REVENUE EARNING EQUIPMENT



	March 31, 2016					December 31, 2015
	Cost		Accumulated Depreciation		Net Book Value⁽¹⁾	Cost		Accumulated Depreciation		Net Book Value⁽¹⁾
	(In thousands)
Held for use:
Full service lease	$	9,093,718	(2,802,126	)	6,291,592	$	8,839,941	(2,723,605	)	6,116,336
Commercial rental	2,702,767		(893,981	)	1,808,786	2,811,715		(907,412	)	1,904,303
Held for sale	528,231		(353,516	)	174,715	496,634		(332,538	)	164,096
Total	$	12,324,716	(4,049,623	)	8,275,093	$	12,148,290	(3,963,555	)	8,184,735

————————————


(1)	Revenue earning equipment, net includes vehicles acquired under capital leases of $46.3 million, less accumulated depreciation of $22.7 million, at March 31, 2016, and $47.5 million, less accumulated depreciation of $22.2 million, at December 31, 2015.

At the end of 2015, 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, 2016.

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 March 31, 2016 and December 31, 2015, the net investment in direct financing and sales-type leases was $444.5 million and $437.8 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 March 31, 2016 and December 31, 2015, 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.

Revenue earning equipment held for sale is stated at the lower of carrying amount or fair value less costs to sell. Losses on vehicles held for sale for which carrying values exceeded fair value are recognized at the time they arrive at our used truck centers and are presented within “Gains on used vehicles, net ” in the Consolidated Condensed Statements of Earnings. For revenue earning equipment held for sale, we stratify our fleet by vehicle type (trucks, tractors and trailers), weight class, age and other relevant characteristics and create classes of similar assets for analysis purposes. For a certain population of our revenue earning equipment held for sale, fair value was determined based upon recent market prices obtained from our own sales experience for sales of each class of similar assets and vehicle condition. Therefore, these vehicles held for sale were classified within Level 3 of the fair value hierarchy.

The following table presents our assets held for sale that are measured at fair value on a nonrecurring basis and considered a Level 3 fair value measurement:



				Total Losses ⁽²⁾
	March 31			Three months ended March 31,
	2016		2015	2016		2015
	(In thousands)
Assets held for sale:
Revenue earning equipment ⁽¹⁾:
Trucks	$	11,538	5,298	$	1,744	1,228
Tractors	39,739		4,611	4,882		827
Trailers	3,153		1,231	662		316

Total assets at fair value	54,430		11,140	$	7,288	2,371

————————————


(1)	Assets held for sale in the above table only include the portion of revenue earning equipment held for sale where carrying value exceeded fair value.


(2)	Total losses represent fair value adjustments for all vehicles held for sale throughout the period for which fair value was less than carrying value.

For the three months ended March 31, 2016 and 2015, the components of gains on used vehicles, net were as follows:



	March 31
	2016			2015
	(In thousands)
Gains on vehicle sales, net	$	(26,417	)	(29,579	)
Losses from fair value adjustments	7,288			2,371
Gains on used vehicles, net	$	(19,129	)	(27,208	)