Lease Commitments (Notes)

12 Months Ended

Dec. 31, 2021

We lease land, dealership facilities, offices, distribution centers, warehouses, and equipment under agreements with contractual periods ranging from less than one year to 40 years. Many of our leases contain one or more options to extend. In certain dealership lease agreements, we are the tenant and we sublease the site to a dealer. In the event the sublease is terminated, we have the option to terminate the head lease. We include options that we are reasonably certain to exercise in our evaluation of the lease term after considering all relevant economic and financial factors.

Leases that are economically similar to the purchase of an asset are classified as finance leases. The leased (“right-of-use”) assets in finance lease arrangements are reported in Net property on our consolidated balance sheets. Otherwise, the leases are classified as operating leases and reported in Other assets in the non-current assets section of our consolidated balance sheets.

For the majority of our leases, we do not separate the non-lease components (e.g., maintenance and operating services) from the lease components to which they relate. Instead, non-lease components are included in the measurement of the lease liabilities. However, we do separate lease and non-lease components for contracts containing a significant service component (e.g., energy performance contracts). We calculate the initial lease liability as the present value of fixed payments not yet paid and variable payments that are based on a market rate or an index (e.g., CPI), measured at commencement. The majority of our leases are discounted using our incremental borrowing rate because the rate implicit in the lease is not readily determinable. All other variable payments are expensed as incurred.

NOTE 18. LEASE COMMITMENTS (Continued)

Lease right-of-use assets and liabilities at December 31 were as follows (in millions):


	2020		2021
Operating leases
Other assets, non-current	$	1,287	$	1,337

Other liabilities and deferred revenue, current	$	323	$	345
Other liabilities and deferred revenue, non-current	991		1,048
Total operating lease liabilities	$	1,314	$	1,393

Finance leases
Property and equipment, gross	$	540	$	715
Accumulated depreciation	(50)		(68)
Property and equipment, net	$	490	$	647

Company excluding Ford Credit debt payable within one year	$	46	$	76
Company excluding Ford Credit long-term debt	368		489
Total finance lease liabilities	$	414	$	565

The amounts contractually due on our lease liabilities as of December 31, 2021 were as follows (in millions):


	Operating Leases (a)		Finance Leases
2022	$	385	$	94
2023	307		88
2024	223		70
2025	161		62
2026	128		57
Thereafter	335		288
Total	1,539		659
Less: Present value discount	146		94
Total lease liabilities	$	1,393	$	565

__________

(a) Excludes approximately $252 million in future lease payments for various operating leases commencing in a future period.

NOTE 18. LEASE COMMITMENTS (Continued)

Supplemental cash flow information related to leases for the years ended December 31 was as follows (in millions):


	2019		2020		2021
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	460	$	434	$	424
Operating cash flows from finance leases	6		15		14
Financing cash flows from finance leases	35		105		52
Right-of-use assets obtained in exchange for lease liabilities
Operating leases	$	527	$	304	$	441
Finance leases	43		306		192

The components of lease expense for the years ended December 31 were as follows (in millions):


	2019		2020		2021
Operating lease expense	$	467	$	463	$	444
Variable lease expense	53		57		49
Sublease income	(16)		(14)		(16)
Finance lease expense
Amortization of right-of-use assets	15		27		34
Interest on lease liabilities	6		15		14
Total lease expense	$	525	$	548	$	525

The weighted-average remaining lease term and weighted-average discount rate at December 31 were as follows:


	2019		2020		2021
Weighted-average remaining lease term (in years)
Operating leases	6.3		6.3		6.0
Finance leases	3.0		14.8		12.1
Weighted-average discount rate
Operating leases	3.4	%	3.8	%	3.3	%
Finance leases	3.3	%	3.5	%	3.3	%