How does Dollar Rent A Car account for leases that do not meet the criteria for financing leases?
Dollar_Rent_A_Car Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company combines lease and non-lease components in its contracts under ASC 842, Lease Accounting ("Topic 842"), when permissible.
The following further describes the Company's leasing transactions.
Lessor
The Company's operating leases for vehicle rentals have rental periods that are typically short term (e.g., daily or weekly) and can generally be extended for up to one month or terminated at the customer's discretion. Rental charges are computed on a limited or unlimited mileage rate, or on a time rate plus a mileage charge. In connection with the vehicle rental, the Company offers supplemental equipment rentals (e.g., child seats and ski racks) which are deemed lease components. The Company also offers value-added services in connection with the vehicle rental, which are deemed non-lease components, such as loss or collision damage waiver, theft protection, liability and personal accident/effects insurance coverage, premium emergency roadside service and satellite radio. Additionally, the Company charges for variable services primarily consisting of tolls, refueling and recharging during the rental period, and for fees associated with the early or late termination of the vehicle lease. The Company
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
mitigates residual value risk of its revenue earning vehicles by utilizing manufacturer repurchase and guaranteed depreciation programs, using sophisticated vehicle diagnostic and repair equipment to maintain the condition of its vehicles and through periodic reviews of vehicle depreciation rates based on management's ongoing assessment of present and estimated future market conditions.
Source: Item 23 — RECEIPTS (FDD pages 102–301)
What This Means (2025 FDD)
Based on the 2025 Franchise Disclosure Document, Dollar Rent A Car combines lease and non-lease components in its contracts when permissible under ASC 842, Lease Accounting. The company's operating leases for vehicle rentals typically have short-term rental periods, such as daily or weekly, and can generally be extended for up to one month or terminated at the customer's discretion. Rental charges are computed on a limited or unlimited mileage rate, or on a time rate plus a mileage charge.
In connection with vehicle rentals, Dollar Rent A Car offers supplemental equipment rentals (e.g., child seats and ski racks), which are considered lease components. The company also offers value-added services, which are deemed non-lease components, such as loss or collision damage waiver, theft protection, liability and personal accident/effects insurance coverage, premium emergency roadside service, and satellite radio.
Additionally, Dollar Rent A Car charges for variable services, primarily consisting of tolls, refueling and recharging during the rental period, and for fees associated with the early or late termination of the vehicle lease. The company mitigates residual value risk of its revenue earning vehicles by utilizing manufacturer repurchase and guaranteed depreciation programs, using sophisticated vehicle diagnostic and repair equipment to maintain the condition of its vehicles, and through periodic reviews of vehicle depreciation rates based on management's ongoing assessment of present and estimated future market conditions.