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Leases

3 Months Ended

Mar. 31, 2019

NOTE 15 — LEASES

The Company is party to various lease agreements for real estate and transportation equipment. For each lease agreement, the Company determines its lease term as the non-cancellable period of the lease and includes options to extend or terminate the lease when it is reasonably certain that it will exercise that option. The Company also assesses whether each lease is an operating or finance lease at the lease commencement date. Rent expense of operating leases is recognized on a straight-line basis over the lease term and includes scheduled rent increases as well as amortization of tenant improvement allowances.

Operating Leases

As of March 31, 2019, the Company is a tenant under various operating leases related to certain of its hubs, vending machines and corporate offices. The initial terms expire at various dates between 2019 and 2029. Many of the leases include one or more renewal options ranging from one to twenty years and some contain purchase options. The Company also had operating leases for certain of its transportation fleet. In March 2019, the Company reassessed the lease terms of the transportation equipment leases based on the likelihood of exercising its extension options and reclassified them to finance leases. Rent expense for the Company's operating leases was approximately $1.8 million for the three months ended March 31, 2018.

Refer to Note 6 — Related Party Transactions for further discussion of operating leases with related parties.

Finance Leases

The Company has finance leases for certain equipment in its transportation fleet. The leases have initial terms of two to five years, some of which include extension options for up to four additional years, and require monthly payments. As of March 31, 2019, the outstanding amount of the finance leases is approximately $34.2 million, of which approximately $7.1 million is due within the next twelve months and is included as current portion of other long-term debt in the accompanying unaudited condensed consolidated balance sheet.

Lease Costs and Activity

The Company's lease costs and activity during the three months ended March 31, 2019 were as follows (in thousands):


Lease costs:
Finance leases:
Amortization of finance lease assets	$	1,267
Interest on obligations under finance leases	331
Total finance lease costs	$	1,598

Operating leases:
Fixed lease costs	$	2,328
Fixed lease costs to related parties	1,806
Variable short-term lease costs to related parties	454
Total operating lease costs	$	4,588

Cash payments related to lease liabilities included in operating cash flows:
Operating lease liabilities to third parties	$	1,817
Operating lease liabilities to related parties	$	2,137
Interest payments on finance lease liabilities	$	331

Cash payments related to lease liabilities included in financing cash flows:
Principal payments on finance lease liabilities	$	1,208

Maturity Analysis of Lease Liabilities

The following table summarizes maturities of lease liabilities as of March 31, 2019 (in thousands):


			Operating Leases ⁽¹⁾
	Finance Leases		Related Party⁽²⁾		Non-Related Party		Total Operating		Total
Remainder of 2019	$	6,676	$	6,231	$	5,937	$	12,168	$	18,844
2020	8,227		7,692		8,078		15,770		23,997
2021	7,953		7,154		7,354		14,508		22,461
2022	7,628		7,179		6,655		13,834		21,462
2023	7,061		7,212		5,430		12,642		19,703
Thereafter	1,224		31,660		32,730		64,390		65,614
Total minimum lease payments	38,769		67,128		66,184		133,312		172,081
Less: amount representing interest	(4,608)		(21,579)		(27,933)		(49,512)		(54,120)

Total lease liabilities	$	34,161	$	45,549	$	38,251	$	83,800	$	117,961

(1) Leases that are on a month-to-month basis, short-term leases, and lease extensions that the Company does not expect to take are not included.

(2) Related party lease payments exclude rent payments due under the DriveTime Lease Agreement and the DriveTime Hub Lease Agreement for locations where the Company shares space with DriveTime, as those are variable lease payments contingent upon the Company's utilization of the leased assets.

As described in Note 2 — Summary of Significant Accounting Policies, the Company adopted ASC 842 using the modified retrospective approach and various practical expedients and relief packages, which permitted the Company to refrain from restating comparative periods. Therefore, the following future minimum lease payments as of December 31, 2018 prepared under previous lease accounting guidance has been included from the Company's 2018 Annual Report on Form 10-K filed on February 27, 2019 (in thousands):


					Operating Leases ⁽¹⁾
	Capital Leases		Other Real Estate Financing Transactions ⁽³⁾		Related Party ⁽²⁾		Non-Related Party		Total
2019	$	3,779	$	3,566	$	6,461	$	8,306	$	14,767
2020	3,779		3,575		6,716		8,202		14,918
2021	3,779		3,583		6,869		7,387		14,256
2022	3,779		3,609		7,020		6,580		13,600
2023	3,275		3,837		7,140		5,330		12,470
Thereafter	—		62,081		36,770		38,402		75,172
Total minimum lease payments	$	18,391	$	80,251	$	70,976	$	74,207	$	145,183
Less amounts representing interest	(2,237)
	$	16,154

(1) Leases that are on a month-to-month basis and lease extensions that the Company does not expect to take are not included.

(2) Related party lease payments exclude rent payments due under the DriveTime Lease Agreement and the DriveTime Hub Lease Agreement for locations where the Company shares space with DriveTime, as those are contingent upon the Company's utilization of the leased assets.

(3) These were previously presented as finance leases and represent the Company's sale and leaseback transactions that are accounted for as other real estate financing transactions, as further discussed in Note 9 — Debt Instruments.

As of March 31, 2019, none of the Company's lease agreements contain material residual value guarantees or material restrictive covenants.

Lease Terms and Discount Rates

The weighted-average remaining lease terms and discount rates as of March 31, 2019 were as follows, excluding short-term operating leases:


Weighted-average remaining lease terms (years)
Operating leases	10.9
Finance leases	4.9
Weighted-average discount rate
Operating leases	9.0	%
Finance leases	5.6	%

Leases