REVENUE EARNING EQUIPMENT, NET

12 Months Ended

Dec. 31, 2023

Revenue Earning Equipment [Abstract]



(In millions)	Estimated Useful Lives	December 31, 2023						December 31, 2022
		Cost		Accumulated Depreciation		Net		Cost		Accumulated Depreciation		Net
Held for use:	(In years)
Trucks	3 — 7	$	5,630	$	(2,192)	$	3,438	$	5,282	$	(2,114)	$	3,168
Tractors	4 — 7.5	6,995		(2,712)		4,283		7,153		(3,153)		4,000
Trailers and other	9.5 — 12	1,686		(683)		1,003		1,610		(690)		920
Held for sale (1)		732		(564)		168		388		(286)		102
Total		$	15,043	$	(6,151)	$	8,892	$	14,433	$	(6,243)	$	8,190

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(1)Revenue earning equipment held for sale, where net book values exceed fair values, are adjusted to fair value on a nonrecurring basis and these adjustments are considered Level 3 fair value measurements. Revenue earning equipment held for sale adjusted with Level 3 fair value measurements was $47 million and $3 million as of December 31, 2023 and December 31, 2022, respectively. The net book value of all other assets held for sale were below fair value.

Total depreciation expense related to revenue earning equipment primarily used in our FMS segment was $1.5 billion in 2023 and 2022, and $1.7 billion in 2021.

Residual Value Estimate Changes

We periodically review and adjust, as appropriate, the estimated residual values and useful lives of existing revenue earning equipment for the purposes of recording depreciation expense. Reductions in estimated residual values or useful lives will increase depreciation expense over the remaining useful life of the vehicle. Conversely, an increase in estimated residual values or useful lives will decrease depreciation expense over the remaining useful life of the vehicle. Our review of the estimated residual values and useful lives of revenue earning equipment is based on vehicle class, (i.e., generally subcategories of trucks, tractors and trailers by weight and usage), historical and current market prices, third-party expected future market prices, expected lives of vehicles, and expected sales in the wholesale or retail markets, among other factors. A variety of factors, many of which are outside of our control, could cause residual value estimates to differ from actual used vehicle sales pricing, such as changes in supply and demand of used vehicles; volatility in market conditions; changes in vehicle technology; competitor pricing; regulatory requirements; wholesale market prices; customer requirements and preferences; and changes in underlying assumption factors. We have disciplines related to the management and maintenance of our vehicles designed to manage the risk associated with the residual values of our revenue earning equipment.

In 2023 and 2022, we did not adjust the estimated residual values and useful lives of existing revenue earning equipments. In 2021, we adjusted our residual value estimates for certain tractors and useful lives of certain classes of our revenue earning equipment, which impacted approximately 15% of our total fleet. The increase in depreciation expense in 2021 as a result of residual value estimate changes was not material to our results of operations.

Used Vehicle Sales and Valuation Adjustments

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 exceed fair value, which we refer to as "valuation adjustments," are recognized at the time they are deemed to meet the held for sale criteria and are presented within "Used vehicle sales, net" in the Consolidated 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 revenue earning equipment held for sale, fair value was determined based upon recent market prices obtained

from our own sales experience for each class of similar assets and vehicle condition if available or third-party market pricing. In addition, we also consider expected declines in market prices, as well as, forecasted sales channel mix (retail/wholesale) when valuing the vehicles held for sale.

The components of Used vehicle sales, net were as follows:


	Years ended December 31,
(In millions)	2023		2022		2021
Gains on vehicle sales, net (1)	$	(216)	$	(459)	$	(271)
Losses from valuation adjustments	20		9		14
Used vehicle sales, net	$	(196)	$	(450)	$	(257)

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(1)2023 and 2022 includes gains on used vehicles sold as part of the exit of the FMS U.K business of $2 million and $49 million, respectively.