How much does a new SD-70mac or one like it go for these days and if anyone knows how much did a GE U30-C go for in the early years? I was just a little curious as to what the railroads are and were spending. [?]
Due to tax law and general bookkeeping requirements most railroads do not buy their engines. They lease them from companies that own them. I have an MBA and the logic is way beyond my understanding but there is a financial advantage to operating in this manner. So a railroad may have 100 million dollars in lease payments per year rather than a capital expenditure of 100 million dollars. As the engines get bigger the expenditure stays the same so figure they are willing to spend so many dollars per horsepower rented. The leases typically last fifteen years at which time both companies have to start anew lease since the engine is fully depreciated. It will be interesting to see how many of these monsters wind up in the scrap yards at the end of their leases since shortline and class 2’s have very little usage for them. To get to your original question probably more than a million dollars per engine out the door in the paint of your choice subject to gadgets and doodads specific to your railroad.
Just a little dip in the convoluted sea of tax law, not only do a lot of corporations do leasing deals on their equipment, they fund[ and/or control] the subsidiaries that do the leasing. It is mostly about taxes and insurance liabilities. The layering provided by the introduction of a second party in such deals protect the major player against the eventuality of a “legal situation” that might arise in the case of an accident. Not to mention the advantages of the tax write-offs for expenses of operation of said equipment.
Off topic: In some cases, large corporations that are ‘self-insured’ hire another firm to administer their liability, thus ducking some exposure to the risks of malactions by their officers, employees or equipment, thus some expenses can be charged of as operational expenses for doing business .
Railroads must be one the most richest companies in the world.
Prices of locomotives, rolling stock, track, stations, buildings, m.o.w. equipment, equal a lot of cash!
Owning a railroad isn’t easy.
Makes ya wonder how they did it then, and what if we can do it know?
You should play Railroad Tycoon 3 to see what its like!
[:)][8D][:D][^][?][:O][8)][|)][:P][;)][alien][X-)][%-)][(-D][swg][{(-_-)}]
I THINK A NEW SD70MAC COST ABOUT 2.2 MILLON
It also depends on the options selected.
DVD player costs about $300 due to anti-vibration housing
Wide-screen tv costs about $2000, for the same reasons
Leather recliners are included if you get both the dvd and tv
On-Star is not available on anything except a GM product
Airbags and anti-lock brakes are not available
Convertible top costs over $10,000 (not available in Canada)
Glasspak exhaust system not available in California
Zardoz, how much for a candy apple red paint and a set of twice pipes?
[quote]
Originally posted by ndbprr
Due to tax law and general bookkeeping requirements most railroads do not buy their engines. They lease them from companies that own them. I have an MBA and the logic is way beyond my understanding but there is a financial advantage to operating in this manner.
I’m missing your point here - Can you enlighten me ? I would have thought (probably mistakenly) that leasing rather than buying outright would avoid an uneven bottom line over the course of the lease ??
Leases that run 15 years are usually for the “lower end” power. Higher-tech units like GE AC6000CWs, ES44ACs,EMD SD70/2ACs, have ten year leases, as technology may render them obsolete within that time frame. Units to watch are former Conrail SD80s, which are ten years old, and obsolete! Their 20-cylinder engine doesn’t “cut the mustard” in today’s economy. Norfolk Southern may have already sent them back to their lessor, or will do so soon. CSX may make their intentions known. Do not bet on their picking up the NS ones, however, as they are leaning toward SD70/2ACs, and more ES44DCs. The other equally compelling reason that has the NS units being “returned”: they are orphans, (only AC traction motor units on the roster). A product like the GE ES44DC or EMDs SD70/2DC will be more likely to have a 15 year lease as they are “assigned” to “longer term” jobs, where they won’t become obsolete as quickly as higher-tech power.
