Equipment on Operating Leases

12 Months Ended

Dec. 31, 2022

EQUIPMENT ON OPERATING LEASES

The carrying amount of Equipment on operating leases, net in the Consolidated Statements of Financial Position as of December 31, was as follows:


(Millions of dollars)
	2022		2021
Equipment on operating leases, at cost	$	4,321	$	4,589
Less: Accumulated depreciation	(1,410)		(1,466)
Equipment on operating leases, net	$	2,911	$	3,123

Our lease agreements may include options for the lessee to purchase the underlying asset at the end of the lease term for either a stated fixed price or fair market value.

We determine the residual value of leased equipment based on its estimated end-of-term market value. We estimate the residual value of leased equipment at the inception of the lease based on a number of factors, including historical wholesale market sales prices, past remarketing experience and any known significant market/product trends. We also consider the following critical factors in our residual value estimates: lease term, market size and demand, total expected hours of usage, machine configuration, application, location, model changes, quantities, third-party residual guarantees and contractual customer purchase options. The residuals for leases classified as operating leases are included in Equipment on operating leases, net in the Consolidated Statements of Financial Position.

During the term of our leases, we monitor residual values. For operating leases, we record adjustments to depreciation expense reflecting changes in residual value estimates prospectively on a straight-line basis.

The carrying amount of residual assets covered by residual value guarantees and subject to operating leases was $3 million as of December 31, 2022 and 2021.

At December 31, 2022, rental payments to be received for equipment on operating leases were as follows:


(Millions of dollars)
2023		2024		2025		2026		2027		Thereafter		Total
$	680	$	446	$	254	$	110	$	30	$	8	$	1,528