REVENUE EARNING EQUIPMENT



	March 31, 2017					December 31, 2016
	Cost		Accumulated Depreciation		Net Book Value ⁽¹⁾	Cost		Accumulated Depreciation		Net Book Value ⁽¹⁾
	(In thousands)
Held for use:
ChoiceLease	$	9,664,962	(3,159,228	)	6,505,734	$	9,486,977	(3,031,937	)	6,455,040
Commercial rental	2,492,992		(942,309	)	1,550,683	2,499,010		(935,346	)	1,563,664
Held for sale	439,022		(324,263	)	114,759	494,355		(365,337	)	129,018
Total	$	12,596,976	(4,425,800	)	8,171,176	$	12,480,342	(4,332,620	)	8,147,722

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(1)	Revenue earning equipment, net book value includes vehicles acquired under capital leases of $37 million, less accumulated depreciation of $17 million, at March 31, 2017, and $43 million, less accumulated depreciation of $22 million, at December 31, 2016.

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 March 31, 2017 and December 31, 2016, the net investment in direct financing and sales-type leases was $404 million and $409 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 March 31, 2017 and December 31, 2016, 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. 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⁾
	March 31,			Three months ended March 31,
	2017		2016	2017		2016
	(In thousands)
Assets held for sale:
Revenue earning equipment ⁽¹⁾:
Trucks	$	12,228	11,538	$	5,800	1,744
Tractors	38,383		39,739	5,183		4,882
Trailers	2,303		3,153	568		662
Total assets at fair value	$	52,914	54,430	$	11,551	7,288

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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 $62 million and $120 million as of March 31, 2017 and 2016, respectively.


(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 months ended March 31, 2017 and 2016, the components of used vehicle sales, net were as follows:



	Three months ended March 31,
	2017			2016
	(In thousands)
Gains on vehicle sales, net	$	(12,331	)	(26,417	)
Losses from fair value adjustments	11,551			7,288
Used vehicle sales, net	$	(780	)	(19,129	)