796
Trailers and other	9.5 — 12	1,566,071		(670,291)		895,780		1,780,487		(868,820)		911,667
Held for sale		357,838		(247,121)		110,717		209,506		(162,922)		46,584
Total		$	14,458,006	$	(6,184,398)	$	8,273,608	$	14,469,122	$	(6,146,083)	$	8,323,039

Residual Value Estimate Changes

We periodically review and adjust, as appropriate, the estimated residual values and useful lives of existing revenue earning equipment for the purposes of recording depreciation expense. Reductions in estimated residual values or useful lives will increase depreciation expense over the remaining useful life of the vehicle. Conversely, an increase in estimated residual values or useful lives will decrease depreciation expense over the remaining useful life of the vehicle. Our review of the estimated residual values and useful lives of revenue earning equipment is based on vehicle class (i.e., generally subcategories of trucks, tractors and trailers by weight and usage), historical and current market prices, third-party expected future market prices, expected lives of vehicles, and expected sales in the wholesale or retail markets, among other factors. A variety of factors, many of which are outside of our control, could cause residual value estimates to differ from actual used vehicle sales pricing, such as changes in supply and demand of used vehicles; volatility in market conditions; changes in vehicle technology; competitor pricing; regulatory requirements; driver shortages; customer requirements and preferences; and changes in underlying assumption factors. We have disciplines related to the management and maintenance of our vehicles designed to manage the risk associated with the residual values of our revenue earning equipment.

The following table provides a summary of incremental depreciation expense that has been recorded related to our previous residual value estimate changes as well as used vehicle sales results (rounded to the closest million):


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021

Depreciation expense related to estimate changes	$	50	$	76	$	147	$	239

Used vehicle sales, net (1)	(113)		(69)		(356)		(150)

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(1)Used vehicle sales, net for the third quarter and nine months ended September 30, 2022, included $15 million and $43 million, respectively, of gains on sales of vehicles in the U.K. Refer to Note 15, "Other Items Impacting Comparability"

Used Vehicle Sales and Valuation Adjustments

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, which we refer to as "valuation adjustments," are recognized at the time they are deemed to meet the held for sale criteria and are presented within "Used vehicle sales, net" in the Condensed 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 revenue earning equipment held for sale, fair value was determined based upon recent market prices obtained from our own sales experience for each class of similar assets and vehicle condition, if available, or third-party market pricing. In addition, we also consider expected declines in market prices when valuing the vehicles held for sale, as well as forecasted sales channel mix (retail/wholesale).

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


					Losses from Valuation Adjustments
					Three months ended September 30,				Nine months ended September 30,
(In thousands)	September 30, 2022		December 31, 2021		2022		2021		2022		2021

Revenue earning equipment held for sale (1):

Trucks	$	838	$	931	$	925	$	1,224	$	1,911	$	2,798
Tractors	1,671		1,485		972		2,177		3,424		2,836
Trailers and other	594		1,309		396		1,161		882		5,036
Total assets at fair value	$	3,103	$	3,725	$	2,293	$	4,562	$	6,217	$	10,670

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(1)Reflects only the portion where net book values exceeded fair values and valuation adjustments were recorded. The net book value of assets held for sale that were less than fair value was $108 million and $43 million as of September 30, 2022 and December 31, 2021, respectively.

The components of Used vehicle sales, net were as follows:


	Three months ended September 30,				Nine months ended September 30,
(In thousands)	2022		2021		2022		2021

Gains on vehicle sales, net	$	(115,778)	$	(73,865)	$	(362,262)	$	(160,458)
Losses from valuation adjustments	2,293		4,562		6,217		10,670
Used vehicle sales, net	$	(113,485)	$	(69,303)	$	(356,045)	$	(149,788)