Net Investment in Operating Leases

6 Months Ended

Jun. 30, 2017

Net investment in operating leases consist primarily of lease contracts for vehicles with retail customers, daily rental companies, and fleet customers with terms of 60 months or less.

Net investment in operating leases were as follows (in millions):



	December 31, 2016			June 30, 2017
Vehicles, at cost (a)	$	32,823		$	32,339
Accumulated depreciation	(5,550		)	(5,580		)
Net investment in operating leases before allowance for credit losses	27,273			26,759
Allowance for credit losses	(64		)	(66		)
Net investment in operating leases	$	27,209		$	26,693

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(a)	Includes interest supplements and residual support payments we receive on certain leasing transactions under agreements with Ford and affiliated companies, and other vehicle acquisition costs.

At December 31, 2016 and June 30, 2017, net investment in operating leases before allowance for credit losses includes $11.8 billion and $11.0 billion, respectively, of net investment in operating leases that have been included in securitization transactions but continue to be reported in our consolidated financial statements. These net investment in operating leases are available only for payment of the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions; they are not available to pay our other obligations or the claims of our other creditors. We hold the right to receive the excess cash flows not needed to pay the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions (see Note 7 for additional information).

We have a sale-leaseback agreement with Ford primarily for vehicles that Ford leases to employees of Ford and its subsidiaries. Effective January 1, 2017, the financing we provide under this agreement is reflected on our balance sheet in Finance receivables, net. Previously, these amounts were reflected in Net investment in operating leases. The amount included in Net investment in operating leases at December 31, 2016 was $907 million. The revenue related to these agreements is now reflected in Other financing revenue. Previously, this activity was reflected on our income statement in Operating leases revenue and Depreciation on vehicles subject to operating leases which was $81 million and $73 million for the second quarter of 2016, respectively, and $148 million and $134 million for the first half of 2016, respectively.