Lease Commitments (Notes)

12 Months Ended

Dec. 31, 2024

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. We also recognize in Net property “build-to-suit” arrangements during the construction period where we are involved in the construction or design of the asset and are considered the accounting owner. We do not recognize right-of-use assets and lease liabilities for leases with a term of 12 months or less. These lease payments are amortized to expense on a straight-line basis over the lease term. We have also entered into manufacturing contracts where Ford’s portion of the output is expected to be significant. As a result, there are embedded leases, and related liabilities, that are reported as part of our financial statements, typically upon commencement of production.

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 17. LEASE COMMITMENTS (Continued)

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


	2023		2024
Operating leases
Other assets, non-current	$	1,833	$	2,308

Other liabilities and deferred revenue, current	$	481	$	558
Other liabilities and deferred revenue, non-current	1,395		1,782
Total operating lease liabilities	$	1,876	$	2,340

Finance leases
Property and equipment, gross	$	897	$	1,150
Accumulated depreciation	(114)		(162)
Property and equipment, net	$	783	$	988

Company excluding Ford Credit debt payable within one year	$	32	$	94
Company excluding Ford Credit long-term debt	606		711
Total finance lease liabilities	$	638	$	805

The amounts contractually due on our lease liabilities as of December 31, 2024 were as follows (in millions):


	Operating Leases (a)		Finance Leases
2025	$	651	$	134
2026	551		126
2027	436		109
2028	312		90
2029	205		88
Thereafter	508		510
Total	2,663		1,057
Less: Present value discount	323		252
Total lease liabilities	$	2,340	$	805

__________

(a) Excludes approximately $707 million in future lease payments for various leases commencing in future periods.

NOTE 17. LEASE COMMITMENTS (Continued)

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


	2022		2023		2024
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	459	$	581	$	663
Operating cash flows from finance leases	22		32		39
Financing cash flows from finance leases	83		91		110
Right-of-use assets obtained in exchange for lease liabilities
Operating leases	$	528	$	889	$	1,051
Finance leases	95		165		286

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


	2022		2023		2024
Operating lease expense	$	463	$	580	$	650
Variable lease expense	62		109		167
Sublease income	(15)		(18)		(18)
Finance lease expense
Amortization of right-of-use assets	60		64		80
Interest on lease liabilities	22		32		39
Total lease expense	$	592	$	767	$	918

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


	2022		2023		2024
Weighted-average remaining lease term (in years)
Operating leases	5.5		5.4		5.7
Finance leases	12.2		11.9		10.8
Weighted-average discount rate
Operating leases	3.7	%	4.7	%	4.5	%
Finance leases	3.9		5.3		4.8