Germanium. Rather than solely tax, leasing provides a manner in which to ensure your cash flow is better managed. Rather than incurring a large debt to purchase an engine and recovering that through a capital cost allowance (ie government mandated depreciation) over the projected life of the asset (also government mandatted) with any untaken CCA being written off in the year of disposal, they have turned to leasing (as first developed by airlines). Here the cost of each year is contractually manadated and fully expensed for tax each year, but there is no inital cash requirement and no tax effect in the year of disposal. The cost of leasing is actually a little higher than the cost of a purchase for individuals (like those who purchase cars), but lower for some financial firms (ie the subsiduaries) than operarting companies whose results tend to be more volatile.
D.C. Traction is $1.5 Million at least
A.C. Traction is $2.2 Million at least
According to the article in TRAINS magazine, this month, you coud probably get it done… The cost was given at between $15,000.00 to $27,000.00. I suspect the multi-coat candyapple red would be somewhere over that price range, due to multiple coats and the final clear coat…No doubt it would be a knock out of a paint job[:p][:p][:p][^]
Awww…
Go old school…flames and pin stripes…well, at least the GEs have the flame part already!
Ed
Railroad accounting.
Railroads have lots of investments in rights of way, rails, ties, signal systems, buildings, mow equipment and on and on. All of it has some depreciation to it. Locomotives and freight cars carry a lot of depreciation as well. There reaches a point where the annual value of the depreciation may exceed the revenues of the railroad. That amount of depreciation cannot be written off. It is lost to the railroad. Banks and other financial institutions do not own much capital equipment, a few buildings and some computers and office equipment. They do not get a large write off for depreciation. Now if the bank buys the equipment like locomotives and freight cars they can lease them to the railroad. The bank or other financial institution gets to claim the full depretiation against revenues from the lease. The cost of that depretiation is figured into the value of the lease and so the railroad reimburses the bank for the depretiation. So the railroad can expense the cost of the lease against earnings for a full deduction against earnings. In effect, they get to write off the cost of depretiation in the lease payment even if they would not be able to do that if they owned the unit outright.
The lease allows the railroad an out if they want newer units at the end of the lease. They are not stuck with a bunch of old locomotives when newer ones are coming on line. If they do decide to keep the older model then the original lease will have a buy out price predetermined at the signing of the lease. It could be a good deal and the railroad will buy the locomotives or it could be a bad deal and the railroad can send the units back to the leasing company and let them deal with them. If the railroad does keep them, they will likely go for a major overhaul. In such cases they are likely to sell the units to a financial institution who will have them rebuilt and then lease the units back to the railroad again.
All the FURX units running around the BNSF these days
Don’t forget about the custom interior with the fuzzy dice and the dingle balls…
Nobody mentioned maintenance of these leased units. I think that these GEs are involved in a maintenance contract with GE as well. I know that GE has facilities on the property manned by BNSF crews paid by GE. I was told that an ES44DC goes for 2.5M
An interesting twist is a government owned transit authority. Being a government institution they do not pay any income tax, hence, depreciation is a non item to them. What our transit system did was to sell our light rail cars to a leasing company then lease them back. We made 8% on our money this way as the bank gave us a good lease rate as they could depreciate the units. The lease was for 30 years and had the standard clauses about maintaining the equipment etc.
The problem with the sale-leaseback deals is that the government keeps flip-flopping on whether or not they’re legal. Right now, we’re in a period where sale-leaseback is not allowed, but it will change back after a while. CTA has done the same thing as DART, selling and leasing back recent orders of rail cars. They also did the same thing with the physical assets of the Green and Orange Lines a few years back.
Current purchase price for GE EVO DC’s is approx. $1.6M, GE 44 AC are approx $2M
You should see the costs involved in running an airline! one airplane costs between $30 million and 50 million for a 737/757 or A320 and 40 million to 70 million for a 767/777 or A340…the A380 is quoted at $100 million per copy. American Airlines has just over 700 aircraft, you do the math. Oh and then there is the fuel, single largest cost for the airline.
I know BNSF has several thousand locomotives, but the overall costs are less per unit than an aircraft.
Mike in Tulsa
BNSF Cherokee Sub