Net Investment in Operating Leases (Notes)

12 Months Ended

Dec. 31, 2016

Net investment in operating leases on our balance sheet consists primarily of lease contracts for vehicles with retail customers, daily rental companies, government entities, and fleet customers. Assets subject to operating leases are depreciated using the straight-line method over the term of the lease to reduce the asset to its estimated residual value. Estimated residual values are based on assumptions for used vehicle prices at lease termination and the number of vehicles that are expected to be returned.

The net investment in operating leases at December 31 was as follows (in millions):



	2015			2016
Automotive Segment
Vehicles, net of depreciation	$	2,014		$	1,620
Financial Services Segment
Vehicles and other equipment, at cost (a)	29,673			32,823
Accumulated depreciation	(4,545		)	(5,550		)
Allowance for credit losses	(49		)	(64		)
Total Financial Services Segment	25,079			27,209
Total	$	27,093		$	28,829

__________

(a)

Includes Ford Credit’s operating lease assets of $13.3 billion and $11.8 billion at December 31, 2015 and 2016, respectively, for which the related cash flows have been used to secure certain lease securitization transactions. Cash flows associated with the net investment in operating leases are available only for payment of the debt or other obligations issued or arising in the securitization transactions; they are not available to pay other obligations or the claims of other creditors.

Financial Services Segment

Included in Financial Services interest, operating, and other expense is operating lease depreciation expense (which includes gains and losses on disposal of assets). Operating lease depreciation expense for the years ended December 31 was as follows (in millions):



	2014		2015		2016
Operating lease depreciation expense	$	3,098	$	3,640	$	4,330

Included in Financial Services revenues are rents on operating leases. The amounts contractually due for minimum rentals on operating leases at December 31, 2016 were as follows (in millions):



	2017		2018		2019		2020		Thereafter		Total
Minimum rentals on operating leases	$	4,349	$	2,750	$	949	$	66	$	5	$	8,119