REVENUE EARNING EQUIPMENT



	September 30, 2014					December 31, 2013
	Cost		Accumulated Depreciation		Net Book Value⁽¹⁾	Cost		Accumulated Depreciation		Net Book Value⁽¹⁾
	(In thousands)
Held for use:
Full service lease	$	7,692,678	(2,558,920	)	5,133,758	$	7,436,093	(2,537,077	)	4,899,016
Commercial rental	2,447,933		(815,266	)	1,632,667	2,210,863		(747,283	)	1,463,580
Held for sale	319,302		(232,349	)	86,953	439,983		(311,742	)	128,241
Total	$	10,459,913	(3,606,535	)	6,853,378	$	10,086,939	(3,596,102	)	6,490,837

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(1)	Revenue earning equipment, net includes vehicles acquired under capital leases of $47.9 million, less accumulated depreciation of $21.3 million, at September 30, 2014, and $54.2 million, less accumulated depreciation of $22.0 million, at December 31, 2013.

At the end of 2013, we completed our annual review of residual values and useful lives of revenue earning equipment. Based on the results of our analysis, we adjusted the estimated residual values of certain classes of revenue earning equipment effective January 1, 2014. The change in estimated residual values and useful lives increased pre-tax earnings for the three and nine months ended September 30, 2014 by approximately $6.3 million and $18.8 million, respectively.

We lease revenue earning equipment to customers for periods typically ranging from three to seven years for trucks and tractors and up to ten years for trailers. The majority of our leases are classified as operating leases. However, some of our revenue earning equipment leases are classified as direct financing leases and, to a lesser extent, sales-type leases. As of September 30, 2014 and December 31, 2013, the net investment in direct financing and sales-type leases was $411.4 million and $400.1 million, respectively. Our direct financing lease customers operate in a wide variety of industries, and we have no significant customer concentrations in any one industry. We assess credit risk for all of our customers including those who lease equipment under direct financing leases upon signing of a full service lease contract. For those customers who are designated as high risk, we typically require deposits to be paid in advance in order to mitigate our credit risk. Additionally, our receivables are collateralized by the vehicles, based on their estimated fair values, which further mitigates our credit risk.

As of September 30, 2014 and December 31, 2013, the amount of direct financing lease receivables past due was not significant, and there were no impaired receivables. Accordingly, we do not believe there is a material risk of default with respect to the direct financing lease receivables. The allowance for credit losses was $0.3 million and $0.5 million as of September 30, 2014 and December 31, 2013, respectively.

In August of 2014, we completed a sale-leaseback transaction of revenue earning equipment with third parties not deemed to be variable interest entities and this transaction qualified for off-balance sheet treatment. Proceeds from the sale-leaseback transaction totaled $125.8 million. We recorded a deferred gain on the sale-leaseback transaction of approximately $1.2 million that will be recognized over the respective lease terms, which range from 66 to 84 months. We did not enter into any sale-leaseback transactions during 2013.